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Tax & financial seminars in Portugal

By Portugal team
This article is published on: 21st September 2023


Are you an expatriate living in Portugal and looking to understand
more about your tax and financial situation?

Join us, and our panel of guest speakers, for informed guidance on Portuguese resident tax and financial planning opportunities, commentary on investment markets and to meet like-minded people in your local area.

10th October 2023
Magnolia Hotel
Estr. da Quinta do Lago, 8135-106 Almancil
10am – 1pm

11th October 2023
Boavista Golf & Spa
Quinta da Boavista, 8601-901 Lagos
10am – 1pm

Tax & financial seminars in Portugal

Engage with our chartered financial planners and tax advisers

  • Demystifying jargon: Understand key terms like residence, domicile, NHR, visas, day counting, and where and to whom taxes should be paid
  • Avoiding costly pitfalls: learn from common mistakes and discover strategies to prevent them
  • Real-life case studies: Business and property sales, personal investments, UK ans offshore pensions, inheritance tax, domicile and personal taxation.
  • Investment fundamentals: Understand risk and volatility, investor psychology, tips and traps of investing and portfolio building
  • Interactive Q&A: Have your questions answered during our open session

Experience a unique opportunity to ‘look over the shoulder’ of a fund manager with RBC Brewin Dolphin

  • Find out how they create and build portfolios: the principles, processes, data and tools
  • Discussion: current markets, trends and forecasts
  • Interactive Q&A: ask anything during the open Q&A
RBC Brewin Dolphin

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    The dilemma: cash or investment markets?

    By Portugal team
    This article is published on: 12th September 2023


    With rising interest rates, we have seen banks offering interest rates in excess of 4% or even higher with 1-year fixed terms. This coupled with the perceived risk of investment markets and the constant stream of negative news has left many wondering whether staying in cash is best.

    Short term goals
    Cash certainly has a place as an emergency “buffer” to allow for life’s unexpected events, and it is also sound financial planning to set aside sufficient for your short-term needs. Likewise, holding cash as part of an investment portfolio is important and it can help reduce the effects of volatility often seen in markets.

    Cash as a long-term investment
    Interest rates offered by banks to customers rarely beat inflation, so using this as a long-term savings strategy is not ideal.

    Even with rising interest rates, the returns from cash are still negative when you consider that inflation currently sits at 7.9% in the UK, so investors are not getting any real returns. As an example, the negative effect of a modest 2% inflation on £100,000 over 10 years is £82,035 and £67,297 over 20 years.

    However in the longer term, interest rate cuts are likely as the Bank of England is starkly aware that keeping interest rates high risks triggering a recession and destabilising the UK housing market. Central banks globally are also now close to pausing and then reversing recent rate hikes.

    Protect yourself against inflation
    Investing in high-quality company shares has been shown to offer inflation protection. Looking at long-term figures, Credit Suisse show that over a 123-year period starting in 1900, shares in developed equity markets have generated returns of 5.1% above inflation and emerging equity markets have achieved 3.8% over inflation.

    The Credit Suisse figures also show that shares have outperformed cash (and bonds) in every one of the 21 countries its data covers over that 123-year period. This is quite remarkable given this period covers two world wars, two global pandemics, the great depression, the 2000 dot-com bubble, and the 2008 global financial crisis.

    Opportunities elsewhere
    Falling interest rates will provide opportunities elsewhere. For example, bond prices move in the opposite direction to interest rates so a future fall in interest rates is likely to result in capital gains on bonds, or holding shares allows investors to not only benefit from the increase in share price over time but income from dividends too.

    If we look at the top 100 shares in the UK, analysts are expecting a dividend yield of 4.1% this year and 4.4% in 2024 and with the possibility for share buybacks added into the mix, this could be as high as 6% for 2023.

    Tax considerations
    Always consider the net interest rate you will earn. For example, a relatively attractive rate of 5% becomes a somewhat mediocre return of just 3.6% for a standard Portuguese tax resident who must pay 28% tax.

    Also be cognisant that some of the more attractive rates being offered by banks in Guernsey and Jersey will have a higher tax rate applied of 35%, even if you are a Non-Habitual Resident.

