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Taxes and property in Portugal

By Mark Quinn
This article is published on: 15th June 2023


Many expats will be surprised to discover that even when selling their main home in Portugal, Capital Gains Tax (CGT) applies.

They may also not realise that when selling secondary or rental properties, tax is likely to be due in both Portugal and the country where the property is located. So, what do you need to know?

Portuguese residents are subject to CGT on their worldwide property gains. On the sale of Portuguese property, the tax treatment is the same for Non-Habitual Residents (NHR) and non- NHRs; 50% of the gain is added to your other income in
that tax year and taxed at scale rates.

For overseas property, there is no tax due in Portugal for NHRs but there is tax due (in the same manner as above) for non-NHRs. CGT is also likely due in the country where the property is located.

Can you mitigate any tax?
Despite the potential for eye-watering tax levels, some reliefs are available if the property you are selling is your home. The two mentioned reliefs can be used in isolation or conjunction.

  1. Main residence relief: You can mitigate all (or a portion of) the CGT by reinvesting the sale proceeds (not just the gain) into another property in the EU or EEA. Any amount not reinvested is taxed
  2. Reinvestment into a qualifying savings structure: This is a relatively recent relief and is particularly advantageous for those wishing to downsize (and therefore will not fully reinvest the sale proceeds), or for those moving back to the UK or elsewhere outside of the EU/EEA. There are strict criteria for qualification and we can advise on this area

NHR tax opportunity
For those with overseas property portfolios, selling these during the 10-year NHR period is much more tax efficient as the gain is exempt from CGT in Portugal. But hat about the tax due in the country the property is located? Let’s look at UK property as an example.

The UK only applies CGT to gains accumulated since 6th April 2015 and you will also have your annual UK CGT allowance to deduct (additional reliefs may also apply depending on your situation). If you bought an investment property in joint names in 1992 for £100,000 and it was sold today at £1m, ordinarily tax would be due on the £900k gain. But selling this as a non-UK resident, and assuming linear growth, you only pay tax on the gain since April 2015 i.e. £210,000.

You can effectively ‘wash out’ a large part of the gain simply by selling as a Portuguese tax resident and generating cash to fund your lifestyle.

Portugeuse residency and taxes

By Mark Quinn
This article is published on: 12th June 2023


Residency, domicile, visas and non-habitual residency… it can be confusing. Mark Quinn and Debrah Broadfield of the spectrum IFA group explain NHRs generous tax breaks, tax planning opportunities, and how to reduce or even eliminate income and gains tax on savings and investments.

Legal residence
Legal residence relates to the right to reside in a particular country. If you are an EU citizen, you have the automatic right to reside in any other EU country without the necessity for a visa. If you are coming from outside the EU, you must apply for a visa to establish your residency rights – a common visa route is the D7 or ‘passive income visa’.

Legal residence is important as it determines how long you are allowed to spend in a country and your right to benefits such as healthcare and social security. Legal residence however does not impact or determine your tax status.

Tax residency
Generally, tax residency is determined by your physical presence in a country and Portugal, along with many other countries, uses the 183-day rule for determining tax residency.

Understanding your tax residency is important because it determines which country has taxing rights over you and can avoid double-taxation issues when you have links to more than one jurisdiction.

It is possible to have legal residence in Portugal, but not actually be Portuguese tax resident e.g. if you have the right to stay in Portugal but you do not spend enough time in Portugal in a given year to be considered tax resident.

Non-Habitual Residence (NHR)
NHR gives successful applicants a special tax status in Portugal for 10 years, but its name is somewhat misleading. ‘Non-habitual’ actually refers to the requirement that you must not have been resident in Portugal in the five years prior to application.

You must apply for residency before you can apply for NHR. On obtaining residency, you have until the following 31st March to apply for NHR. If you miss this deadline there is no second chance to apply.

Portugal residency

Domicile is something that is often confused with residency. Your domicile does not affect your income tax position, but it does affect your liability to UK Inheritance Tax. It is most likely to be a consideration for British nationals, individuals married to British nationals, or those who are not British but spend a considerable amount of time in the UK.

UK domicile is very adhesive and is difficult to shed; moving to Portugal does not automatically remove your liability to UK inheritance tax, no matter how long you have been out of the UK. Likewise, simply sheltering the bulk of your assets in a trust or QNUPS is unlikely to protect assets from UK IHT.

