Financial adviser in Portugal

By Mark Quinn
This article is published on: 19th April 2022

19.04.22

“British expats, your financial adviser may well be a bandit!”, this was the title of a 2016 article by Jason Butler in the Financial Times. He painted a depressing picture of the state of the advisory market for expats and some of his key observations still hold today.

So what are some of the issues you need to be thinking about when you are seeking a Financial Adviser in Portugal?

Fees
One of the main points from the FT article was the importance of focusing on fees and charges. Butler states that unlike the UK, which abolished commission in 2012, many expat destinations suffer from “eyewatering expensive financial products laced with enormous commission payments”.

It is therefore important to have a clear understanding of what you are being or will be charged, and importantly that these are fully disclosed. This is something not all advisers have done and is fast becoming an issue for them as a result of the MIFID II directive which is forcing them to disclose their charges.

Qualifications
The other area of focus was on qualifications, with Butler citing a lack of qualifications in general. In fact, in Portugal, there is no minimum qualification requirement so in theory, anybody can set themselves up as ‘advisers’.

In the UK, the minimum standard to advise is ‘level 4’ but the gold standard is ‘level 6’, which is Chartered status. These higher qualifications are awarded by the CISI and CII (UK) and the average pass rate for the Chartered status examinations was just 56% in 2020.

You should also seek advisers who are tax qualified, or at the very least work with a firm or individual that is, and who fully understands cross-border issues. This is important given the relatively complex nature of expats’ financial affairs.

Download my financial guides to living in Portugal

So, why might you need a financial adviser?
If you are considering setting up or reviewing a complex structure such as a pension or investment, looking to put inheritance and succession planning in place, or restructure your affairs for tax efficiency, you should seek professional advice so you do not end up with something that is unsuitable or has unforeseen negative implications.

Your adviser’s role is to help you achieve your objectives by advising you on the best course of action to take and if necessary, research the market to find suitable structures that can be tailored to your personal situation.

How to choose your adviser and advisory firm?
Firstly, you should shop around and meet with several advisers to discuss your circumstances. Advisers will usually offer an initial discussion free of charge and this will give you the opportunity to evaluate them, their firm and gauge if you can work together long term.

Some initial questions you should be considering are:

Is the firm regulated?
Are they able to offer impartial advice or are they restricted in what companies and products they can offer due to exclusivity agreements?
Do they have indemnity insurance?
Is the adviser qualified? If so, to what level?

You should also do your own research but bear in mind, some firms are known to remove any negative reviews from the internet.

What if you already have a financial adviser in Portugal?
David Blanchett, the head of retirement research for Morningstar Investment Management, wrote the following for the Wall Street Journal in February 2020, “the adviser-and advice-who was a good fit for you 10 years ago, may no longer be a good fit now. Even if you have no major complaints about the service you have been getting, it is a good idea to ‘shop around’ every few years. You may not realize that you are missing out on better advice or costs until you do a comparison. Conversely, you may reinforce that the adviser you have still is the best fit.”

Where am I resident and where should I be paying tax?

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

12.04.22

There is a lot of confusion around the difference between residency, tax residency, Non-Habitual Residency and domicile so this week I will try and cut through this complexity.

Legal residence
Legal residence is the right to reside in a country. So, 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.

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 the taxing right 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 a 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, as you must be a resident to apply for it.

‘Non-habitual’ actually refers to the requirement that you must not have been resident in Portugal in the 5 years prior to application, so it is aimed at attracting new people to Portugal.

Domicile
Domicile is something that is often confused with residence. It is a very complex area, but the very loose definition of domicile is ‘where you are considered to originate from’. It is a common-law concept and is most likely to be a consideration for British nationals, individuals married to British nationals, or those who are not British but either hold assets in the UK or spend a considerable amount of time in the UK.

Your domicile does not affect your income tax position in Portugal but it can have tax implications, most notably UK Inheritance Tax. (We will elaborate on domicile in next week’s article).

Myths

Many people are under the misconception that, as long as they are paying tax somewhere, they are meeting their obligations but it does not work that way. It is crucial you have a clear understanding of where you are resident to avoid being taxed in more than one jurisdiction
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 5 years

Planning

Have a clear understanding of the tax residency rules of the country you are leaving. e.g. you can be tax resident in the UK by spending as little as 16 days there, or if leaving Spain a presumption of residence can remain if your family or your economic interests remain there
Prior to departing your current country of residence, utilise any remaining annual allowances and pension contributions, consider reorganising your affairs via inter-spouse transfers, and unwind any structures free of tax that may otherwise be taxed on arrival in Portugal
It may also be possible to create periods where you are not considered tax resident in any country or establish residency in another country prior to moving to Portugal for tax planning purposes

Mark Quinn is a Chartered Financial Planner with the Chartered Insurance Institute and Tax Adviser, qualifying with the Association of Tax Technicians.