    The solution – balance
    We believe a balanced approach of cash and investments makes most sense. The split however really comes down to your short- and long-term goals.

    In short, cash is still king for short-term needs but for meeting longer-term income and growth objectives, stack the odds in your favour by using a sensible and well-diversified portfolio of shares, bonds and property. Coupling this with effective tax planning can lead to even more savings.

    Lastly, Warren Buffet’s advice as one of the world’s most successful investors is, “The one thing I will tell you is that the worst investment you can have is cash. Cash is going to become worthless over time but good businesses are going to be worth more over time”.

    Exchange Traded Funds

    By Portugal team
    This article is published on: 25th August 2023


    Difficult times
    With high levels of inflation and relatively low rates of returns on cash deposits, it is important to make sure your money is working hard for you.

    In order to do this, investors will look to “real” investments i.e. assets that are expected to grow above the rate of inflation over the longer term – the main contenders are shares, bonds and property.

    Make your money work harder
    Whilst you can purchase individual investments direct, most investors choose to invest through a collective investment where you pool your money with other investors into a larger pot and appoint a fund manager to run this pot for you – in doing so, your combined value is larger and you can spread your investments much more widely which reduces risk. For example, the Vanguard LifeStrategy fund has approximately 22,000 underlying holdings.

    ‘Active’ versus ‘passive’ management
    Active investors appoint a fund manager such as Fidelity or BlackRock to run the fund on their behalf and pay the manager a fee, typically between 1-2% per annum.

    The alternative is to simply buy a basket of investments through a ‘tracker’ or passive fund – in this way, your fund will simply grow in line with the performance of the investments within the basket and do not have the personal involvement (and cost) of a fund manager overseeing the fund.

    Examples of common trackers are those that mirror the S&P500 or FTSE100 indices, which are the largest companies trading on the US and UK stock markets respectively.

    More money in your pocket with ETFs
    ETFs are tracker funds that trade on a stock market and the major advantage is the extremely low fees, with annual charges on some ETFs as low as 0.01%. The savings in fees compared with active fund managers can make a substantial difference to the value of your investments over time.

    As ETFs are traded in real-time on a stock exchange, they can be accessed quickly, with low costs and they offer access to a wide range of investments, from shares, gold and commodities to AI and environmental funds.

    Exchange Traded Funds

    The devil is in the detail
    Whilst Exchange Traded Funds certainly have a place in a well-diversified portfolio, there are important considerations when selecting them.

    Tracking error – as the sole job of the ETF is to follow the index it is tracking; you must ensure it is following the market accurately. If it fails to track the market it could result in underperformance, and this can be more costly than the fee saving on the management fee.

    Skewed risk – be careful that your portfolio is sufficiently diversified e.g. you may think that the S&P 500 is a highly diversified basket because you have 500 different underlying investments but the top 10 holdings make up around 35% of the value of the 500. The risk is very skewed to the big tech firms such as Google, Apple and Meta.

    Another example of skewed risk is the MSCI World Index tracker. Although ‘world’ would suggest a globally diversified portfolio around 2/3rd is invested in the US alone.

    Counterparty risk – there are different ways of tracking the market. The most secure is “physical replication” whereby the tracker simply holds the underlying investments of the index it tracks i.e. if you buy a FTSE 100 tracker, you will simply hold the 100 shares that make up that index.

    The other main way is “synthetic replication” which means the index is tracked by using a complicated financial product supplied by another financial institution. In this situation, you have to think about the additional risk of that counter-party’s financial strength.

    Other important points to have clear knowledge of are:

    • The size of the fund
    • The ETF’s domicile status
    • The ETF’s tax residence
    • Income treatment
    • Currency of the ETF

    In short, although Exchange Traded Funds and tracker investments are simple in principle, there are important nuances of which to be aware, especially when considering cross-border investment.

    As always, when investing your hard-earned money, take guidance from a professional.

    Preparing for the end of your NHR

    By Portugal team
    This article is published on: 24th August 2023


    Many people have been attracted to Portugal by the very advantageous Non-Habitual Residence Regime, but many are concerned about what will happen to their spending power once the normal tax rates are applied. Mark Quinn and Debrah Broadfield look at the planning you should put in place to prepare your finances for the end of NHR.