Tax liabilities in Portugal
Tax residents of Portugal must declare their worldwide income and gains in Portugal. For those with assets in several countries, you might also have tax and reporting obligations in the jurisdictions where you hold the assets e.g. UK rental income is always taxable in the UK but is also reportable and taxable in Portugal. Whether you will pay tax twice depends on the Double Taxation Treaty between the two countries, but there are usually rules in place to avoid this happening.

Potential pitfalls
Many people believe that, as long as they are paying tax somewhere they are meeting their obligations, but this is not correct. It is important that you have a clear understanding of where you are resident to avoid being taxed in more than one jurisdiction or being fined.

Registering yourself in Portugal does not automatically make you a tax resident. It is determined by your physical presence, so it is important to check your tax residency every tax year, as it could change.

Your nationality or citizenship does not change by coming to live in Portugal and becoming resident, although you do have the option of applying for Portuguese citizenship after five years.

Inheritance tax liabilities in Portugal

By Mark Quinn
This article is published on: 7th June 2023


Our team of advisers in Portugal talk about the inheritance tax (IHT) implications of leaving the UK and point out that British nationals are likely to remain liable to UK IHT even many years after departure.

To understand why UK nationals have a liability to IHT we must understand the concept of domicile.

There are actually four types of domicile, but relevant to most readers will be ‘domicile of origin’. Generally, you acquire your domicile of origin from your father – if he is British, you have a UK domicile and it is this that gives you your liability to IHT.

It is important to understand that domicile is different from tax residency; residency is based on your physical location – you can be a Portuguese tax resident and live in Portugal, never return to the UK but still have a UK domicile by virtue of your origin. The main impact of domicile is that it determines your liability to UK IHT. Simply, if you are UK domiciled, then you are liable to UK IHT. Moreover, IHT is based on your worldwide assets so, whether it be an Australian property or a bank account in the Cayman Islands,
It is all caught within the UK IHT tax ‘net’.

If you are UK domiciled and your worldwide estate is subject to IHT on death, and you are resident in Portugal, you could also have a Portuguese tax liability. Portugal, however, only taxes assets that are located in Portugal, eg property, and that pass to non-direct line ascendants or descendants. The UK/Portugal double tax treaty does not cover IHT and there is no automatic relief applied, so it is worth noting that there is a risk that double taxation might apply.

Inheritance Tax

Can you avoid UK IHT?

Most people find IHT the most distasteful tax of all because, after working hard and having paid income tax, capital gains tax, stamp duty, VAT, etc, throughout their lives, the final ‘nail in the coffin’ is that the UK exchequer will take 40% of your estate on death.

  • The simplest way to mitigate UK IHT is to gift assets during your lifetime. You can gift an unlimited amount to beneficiaries and pay no tax if you survive seven years from the date of the gift – this is known as a ‘potentially exempt transfer’. Be careful, however, that you fully surrender the rights and enjoyment of the asset because if not, it will remain in your estate for UK IHT purposes eg gifting property to your children but still living in it for free or at a reduced market rent.
  • You can also take advantage of other gifting exemptions, such as your annual allowance of £3,000 or ‘gifting out of normal expenditure’ – if you can demonstrate you have surplus income to your needs, you can regularly gift the excess each year and this will fall immediately outside of your estate.

Whilst gifting is simple, some may not be comfortable relinquishing control just yet, so you could consider investment options such as a Qualifying Non-UK Pension Scheme (QNUPS). However, be careful, as if HMRC believe this is done for tax avoidance purposes, or it cannot be proved that it wasn’t, they can still tax this, so it must be managed carefully’.

You can ‘shed’ your UK domicile of origin by acquiring a new ‘domicile of choice’. You do this by moving to a new country and demonstrating your intention to remain there permanently. However, whilst it is easy to move country and change your tax residency, proving your intention is more challenging. HMRC does not have a prescribed list of ‘dos and don’ts’ but everything you do, say and leave behind can be used as evidence of your intention. Consider the case of Richard Burton, who after decades of living in Switzerland was deemed to have not shed his UK domicile because he had the Welsh flag draped over his coffin and was buried with a book of Dylan Thomas’s poems. HMRC successfully argued that he never truly severed ties with his ‘homeland’, Wales.

HMRC will not provide a certificate or determination of domicile during your lifetime, therefore meticulous recordkeeping is essential. It is the executors of your estate who will be presenting your non-domicile case after your death, as this is when a challenge might arise.