Download my financial guides to living in Portugal

Measuring investment performance

By Mark Quinn
This article is published on: 11th April 2022

11.04.22

There are several different ways of measuring your investment performance, and I will run through some simple tips to allow you to dig deeper into your portfolio.

Firstly, do not forget to factor in fees such as adviser and management fees and structure costs when looking at returns. I have seen the cost of some investments run as high as 4% p.a. through hidden commissions and explicit charges. These have been disguised by strong market performance over recent years, but are likely to be exposed if we experience leaner years in markets in the future.

Simple benchmarking
A simple and quick method of comparison is looking at interest rates on cash accounts. If your investment returns are generating the same returns as cash on deposit, why are you taking the market risk?

Similarly, take into account inflation. If you generate a 3% return and inflation is 2%, your net return is just 1%; is this what you thought you were achieving?

Lastly, look at what similar passive investments have done. These types of funds simply track a stock market index and are inexpensive. If you are paying a fund manager to outperform and add value by trying to achieve higher returns, have they done this?

More in-depth methods

Market indices
A market index tracks the performance of a group of shares or other investments e.g. the S&P 500 index which tracks the performance of the largest 500 shares in America. They can be a useful barometer for the ‘health’ of an investment market as a whole but it is important to use them appropriately.

For example, you cannot meaningfully compare the performance of the S&P 500 index (100% shares) with a portfolio that consists only 40% of shares. Similarly if you are comparing a euro denominated portfolio with the US market which is denominated in dollars, then again this is not necessarily an appropriate comparison.

The downsides of using indices as a comparison are therefore addressed by the use of:

Peer group
A peer group allows you to compare investments that are similar in nature e.g. a specific class of investments or geographical region, and because you are comparing “like for like” it can be a more meaningful comparison tool.

Morningstar.com is a particularly useful tool in this respect and can guide investors with regard to an appropriate benchmark and peer group.

Quartile rankings
These are used to compare returns of investments in the same category over a period of time. Investments in the top 25% are assigned quartile rank 1, the next 25% quartile 2 etc.

They can be useful in tracking consistency – what is important is not the quartile ranking in any one period, but they allow you to track trends over multiple periods and time frames.

There is no one way, or right way, to compare performance and you will likely need to combine several measures to get a more accurate reflection of performance. Even more importantly, this should be done regularly to ensure you are doing all you can to achieve your financial goals. Finally, you should take into account the risk you are taking to achieve a set level of return, and this will be the focus of a future article.

If you would like to discuss your performance or how best to build your own portfolio of investments, please get in touch.

Wealth Tax in Catalonia

By Chris Burke
This article is published on: 7th April 2022

07.04.22

How to reduce it and know how it works

Catalonia is a great place to live for so many reasons. However, like the majority of places in the world, there are taxes to pay too. Although nobody likes to pay taxes, there is a societal need for them. They help fund the public health system, providing care for our families and for ourselves in later life, schools, so our children can receive a formal education and roads, so we can safely and effectively travel. However, in spite of this there are ways in which we can organise our taxes in an efficient manner to ensure that we are paying no more than the amount that we need to pay.

The Wealth Tax (known as ‘El Impuesto de Patrimonio’ in Spanish) is an example of a tax which is an additional tax in Catalonia that many people deem to perhaps be unfair. I mean, why should you pay tax just because you have done well in life, or your parents have and passed this wealth onto you? In summary, it is a tax that you pay on your net wealth (assets owned minus liabilities). The tax is paid on the assets that you hold which fall over a certain threshold. The threshold in Catalonia is €500,000 whilst the threshold throughout the rest of Spain is €700,000. There is a €300,000 exemption for your main residence, meaning that you will not pay tax on your main residence if it is valued under this amount. If your main residence is worth more, you can deduct €300,000 from the valuation and you will only be liable to wealth tax on the excess amount.