    What is NHR?
    NHR is a preferential tax status granted by the Portuguese government to new residents and lasts 10 years. It offers greatly reduced tax rates on foreign-sourced pensions, employment income generated from ‘highly valued’ professions, tax exemption on foreign-sourced rental income, dividends and on real estate capital gains.

    What it does not do is protect from capital gains generated from stocks and shares, company sales or dividends received from funds.

    What happens after NHR?
    You will become subject to standard rates of tax but your tax position will be determined by the planning (if any) you have implemented during the NHR period.

    How to take advantage of NHR
    The benefits of NHR are not automatic and you must plan to make the scheme work for you. This might involve rearranging your assets and income sources so you can fully take advantage of the tax breaks. For example:

    If you are receiving a salary from an overseas company, dividend payments are preferable as these are tax-free, but a salary is taxable at either 20% (if a qualifying profession) or standard scale rates. Additionally, social security contributions will be due on salary payments, but not on dividends.

    If you have foreign property you will want to sell this during the NHR period. Whilst rental income is tax-exempt during NHR, post-NHR it is taxable at scale rates. Similarly, capital gains on sale during NHR are exempt, but post-NHR 50% of the gain is taxable at scale rates.

    If you are selling a UK company, you would want to structure the sale as a dividend pay-out, rather than a share sale. The former would be tax-free and the latter would be taxed at 28%.

    If you have non-Portuguese sourced savings and investments, interest and dividends from direct equities are tax-exempt (strictly, dividends derived from funds are taxable under NHR) but after NHR, they are taxable at 28%. Capital gains however are not protected under NHR. Gains realised e.g. by selling or switching your investments, are taxable – even if you do not have the gain physically paid out to you and they remain within the investment portfolio/ISA/platform. If the investment holding sold was held for more than 365 days the tax rate is 28% but if held for less, then it is taxable at scale rates of tax. The capital gains tax can be mitigated by restructuring these types of holdings within approved tax wrappers.

    Pension income is taxable at 10% under NHR (or 0% if you have pre-31st March 2020 NHR). Post-NHR, generally pensions are taxable at scale rates so some individuals aim to deplete their pension over the NHR period. Just bear in mind however that this might not be suitable for everyone, as moving pension savings out will expose them to UK IHT. Do note, that QNUPS are often sold as a ‘silver bullet’ to protecting assets from UK IHT but this is not the case. There is no guarantee of tax-exempt status and HMRC are vigilant when assessing potential tax avoidance on death.

    Preparing for the end of your NHR

    What can you do to plan?
    Portugal does offer very advantageous tax breaks for those that use approved long-term savings vehicles, and it is not dependent on your NHR status. These shelter ongoing income and gains from tax and tax is only applied to gains when you make a withdrawal at 28%. Additional tax reductions apply after years 5 and 8 reducing the tax rate to 22.4% and 11.2%. Having said this the right jurisdiction must be chosen otherwise you could be subject to a punitive rate of 35%.

    A particular advantage is that the tax reduction time limit is applied to the start date of the structure, not each time monies are added. This means you can start the structure with a small sum and add to it over time say, as you sell foreign property, drawdown your pension or sell a UK company.

    The ideal position is to establish the structure when you are at the beginning of NHR so that by the end of the NHR period the structure is at its maximum tax efficiency.

    Many individuals draw on their pensions and dividends during NHR tax efficiently and accelerate the drawdown towards the end of the 10 years to fund the tax-efficient investment. They may also sell property or companies during the NHR period and reinvest the proceeds in preparation for the end of NHR. Then after NHR, they switch the income source to the new investment and generally enjoy single-digit or very low double-digit effective rates of tax.

    Pensions in Portugal

    By Portugal team
    This article is published on: 13th July 2023


    Taxation of pensions in Portugal is complicated. The type of pension, how it is funded and how it is paid out can affect the rate of tax you pay and it becomes even more confusing when you have to consider potential taxes in the source country. Mark and Debrah examine the rules on taxation and the steps you should take to save your hard-earned cash.