Tax in Portugal – Webinar

By Mark Quinn
This article is published on: 13th January 2023



International tax issues affecting
residents in Portugal

Please join us for our quarterly client update and 2023 outlook video call on Thursday 26th January at 11am.

After registering, you will receive a confirmation email
containing information about joining the webinar.

I will be updating you on international tax issues affecting residents in Portugal, and those looking to relocate here.

I will also be joined by two specialists to give their thoughts on investment and currency markets:

Christopher Saunders
New Horizon Co-founder and Chartered Wealth Manager

Chris co-founded New Horizon in 2008 and has focussed on developing services to IFAs, accountants and other intermediaries and works with many leading IFA groups and accountancy networks in the UK and overseas.

Steve Eakins
Currency specialist, Lumon

Steve has been working in the international payments market for nearly 15 years. Over that time he has helped clients through the market around ash clouds, hung governments, wars in Europe, Brexit and Trump.

Tax in Portugal

Planning for Non-Habitual Residency in Portugal

By Mark Quinn
This article is published on: 16th December 2022


Portugal has long since been a popular expat destination, but the Non-Habitual Residence (NHR) scheme has been instrumental in attracting new residents seeking a favourable tax regime.

NHR is a preferential tax status granted to new residents and lasts 10 years. However, the benefits of NHR are not automatic and you must plan to make the scheme work for your specific situation.

Pre-arrival planning
The ideal situation is to start looking at your finances before you move. This way you can identify any tax planning opportunities available in your home country that would otherwise not be available in Portugal and utilise any tax breaks and annual allowances.

From a UK context, for example, ISAs are tax-free in the UK but if you wait to surrender until after establishing residency in Portugal you will incur 28% tax on any gain (even with NHR).

NHR period planning
During NHR it is important to maximise the tax opportunities available, particularly the flat 10% rate on pension income and nil rate tax on foreign-sourced capital gains and income. It is also the opportune time to start thinking about how to structure your finances for when NHR comes to an end.

Planning for Non-Habitual Residency

Post-NHR planning
At this point, you become subject to the standard rates of Portugal tax and the effectiveness of your position will be determined by the planning you previous implemented, particularly during the NHR stage.

Whilst the prospect of paying up to 48% on income (excluding solidarity taxes) and 28% on all capital gains is unpleasant, it is possible to rearrange your finances over time to reduce this tax burden.

Lastly, there are some subtle rules to the NHR scheme and international tax meaning that in some cases applying for NHR can put you in a worse tax position. Likewise, those with pre-April 2020 NHR and enjoying 0% tax on pension income will be subject to slightly different restrictions when drawing down their pensions to maintain this status.

As such, we recommend you always seek advice from appropriately qualified individuals with effective cross-border experience.

With over 30 years of combined experience in the industry and over 15 in Portugal, we are best placed to provide expert, impartial and personalised advice to expatriates. Please contact us if you wish to discuss your position.

Tax and property in Portugal

By Mark Quinn
This article is published on: 14th December 2022


I’m often asked for my opinion on property as an investment, either in Portugal or elsewhere and I must admit it doesn’t tick many boxes as an investment.

For example, it is generally subject to income tax, capital gains tax and succession tax, as well as ongoing local rates. It cannot be converted into cash quickly or easily (illiquid) and it is expensive and time-consuming to maintain. It also comes with administrative issues such as unruly tenants, rental void periods and due to its static nature, it is difficult to plan around.

Having said this, property continues to be a popular investment choice as it is easy to understand and you can touch it, giving investors a sense of security and reduced risk. Additionally, we probably all know a few ‘property millionaires’. So, what are the planning angles and how can you ‘get out’ and enjoy your spoils tax efficiently?

Capital gains tax (CGT)
Portuguese residents are subject to capital gains tax (CGT) on their worldwide property gains, unless the property was purchased before 1st January 1989, in which case CGT does not apply.

For Non-Habitual Residents (NHR) selling Portuguese property and non-NHRs CGT is due on 50% of the gain and is added to your other income in that tax year and taxed at scale rates.

In addition to this, if the property is located overseas, tax may also be due in the country the property is located. However, if there is a double taxation agreement between the two countries e.g. Portugal and the UK, you should not pay tax twice on the same gain.