Here is a list of the assets that are and aren’t liable to Wealth Tax in Catalonia:

Assets that Wealth Tax is applicable to	Assets that Wealth Tax is not applicable to
Real estate	Household contents (except for Art)
Savings	Shareholdings in family companies
Shares	Commercial Assets
Cars	Intellectual Property and Pension Rights
Boats
Jewellery
Art

Source: Balcell’s Group

The rate of wealth tax depends on the amount by which you are over the threshold. The general rule is that it ranges from 0.20% to 2.50% in Spain. However, in Catalonia the rate is slightly higher, ranging from 0.21% to 2.75%. You are required to declare your wealth as part of your annual declaration (in Spanish, ‘Declaración de la Renta’) on form 714 at the end of the calendar year, making any payment by 30th June the following year. The below tables display the Wealth Tax rates for Spain as a whole and the variation of the wealth tax to pay depending on the autonomous community (Communidad Autonomo) in which you reside. However, this is an overview to what is a complex calculation, so if you require personalised information, please get in contact with Chris.

Yes, I would like to arrange a call to discuss my personal situation

Settlement basis up to (euros)	Fee (Euros)	Other net base up to (euros)	Applicable Rate %
0.00	0.00	167,129.45	0.20%
167,129.45	334.26	167,123.43	0.30%
334,252.88	835.63	334,246.87	0.50%
668,499.75	2,506.86	668,499.76	0.90%
1,336,999.51	8,523.36	1,336,999.50	1.30%
2,673,999.01	25,904.35	2,673,999.02	1.70%
5,347,998.03	71,362.33	5,347,998.03	2.10%
10,695,996.06	183,670.29	Thereafter	2.50%

Source: Balcell’s Group

Autonomous Community	Wealth Tax % Variation
Catalonia	Between 0.21% and 2.75%
Asturias	Between 0.22% and 3%
Region of Murcia	Between 0.24% and 3%
Adalusia	Between 0.24% and 3.03%
Community of Valencia	Between 0.25% and 3.12%
Balearics	Between 0.28% and 3.45%
Extremadura	Between 0.30% and 3.75%

Source: Balcell’s Group

There are ways in which you can mitigate the wealth tax you are required to pay, as noted in the above table, some assets are exempt. Therefore, if you transfer your wealth into these assets then they will not be included as part of your wealth tax calculation. For example, you may not be liable to wealth tax on assets that you transfer to shareholdings in family businesses or certain household or commercial assets.

However, this is not a straightforward process and certain criteria must be met. For example, if you transfer your capital to a ‘family business’, then there are strict regulations on what constitutes a family business, which assets qualify and how you do this. And if you were to utilise your capital to purchase household contents, certain items such as art are not exempt.

Another way to mitigate wealth tax is by relocating. There are a few countries in Europe in which you would not have to pay the wealth tax such as Sweden, Luxembourg, Denmark, Germany and Austria or France. In the UK, they are considering implementing a wealth tax. If you prefer to stay in Spain, then residents of Madrid are exempt from wealth tax so it may be beneficial relocating there.

Finally, you can effectively double your wealth tax exemption threshold by getting married! The wealth tax exemption threshold will then be increased as everyone person is entitled to it. This also counts for the main residence allowance; therefore you may not be liable on wealth tax on your main residence up to €600,000.

Being efficient with your monies/assets from a tax perspective is almost as important as making your money grow. If you would like to seek specialist advice, Chris Burke is able to review your pensions, investments and other assets and evaluate your current tax liabilities, with the potential to make them more tax effective moving forward. If you would like to find out more or to talk through your situation and receive expert, factual advice, don’t hesitate to get in touch with Chris via the form below, or make a direct virtual appointment here.

Disclaimer: Spectrum IFA do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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Financial planning for women

By Victoria Lewis
This article is published on: 6th April 2022

06.04.22

Does it have to be different and what are the nuances in terms of goals, investment outlook and risk and why is it even assumed that it needs to be different?

Victoria Lewis from The Spectrum IFA Group was recently asked to speak about this subject by the ‘Network Provence‘

Network Provence is a platform for women to promote their business, blog, club, project and to socialise. Networking allows one to socialise, meet potential clients and often offers possibilities to collaborate with other like-minded women on a variety of projects.

Victoria spoke about financial planning for women and some of the difficulties they face. Whatever your gender, if you live in France (or are planning a move here) and are interested in obtaining a confidential review of your financial situation, please contact Victoria.lewis@spectrum-ifa.com + +33 (0) 6 62 50 70 21.’