    Over the years we have seen different ways of reporting pensions in Portugal. This is because the Portuguese rules do not quite fit the complex UK pension rules and there is also a lot of confusion, even amongst professionals, about the nature of pensions. Sometimes this results in a favourable outcome, but in other instances, we have seen people paying more tax than they need to.

    What is a pension in Portugal?
    Portugal views a pension as a regular series of income payments. This can get confusing as from a UK context, pensions can be paid out as a series of income payments or lump sums.

    Portuguese law does not specify a time period for payments to be deemed a pension, but it is generally considered amongst professionals that payments made on predetermined dates and at predetermined amounts would be deemed pension income.

    Ad hoc payments could be deemed lump sums and would receive different tax treatment (as long there were no employer contributions). Here, the growth element is taxed at 28% and the capital is returned free of tax. There is a tax reduction of 20% after 5 years and 60% after 8 years. It is best to speak to your accountant on reporting options as they will be performing your submission.

    UK Government pensions
    These pensions are acquired by working for the state. In the UK these are generally armed forces, local authority and some types of NHS pensions (a full list can be found on HMRC’s website).

    These are always taxable in the source country and tax is deducted at source. Portugal does not tax these pensions, but they must be reported in Portugal, and they do count when assessing your other taxable income in Portugal.

    All other pensions are taxable in Portugal (not the UK) and each person has an annual deduction of €4,104 against pension income

    UK state pension
    The UK state pension is taxable in Portugal only. No tax is due in the UK. The pension can be paid out free of tax to you from the UK once HMRC are satisfied you are no longer a UK resident. Otherwise, UK tax will be deducted at source and you must reclaim this.

    For Non-Habitual Residents (NHR), the tax due in Portugal is 10% (unless you have pre 31st March 2020 NHR, in which case it is 0%). For normal residents, scale rates of tax apply which for 2023 are 14.5% to 48%.

    Occupational pensions
    These pensions are funded solely by an employer, or by employer and employee contributions from pre-tax income.

    If you can determine the split between employer and employee contributions, the former are taxed at the prevailing rate and the latter can receive 85%/15% treatment i.e. 85% is returned free of tax and 15% is taxed at the prevailing rate. If this cannot be determined, the whole amount will be taxed at the prevailing rate of tax.

    For NHRs, the rate is 10% (or 0% for pre-2020). For non-NHRs, it is the scale rates of tax.

    Personal pensions
    Where a personal pension was solely funded by personal contributions made with after-tax income, then it is possible to apply long-term savings taxation rules which can be more favourable. Here, only the growth element of any income received is taxed at 28%, with tax reductions after years 5 and 8 resulting in effective rates of tax of 22.4%and 11.2% respectively.

    If there are contributions made in resect of employment activity e.g by an employer or via pre-tax income, then scale rates are likely to apply to the full pension, unless you can distinguish between the contributions.

    Personal pensions

    What about the 25% PCLS?
    Portugal does not recognise the UK concept of a 25% pension commencement lump sum. So, if your retirement plan is to take this, then it is best to do it whilst UK tax resident. If taken once resident in Portugal, the above tax rates will apply.

    Get your UK pension paid out to you gross
    Firstly, you must complete a ‘DT Individual’ form. This is available online from HMRC. You then submit this form to HMRC with a proof of residency in Portugal certificate, which you can obtain from the finances portal. You will need to take an income from the pension to trigger the process, which is likely to be emergency taxed so just take a small amount. Once your provider receives notification of a ‘nil rate tax code’ from HMRC they will pay your pension out to you without deducting UK tax.

    What else should you be aware of?
    The UK government recently changed the ‘lifetime allowance’ (LTA) rules. Contrary to the common belief that this has been ‘abolished’, the rules actually state that no charge will apply for 2023/24. This difference is important for those thinking of taking their pension benefits during this window of opportunity.