Portuguese property
NHR status does not have an impact on the taxation of Portuguese property. The tax treatment is the same for NHR and normal residents, but despite the potential for eye-watering levels of tax, there are some reliefs available if the property you are selling is your home – it does not apply to rental property sold in Portugal. The two reliefs mentioned can be used in isolation or conjunction.

Tax and property in Portugal

Main residence relief: You can mitigate all – or a portion of – the CGT by reinvesting the proceeds into another property in the EU or EEA. Any amount not reinvested is taxed.

Reinvestment into a qualifying pension or long-term savings structure: This is a relatively recent relief and is particularly advantageous for those wishing to downsize (and therefore will not fully reinvest the sale proceeds), or for those moving back to the UK or elsewhere outside of the EU/EEA.

There are strict criteria for qualification and we can advise on this area but most notably, you or your spouse must be retired or above 65 and the gain must be reinvested in a qualifying structure.

Non-Habitual Residence (NHR)
NHR gives those selling foreign property an advantage as gains are exempt from CGT in Portugal.

But what about the tax due in the country the property is located? Let’s look at UK property as an example.

The UK only applies CGT to gains accumulated since 6th April 2015 and you will also have your annual CGT allowance to deduct of £12,300 per person. Additional reliefs may also apply, further reducing any gains, but this will depend on whether the property sold was your home or investment property.

For example, if you bought an investment property in joint names in 1992 for £100,000 and it was sold today at £1m, ordinarily tax would be due on the £900k gain. But selling this as a non-UK resident, you only pay tax on the gain since April 2015 Using the straight-line method, the gain is £212,000 from which you can deduct your annual CGT allowance, leaving a taxable gain of £199,700. Assuming you had no UK income in that tax year, the tax due to HMRC would be £52,146 which is an effective rate of 5.7%.

Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates.

Contact us at: +351 289 355 316

Don’t get caught paying 53% capital gains tax in 2023

By Mark Quinn
This article is published on: 12th December 2022


The saying goes that there are only two certainties in life: death and taxes. One you cannot control but the other you can through advice and careful planning.

Short-term CGT: approved for 2023
From 1st January 2023 any gain arising from the disposal or transfer of shares/securities held for less than 365 days will be taxed at progressive rates of income tax i.e. 48% plus 2.5%/5% solidarity tax, if your total taxable income (including the gain) is more than €75,009.

Shares/securities held for more than 365 days, or where your total taxable income including the gain is below €75,009, will remain taxable at 28%.

This is important if you or your investment adviser is trading, rebalancing or switching regularly.

Changes to taxation of crypto: budget proposal
Portugal has been touted as a crypto investor’s dream with 0% tax on gains. Although not yet agreed, investors should be aware of the potential changes to the taxation of crypto assets which if agreed, will come into effect in 2023.

Firstly, NFTs could be deemed crypto assets under the new definition. Secondly, it is not just simply selling crypto/NFTs that will trigger a charge – other triggers include purchasing goods and services with crypto or trading for a different type of crypto.

Gains arising on the disposal of crypto will be taxed if held for less than 365 days at 28%. This will apply even if the crypto was purchased before the rules (potentially) come into force on 1st January 2023.

Issuing, mining or validating crypto transactions would be deemed a business activity and taxed as such i.e. 15% of the income taxable at progressive rates without deductions for expenses (if the business did not generate more than €200,000 gross in the previous year). If the business generated more than €200,000 in the previous year, net income is taxable at progressive tax rates (48% plus 2.5%/5% solidarity tax). If trading via a company, 21% plus surtaxes may apply.

CGT and Bitcoin taxes

Solution: wrap it up!
Investing within a tax-favoured structure could shield you from short-term CGT. This means that your investment decisions will not be constrained by the tax implications, and you can benefit from compounding/tax-free roll-up of income and gains.

Become your own tax planner
For those relocating to Portugal, it is an opportune time to tax plan. There is no ‘step-up’ in Portugal, and gains are taxable from the date of the original purchase. You can create your own step-up by rebasing your assets before you leave your home country i.e. sell and repurchase your funds/shares. This will also allow you to utilise any CGT reliefs/allowances that would otherwise not be available in Portugal or be taxed at a much lower rate than 28% depending on your originating country’s CGT tax rules.

Contact us for a free impartial discussion if you would like to understand more.
With over 30 years of combined experience in the industry and over 15 in Portugal, Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates.