Please watch the video below

Planning for Non-Habitual Residence | Portugal

By Mark Quinn
This article is published on: 4th April 2022

04.04.22

The Non-Habitual Residence (NHR) scheme has been a great success in attracting new residents to Portugal seeking a favourable tax regime and is also the ‘icing on the cake’ for those moving to Portugal for lifestyle reasons.

NHR is a preferential tax status granted by the Portuguese government to new residents and lasts 10 years. I will not write about the specific benefits as we have produced a dedicated NHR guide which is available on our website. Rather, I wanted the focus of this article to be on the planning that is required because the benefits of NHR are not automatic; you have to plan to make the scheme work for your specific situation and objectives.

When talking with clients, I break down the planning required into three phases: prior to arrival, during the NHR period, and following the expiry of the NHR status.

The planning required before arriving in Portugal involves:

Utilising any tax breaks and exemptions in your home country. For example, in a UK context, you may wish to close any investments you have that work from a UK perspective but are not efficient in Portugal such as Individual Savings Accounts (ISAs). ISAs are tax free in the UK, but if you wait until you establish residency in Portugal to surrender, you are likely to incur unnecessary taxation
If you are relocating from countries such as the UAE or Singapore, you may wish to consider realising capital gains prior to departure
Considering taking advantage of your Pension Commencement Lump Sum entitlement (25% tax free cash) from pension schemes, as this is lost when you become a Portuguese resident

Download my guides on moving to Portugal here

Planning for Non-Habitual Residence in Portugal

During the NHR period it is important to:

Maximise pension income opportunities as NHRs benefit from a flat tax rate of 10% as opposed to rates of 20%, 40% and 45% in the UK. There is even the argument that any pension schemes should be fully depleted during the 10 year window, although this does have to be balanced against the inheritance tax efficiency of retaining money within a pension scheme
Plan well in advance of the 10 year period and ideally look to establish structures that can be effective post NHR. If your position does not allow for immediate restructuring and is tax efficient under NHR but not post-NHR e.g. property portfolios, you should start reviewing your position again around years 7-8 of the NHR period to prepare for life after NHR
Review your affairs regularly to take account of personal, family or legislative changes
For those of you taking salaries or a combination of salary and dividends from companies in the UK, you may wish to re-weight the focus to a dividend only strategy

After the end of the NHR period, you become a standard Portuguese tax resident and will pay tax at the prevailing rates. The effectiveness of your position is determined by the planning you have implemented during the first two periods.

A few caveats for you to consider:

There are subtle nuances to the NHR scheme and international tax rules meaning that in some cases it may be in your best interest not to apply for the NHR regime
For those of you enjoying the 0% tax rate on pension income (which applied to NHRs prior to April 2020), the planning will differ
If you are a non-UK domicile, there are further issues and tax-saving opportunities to consider, and again, delicate planning is required in this area to ensure success

As always please seek advice early and as the only UK Tax Adviser and Chartered Financial Planner in Portugal, I can analyse your situation from both a UK context and Portuguese perspective.

Download my guides on moving to Portugal here

Difficult questions your financial adviser may not want to answer

By Mark Quinn
This article is published on: 30th March 2022

30.03.22

I like being asked tough questions –

It shows that clients have a real grasp of the key issues involved, which is great. It forces me to regularly reconsider the advice I give, and to make sure it continues to be the very best and most cost-effective solution. Also, and speaking from bitter personal experience of poor, disjointed advice I received in an area on which I am not au fait (renovating my property), I truly believe that clients are in a much more powerful position if they are aware of all the salient facts and issues.

With that in mind, and to put you in the most powerful position in your existing adviser relationship, I would start by getting the answers to the following:

Are you truly impartial or are you restricted to only recommending certain structures and funds? I come across many clients with the same structure managed by the same investment manager. How can one structure and fund be the most appropriate for all clients with a wide variety of issues and situations?
What qualifications do you have to advise? When you visit a professional one assumes they are qualified and good at what they do. It is remarkable therefore that many ‘advisers’ operate in Portugal without qualifications, and some even purport themselves to be tax advisers who do not have any formal tax qualifications. Those coming from the UK may be aware that ‘Chartered Financial Planner’ is the gold standard for advising clients, and ‘level 4’ is the minimum level of qualification required to advise.
How much am I being charged? One of the most damaging issues to the performance of your portfolio are the charges that are being taken from your policy. Many times, these are ‘bundled’ or paid discreetly out of the back end of the product. Ask for an explicit breakdown in writing between each fund’s ‘Ongoing Fund Charge’, product/structure charges and the fees or commissions your adviser is taking, and from where.