    Previously the LTA was capped at £1,073,100. After which pension savings suffered a tax charge of 25% if taken as income or 55% if a lump sum. Lump sums were taxed more heavily as it assumed that 25% represented the LTA excess charge and a further 25% represented an income tax charge. The new rules remove the 25% LTA excess charge but not the 25% income tax charge, so when taking amounts above the LTA as lump sums, a 25% deemed income tax charge will still apply.

    Either way, this provides a unique opportunity for those with large pension pots. This opportunity however is not guaranteed for the future as commentators believe that a Labour win in the next election will likely see this reinstated.

    Lastly, currently, assets within a pension can be passed down free of UK inheritance tax (IHT) and they have become crucial planning tools for UK domiciles. Similarly, income tax is not payable by beneficiaries if the pension holder dies before age 75 (tax is payable if death occurs after 75).

    There have been ever-increasing murmurings of the introduction of inheritance tax applying to pensions and income tax being imposed on beneficiaries where death occurs before age 75. The most recent and serious being at the end of 2022 when the Institute for Financial Studies published a report recommending changes to the rules and stating that these changes could bolster government funds by £1.9 billion.

    It could be an opportune time for you to review your pension planning with this and your beneficiaries in mind.

    Investment options for Portuguese residents

    By Portugal team
    This article is published on: 12th July 2023


    You are probably quite au fait with your home country’s investment structures, options, and practices, but what happens when you move abroad? Just because your investments are tax efficient in one country does not mean that the tax advantages will transfer to another.

    Mark Quinn and Debrah Broadfield look at the taxation of typically held investments in Portugal and what options are open to residents looking to legally shelter from taxation.

    Bank accounts

    All bank interest is reportable and potentially taxable in Portugal, irrespective of where the account is located or if you use it or not.

    If you have Non-Habitual Residence (NHR), interest earned on foreign accounts is tax-exempt, unless the account is held in a blacklisted jurisdiction such as Guernsey, Jersey, or the Isle of Man, in which case it is taxed at 35%.  So, if you are still holding large sums in these ‘tax havens’ you should consider restructuring this.

    If you are a non-NHR, all bank interest earned on foreign accounts is taxed at 28%. Similarly, interest from Portuguese bank accounts is always taxed at 28%, irrespective of your NHR status.


    We usually see individuals with dividends paid from their own companies, directly held shares, or investment portfolios. This is a great source of income if you are a NHR as these are tax-free in Portugal during the 10-year period.

    It is worth thinking about what you are doing with the income once received. If you are not spending it all and it is accumulating in a bank account earning little or no interest, you should consider investing this in a tax-efficient manner to get your money working for you.

    For normal residents, dividends are taxed at 28% but there is the potential for tax savings if you can restructure.


    Foreign-sourced property income is reportable in Portugal but is tax-exempt during NHR. Post-NHR, this income is taxed at scale rates (up to 48% plus solidarity tax at 2.5%/5%) with a credit given for tax paid in the country where the property is located (if there is a double tax treaty).

    NHR does provide a unique tax-saving opportunity when selling a foreign property. Usually, 50% of any gain on sale is taxed in Portugal at scale rates, but if sold during the NHR period there is no tax to pay. Do note however that tax may still be due in the country where the property is located.

    tax efficiency for Portuguese residents

    Striving for tax efficiency

    One of the most common and tax-efficient ways to save is within an ‘offshore investment bond’. Such structures are recognised throughout most of the EU and in the UK.

    Unlike a standard investment portfolio, that attracts capital gains and income tax as it arises, gains within an investment bond grow free of both income and capital gains tax. This is also known as ‘gross roll up’ and works in a similar way to a pension or a UK ISA.

    The other main advantages over directly held investments are:
    – You can control the timing of taxation. With standard investment holdings, when income or dividends are produced, they are deemed paid (whether actually paid out to you or not) and are taxable on an annual basis. With a tax-sheltered structure, income and gains are only taxable when a withdrawal is made.

    – Withdrawals are very tax efficient. Withdrawals are split into capital and growth and tax is only payable on the growth. Although the tax rate on the growth element starts at 28%, you enjoy a 20% tax reduction after 5 years and a 60% tax reduction after 8 years.