Contact us at: +351 289 355 316

Financial myth busting for expats in Portugal

By Mark Quinn
This article is published on: 7th December 2022


In my conversations with clients, I come across several issues that create confusion. In this article we will dispel some key common myths.

Myth 1 – “I’ve left the UK so I won’t pay UK taxes”
The UK has a particularly complicated and adhesive tax system that clings on to former residents after they have left if they have not effectively severed their ties. So, even though you have left the UK, you could still be liable to tax in the UK on income, capital gains and on death (inheritance tax).

Additionally, certain types of income may remain taxable in the UK even after you have left and established residency elsewhere. This means that you may have to continue to complete an annual tax return for HMRC as well as make your annual declaration in Portugal.

Myth 2 – “I can come and go as I choose”
In order to maintain your residency in Portugal, or elsewhere, there are day limitations that you will have to adhere to. For example, in order to remain outside of the UK tax net after leaving, you have to cap the time you spend back in the UK. This may be as little as 16 days or as much as 182 days.

If you are in Portugal on a visa, such as the D7 or Golden Visa, you will have minimum stay requirements in Portugal to maintain this status.

Myth 3 – “I’ve left the UK, so I won’t be subject to UK Inheritance Tax (IHT)”
Unlike income tax and capital gains tax which is generally based on your location, liability to UK IHT is determined by your domicile. For most people, this means they will continue to pay UK IHT even if they no longer live in the UK.

There are steps you can take to mitigate a portion, or all, UK IHT but individual advice should be sought as it is a highly complex area. Any challenge by HMRC will be once you have passed so it requires specialist advice during your lifetime.

Myth 4 – “Non-Habitual Residence (NHR) means I’m not resident”
NHR is the 10-year tax incentivised scheme for new residents to Portugal. The name causes understandable confusion as it implies that you are not a resident of Portugal.

What NHR actually means is that you have not been tax resident in Portugal in the last 5 years, and in order to apply for NHR you must first be legally resident in Portugal.

This has created issues where people have not applied for NHR due to this misunderstanding, or worse, have been actively discouraged from applying for it even though in 99% of cases it is a financial ‘no brainer’.

Facts & Myths

Myth 5 – “NHR means I’ll pay 0%”
Whilst the NHR scheme is certainly very attractive and can result in low or nil tax rates, planning is required to achieve the best position and it does not happen automatically.

Myth 6 – “I report my income in the UK so I don’t have to declare in Portugal”
Many I speak to believe they can choose to report their income and gains in the place that results in the best financial position or where they ‘have always paid tax’, rather than where they should be paying tax.

As a resident of Portugal you should declare your worldwide income and gains, and pay the necessary tax, in Portugal.

Seek clear guidance
It is possible to achieve an extremely positive financial and tax position as a resident of Portugal, but you must ensure you have a clear understanding of the cross-border issues at play, particularly residency rules and taxation of income and gains to take full financial advantage. Speak to us for an initial consultation.

With over 30 years of combined experience in the industry and over 15 in Portugal, we are best placed to provide expert, impartial and personalised advice to expatriates. Please contact us if you wish to discuss your position.

Investment hurdles

By Mark Quinn
This article is published on: 5th December 2022


The corrosive effect of inflation and fees

Here we look at two key hurdles to investment performance, and ultimately your lifestyle, and some ways to tackle these issues.

This is a topical issue as we all experience the pinch of rising energy, food, and other prices, with inflation in the UK and US recently hitting 7% and 8% respectively.

It is important to monitor and understand as it tells you how much return you need to maintain your current standard of living. So, what can you do to try and beat inflation?

Moving out of cash is critical as you are losing money in real terms. There is no one solution but building a diversified risk-rated portfolio gives you a greater chance of growing your money in excess of inflation over the medium to longer term.

  • Shares/equities – as companies and earnings can adjust upwards, shares tend to keep up with inflation better over time than other investments. However, careful selection here is important as you want to select companies that are able to pass on cost increases to consumers
  • Index-linked bonds – these are fixed-income investments and their return is linked to inflation rates
  • Commodities – you can benefit from the causes of price increases by investing in companies that are involved in the production of raw materials, such as oil and metals
  • Gold – can act as a hedge against inflation and also tends to act differently to the above investment types which means it provides diversification, particularly when geopolitical risks come to the fore

These investments do come with different types of risk so you should seek advice on how to minimise and balance these types of risks. It is also important to monitor and measure risks in relation to the returns you achieve.