Find out more about Mark Quinn here

Have you disclosed the full charges to me? If not, why not? This is a contentious issue for some firms at present as, due to an EU directive, they now have to inform clients if they have not disclosed the true costs of the investments that they have set up and managed for them; obviously leading to many disgruntled people and tainted trust in the advisory relationship.
What is my number? Does your adviser tell you how long your money will currently last and under what conditions? Do they paint of picture of different scenarios and how these would impact this projection? Or how you can tweak your planning to achieve your goals?
How much risk am I taking? People often focus and compare the returns they might achieve but neglect to consider the level of risk their adviser is taking with their money. For example, two portfolios can achieve 5% a year return, but fund 1 may be down 50% at any point during the year, and fund 2 just 10% – clearly these two are very different investments, with fund 2 being superior.
Is my fund outperforming a tracker fund? One chooses to invest in a fund if the manager has a proven ability to deliver attractive returns relative to the market, and for this you pay the fund manager a fee, typically around 1% per annum. But are they doing their job and is it worth the cost? A 0.5% reduction in fees may sound trivial, but I recently showed a client they could save in excess of £200,000 in fees over time.

If you would like an independent analysis of your position,
it would be our pleasure to help you.

Spanish tax on UK property

By John Hayward
This article is published on: 29th March 2022

29.03.22

In February I wrote about the impact on investments with Russia’s invasion of Ukraine and inflation rearing its ugly head. For the last month or so, the movement of global stock markets has attracted comparisons to a violin player’s arm joint and the undergarments of a professional lady. This is possibly the future for investments for a while although there appears to be more positive than negative movement (at the time of writing in case there has been a sudden catastrophe).

In the meantime, away from the uncertainty of how much a tank of fuel will cost in 6 months’ time, I want to mention something regarding Spanish tax on UK property.

31st March 2022. The end of the declaration period for everyone’s favourite, the Modelo 720. Although this is not a tax declaration, it does highlight assets and how these might be taxed in the future, whether this be capital gains tax, wealth tax, inheritance tax, or income tax. Focusing on the latter, I believe that it is generally not appreciated that a tax resident in Spain has to pay income tax on a UK property, even if it is not rented out.

Download your guide to tax in Spain here

It is (fairly) well known that, if you are a not tax resident in Spain, and you own a property in Spain, and you receive rental income, you have to pay Non-Resident Income Tax (NRIT) or Non-Resident Imputed Income Tax (NRIIT) if you do not receive rental income, perhaps both depending on how much of the tax year (1st January to 31st December) it is rented out. Imputed rent is a fictional amount of rent that the Spanish tax office decides is what you are receiving based on the cadastral value. It works the other way around. That is, if you are a tax resident in Spain with a UK property, and you do not rent it out, you still have to pay tax on the imputed rent.

How is the tax calculated? UK properties do not have a thing called a cadastral value. Some have said on the (not always reliable) worldwide web that it would be the rateable value that would be used. The actual rule is that, if there is no cadastral value, the tax is based on 50% of the original purchase price with the application of a rate of 1.1%. That gives you the imputed rent. It is this figure that would be used for income tax purposes.

For some people, this may not introduce a problem, especially when considering the double tax treaty between the UK and Spain. It is the fact that those who should have been declaring this “income” have not been and my message could prompt a chat with their tax agent. The Spanish tax office is regularly sweeping up what they (or their computer) see as outstanding items, often up to 4 years old in line with Spain’s statute of limitations.

Contact me today for more information on how we can help you to protect your assets from unnecessary taxation and make more from your money, protecting your income streams against inflation and low interest rates, or for any other financial and tax planning information, at john.hayward@spectrum-ifa.com or call or WhatsApp (+34) 618 204 731.

Moving to Portugal post Brexit | Visa options for UK nationals

By Mark Quinn
This article is published on: 28th March 2022

28.03.22

Whether you are ‘for’ or ‘against’, Brexit has had a wide-ranging impact on our daily lives.

A major consequence has been to the rights of British nationals to move freely around Europe to travel, live and work; especially so for those with holiday homes who now find themselves limited to 90 days in every 180.

To be clear, if you are an EU citizen, you have the right to freedom of movement and can therefore come and go as you please. So, what are the options for those Brits lucky enough to be able to commit to a permanent move to Portugal? You will have to apply for a visa.

Portugal has made it fairly easy to qualify for a visa by offering several options, obviously wanting to continue to attract foreigners to boost investment in the country. The most common are the Golden Visa (residency by investment) and the D7 visa (residency by passive income).

