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.

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 as early as 2 years into 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 a UK Tax Adviser and Chartered Financial Planner in Portugal, I can analyse your situation from both a UK context and Portuguese perspective.

For further information please visit www.spectrum-ifa.com. Mark Quinn is a Chartered Financial Planner with the Chartered Insurance Institute and Tax Adviser, qualifying with the Association of Tax Technicians. Contact Mark, at: mark.quinn@spectrum-ifa.com