Fees and expenses
Another factor often overlooked is fees. These may seem small but over time they can have profound long-term effects. You do not just lose the amount of the fees you pay, but you also lose all the growth that you might have received, compounded over years.

For example, assume you have a €1m portfolio paying 6% p.a. If you had no fees to pay, after 25 years, you would have. €4.3m. If you paid 2% p.a. in costs, you would have €2.6m.

Now going further, if you could reduce your overall charge from 2% to 1% p.a., you would have approx. €3.5m. This seemingly small 1% saving is really €793,215 in real terms over 25 years! And this is being paid to someone else, not you.

investment hurdles

What can you do to control costs?
All investments have cost so you cannot avoid them, but you can manage them at all levels.

  • Structure fees e.g. a pension or an investment. These are charged by the company providing the structure
  • Underlying investment fund fees. These are charged by the company that manages the funds within the structure. These are paid out prior to the returns being paid to you, so you do not usually see these, so they can be easy to forget and review
  • Advice fees. These are paid to your financial professional whose job is to recommend and advise you. Usually, a single set-up fee and an ongoing fee are charged. The effect of the latter is very important as this can have the most significant effect as seen in the above example

I would strongly recommend that you seek clarity on each applicable fee and benchmark these against alternative solutions to get yourself the best deal.

As with most things, as time goes on, innovation usually reduces prices. Review your structures regularly and shop around for independent advice, and lastly, remember that a higher price does not mean higher quality.

Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates.

Contact us at: +351 289 355 316

A balanced portfolio

By Mark Quinn
This article is published on: 2nd December 2022


Investment and fund management

There are several different investment management styles to consider and each will have benefits and drawbacks. The key difference are between a managed/active/discretionary route, and a passive/tracker approach, and this can be a divisive area within the investment industry.

In order to put into context the differences between these styles and which approach may be right for you, let’s first look at what a stock market index is.

An index simply measures the performance of a group/basket of shares. For example, the S&P 500 index tracks the performance of the shares in the largest 500 companies in America. As the US market is the largest stock market in the world, and the US is the world’s largest economy, it is often seen as a barometer for the health of global markets in general. The equivalent index in the UK is the FTSE 100 index.

Managed/active management/discretionary
Historically, most private investors would invest through a fund manager. In this way, you would pay an annual percentage fee to an investment institution to actively manage your investment i.e. make the buying and selling decision on your behalf.

The aim of investing in managed investments is to generate better investment returns than the stock market index as a whole, or another appropriate benchmark.

Discretionary investment is a specialist branch of managed investment whereby the manager has a greater range of investment powers and freedoms to make buying and selling decisions without your consent (although always within with the remit and investment powers that you grant at outset).

Over recent years there have been numerous studies to suggest that many fund managers do not achieve their aims of beating their respective benchmarks, and it has led some investors to favour a “passive” investment approach.

A balanced portfolio

Passive or index trackers
Passive investment does not employ a fund manger to make decisions, and instead of trying to outperform the market, you simply ‘buy’ the market as a whole. For example by investing in an S&P 500 tracker, you would effectively be purchasing the top 500 shares in the US stock market.

The key difference between the managed style is cost i.e. whereas a manager may charge between 1-2% per annum to manage your fund, you can access a tracker fund from as little as 0.1% which can make a huge difference to your fund value cumulatively.

Proponents of this approach accept they will only even achieve the return of the market as a whole (with no outperformance) but because you are spending far less in fees, believe they will do better over the longer term.

Proponents of active management on the other hand highlight the drawbacks of the passive approach viz. in a falling market, you will only ever track a falling market, tracker funds “blindly” sell what may otherwise be high quality investments at inopportune times, and that tracker investments can still be complex to understand, such as the difference between ‘synthetic’ versus ‘physical’ tracking methods.

Summary – balance pays
As my previous two articles have demonstrated, tax and investment planning generally involves shades of grey, rather than black and white solutions and in practice we do not believe either approach is the ‘holy grail’.

Rather each management style can offer benefits within a balanced portfolio. Holding passives can reduce the overall cost of your portfolio (thus increasing your net return) and using managed funds can completement by avoiding “blind” automatic sales and potential downside mitigation.

Whichever route you choose, minimising fund fees is crucial as it is biggest eroder of returns over time.

Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates.

Contact us at: +351 289 355 316