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Generous Tax Breaks For New Expats Living In Portugal

Planning to relocate to Europe?

New expats moving to Portugal can potentially benefit from 10 years’ worth of generous tax breaks under the ‘non-habitual resident’ (NHR) scheme, accountancy experts have said.

The increasingly popular scheme, which is available to newcomers who have not been a tax resident in Portugal for the past five years, meet the basic terms of Portuguese residency and have registered as an NHR with the nation’s tax authorities, can entitle users to a number of attractive benefits in terms of income tax and pensions. According to tax and wealth management firm Blevins Franks, such benefits include a flat 20 per cent income tax rate for people employed in ‘high value’ professions – and the ability to receive foreign income or pensions completely tax-free. In addition, those utilising the NHR scheme do not have to pay any Portuguese tax on gains made by selling or disposing of UK-based property and assets.

Jason Porter, Business Development Director at Blevins Franks, says that the likes of pensions, capital gains, rental income, interest, dividends and overseas income are all tax-free for NHRs, assuming these income sources are foreign. However, this only applies if the income itself is taxable in the country of origin, such as under the UK/Portgual double tax treaty. Meanwhile, users of the scheme must meet the terms of Portuguese residency – which currently requires either spending 182 days a year or more in Portugal or having a permanent residence in the country.

Mr Porter added that there were numerous other tax advantages of living in Portugal, as opposed to becoming an expat in other European countries.

“Portuguese taxes are relatively low and, unlike Spain or France, there is no wealth tax,” he said.

“Inheritance Tax is also softer – it only affects Portuguese assets, does not apply to spouses and children and is 10 per cent for others. Portugal also offers opportunities to enjoy extremely favourable tax treatment on your investments.”