    It is worth knowing that this preferential tax treatment is enjoyed by both NHRs and standard Portuguese tax residents. And because the structure becomes more tax efficient over time, these are great long-term planning tools for those with NHR who intend to remain in Portugal once they are subject to the standard rates of tax post-NHR, or for long-term residents without NHR.

    – These structures offer a unique tax planning opportunity for those who might return to the UK in the future. Under UK rules, only investment growth generated whilst resident in the UK is taxable. So, for those who have spent many years abroad in Portugal, this can create the opportunity for very advantageous tax planning on a return to the UK.

    Lastly, choosing the right jurisdiction and provider is essential to ensure compliance in Portugal. You will also want to avoid jurisdictions with withholding taxes and bonds located in tax havens, as these are punitively taxed at 35%.

    Living in Portugal

    By Portugal team
    This article is published on: 11th July 2023


    There are so many questions, so many concerns, so many areas that need clarifying. Here we dispel some of the most commonly held misconceptions for expats who have chosen to live in Portugal.

    1. “I can come and go as I choose”

    To determine and maintain your residency in Portugal or any other country, you will need to follow certain rules regarding the amount of time you spend there and your residence could change year on year depending on your circumstances.

    For instance, if you want to avoid being subject to UK taxes after leaving, you will need to limit the number of days you spend in the UK. This limit can range from as little as 16 days to as much as 182 days.

    1. “I’ve left the UK so I don’t have to pay tax there”

    The tax system in the UK is notoriously complex and can have lasting effects on former residents who have not properly cut ties with the country. Despite leaving the UK, you may still be responsible for paying taxes there on income, capital gains, and even after death (inheritance tax).

    Additionally, specific types of income and gains continue to be taxable in the UK even after you’ve left. As a result, you may need to file an annual tax return with HMRC in the UK as well as in Portugal.

    1. “I’ve left the UK, so I won’t be subject to UK Inheritance Tax (IHT)”

    Unlike income tax and capital gains tax, which are usually determined by your residence, your liability for UK IHT is based on your domicile status. This means that even if you no longer live in the UK, you may still be subject to UK IHT if you have a UK domicile of origin.

    There are ways to minimise or eliminate your UK IHT liability, but it is a highly complex area and not as simple as setting up an offshore trust, gifting assets or establishing a QNUPS – UK anti-avoidance rules are extensive and highly effective. It’s important to seek specialist tax guidance as early as possible, as any challenges by HMRC will only occur after you’ve passed away.

    1. “I report my income in the UK so I don’t have to declare in Portugal, even as a Portuguese resident”

    Some assume that they have the flexibility to report their income and gains wherever it yields the greatest financial benefit or where they ‘have always paid taxes’, rather than where they are obligated to pay taxes.

    As a resident of Portugal, you are required to declare your worldwide income and gains and pay the appropriate tax in Portugal. You may also be required to declare income and gains in the country where assets are physically held/registered, but there are rules in place in most countries to avoid double taxation.

    1. “Non-Habitual Residence (NHR) means I’m not resident in Portugal”

    The NHR program is a ten-year tax incentive scheme for new residents of Portugal. The name of the program can be misleading, as it suggests that you are not a resident of Portugal. In reality, NHR is intended for those who have not been tax resident in Portugal in the previous five years, and you must be legally resident in Portugal before you can apply for it.

    This can lead to some confusion, causing some people not to apply for the NHR program, or even being discouraged from doing so, despite it being a financially advantageous decision in most cases.

    1. “NHR means I’ll pay no tax”

    Although the NHR scheme offers the opportunity to attain low or even zero tax rates, it requires careful planning to achieve the optimal outcome. Simply applying for the program is not sufficient, and you must take proactive steps to ensure that you are in the best possible position to benefit from it.

    For example, not all foreign income is exempt from taxation, you may need to restructure your income sources to fully utilise planning opportunities, and generally, capital gains are not exempt under NHR.

    Becoming a resident of Portugal can result in significant financial and tax benefits, but it is crucial to have a comprehensive understanding of the cross-border complexities involved, such as residency regulations and tax declaration obligations. Only with a clear understanding of these issues can you take full financial advantage and achieve the most favourable outcome.

    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.