Both visas allow non-EU/EEA or Swiss citizens and their families to live, study and work in Portugal and ultimately apply for permanent residence or Portuguese citizenship. They also allow access to the Portuguese healthcare and education system, as well as free access to the Schengen area, and are a gateway into the advantageous Non-Habitual Residence (NHR) tax scheme.

The key difference between the two programs comes down to one of cost versus flexibility.

Validity
The Golden Visa (GV) is initially valid for 2 years. This can be renewed, and the renewal permits are valid for 3 years. After 5 years, you can apply for permanent residency or citizenship, or you can continue to renew the GV every 3 years. Your family can also obtain permits and the same benefits.

The D7 visa is valid for a stay of 4 months. After this, you apply for a D7 residence permit that will allow a stay of up to 2 years and this can be renewed for a further 3 years. After 5 years you can apply for permanent residence or citizenship. Your family can also obtain permits and the same benefits, assuming minimum criteria are met.

Minimum financial commitment
The GV has one of the lowest ‘residency by investment’ thresholds in Europe. There are many investment options, but the most commonly used is investment in real estate of at least €500,000. Changes at the start of 2022 restricted the location of the property purchase to low-density areas, excluding metropolitan and coastal areas such as Lisbon, Porto and much of the Algarve.

The D7 visa only requires the applicant to prove a minimum level of income equal to the Portuguese minimum wage. This can be in the form of dividends, rent, interest or pensions. If they are also supporting family, an additional 50% for a spouse and 30% for each child is required.

Minimum stay & tax dimension
The GV has a short minimum stay period in Portugal of only 7 days in the first year and 14 days in subsequent years. This is ideal for those who might not wish to trigger tax residency.

The D7 has a minimum stay of 6 months, therefore triggering tax residency.

If tax residency is triggered, you can apply for the NHR scheme which can result in substantial tax savings.

Cost of applications
Excluding 3rd party fees, the GV is approximately €5,900 for the main applicant and €5,400 per additional family member. Renewal is approximately €2,668 per person.

The D7 fees are much lower at approximately €255 per applicant and family member. Renewal is approximately €165 per applicant and family member.

Donwload our guides on moving to Portugal here

Planning for Non-Habitual Residence in Portugal

By Mark Quinn
This article is published on: 21st March 2022

21.03.22

When talking with clients, I break down the planning required into three phases: prior to arrival, during the NHR period, and following the expiry of the NHR status.

The planning required before arriving in Portugal involves:

Utilising any tax breaks and exemptions in your home country. For example, in a UK context, you may wish to close any investments you have that work from a UK perspective but are not efficient in Portugal such as Individual Savings Accounts (ISAs). ISAs are tax free in the UK, but if you wait until you establish residency in Portugal to surrender, you are likely to incur unnecessary taxation
If you are relocating from countries such as the UAE or Singapore, you may wish to consider realising capital gains prior to departure
Considering taking advantage of your Pension Commencement Lump Sum entitlement (25% tax free cash) from pension schemes, as this is lost when you become a Portuguese resident

During the NHR period it is important to:

Maximise pension income opportunities as NHRs benefit from a flat tax rate of 10% as opposed to rates of 20%, 40% and 45% in the UK. There is even the argument that any pension schemes should be fully depleted during the 10 year window, although this does have to be balanced against the inheritance tax efficiency of retaining money within a pension scheme
Plan well in advance of the 10 year period and ideally look to establish structures that can be effective post NHR. If your position does not allow for immediate restructuring and is tax efficient under NHR but not post-NHR e.g. property portfolios, you should start reviewing your position again around years 7-8 of the NHR period to prepare for life after NHR
Review your affairs regularly to take account of personal, family or legislative changes
For those of you taking salaries or a combination of salary and dividends from companies in the UK, you may wish to re-weight the focus to a dividend only strategy

A few caveats for you to consider:

There are subtle nuances to the NHR scheme and international tax rules meaning that in some cases it may be in your best interest not to apply for the NHR regime
For those of you enjoying the 0% tax rate on pension income (which applied to NHRs prior to April 2020), the planning will differ
If you are a non-UK domicile, there are further issues and tax-saving opportunities to consider, and again, delicate planning is required in this area to ensure success

As always please seek advice early and as the only UK Tax Advisers and Chartered Financial Planners in Portugal, we can analyse your situation from both a UK context and Portuguese perspective.

Download our guides here