Tax Breaks: Expats head for Portugal

By Brendan de Beer, in News · 10-03-2016 13:51:00 · 4 Comments
Tax Breaks: Expats head for Portugal

While the Non-Habitual Residence (NHR) programme was introduced in Portugal back in 2009, it has only recently seen a strong increase in people moving here from other European states to take advantage of the beneficial tax exemption system.

Figures from the Finance Ministry published this week reveal that while people taking up the beneficial tax treatment in Portugal failed to exceed a hundred a year in the first four years following its introduction, this number exceeded ten a day in 2015 and continues to rise.
Dennis Swing Greene of financial consultancy firm Eurofinesco, on Thursday told The Portugal News that while nationals from countries such as France, Sweden and Finland continue to make use of bilateral tax treaties with Portugal, “interest from the UK and Ireland has seen an increase”, a situation he explains as being due to greater awareness of the scheme.
Portugal’s Non-Habitual Resident regime provides beneficial tax treatment for the first ten years of residence.
Furthermore, those approved for the scheme, will see employment income earned in Portugal and derived from a “high value added” activity such as an engineer or medical doctor taxed at just 20 percent, as opposed to 48 percent.

The regime also provides for tax exemptions for foreign source income, provided certain conditions are met, according to information supplied by Blevins Franks.
The idea behind this exemption was reportedly conceived following pressure from interest groups in Sweden, and after Portugal’s agreement to waive income tax on pensions. The legislation effectively spread to cover all EU member states and any other nations with which Portugal shares tax agreements.
In 2014, Portugal was ranked the second best country in the world for Britons to seek retirement.
Castle Cover, insurance specialists for over-fifties, surveyed a total of 23 countries based on a number of criteria including rainfall, hours of sunshine, temperature, property price, petrol costs, murder rate and healthcare availability and costs, among others, placing Portugal at number two.
But despite Portugal’s favourable positioning for pensioners, Dennis Swing Greene revealed that a number of European countries are also actively looking to do away with this bilateral agreement.
Portugal has already come under fire from the Netherlands, which has described the country as being a tax haven in Europe, while pressure is also being applied by Finland for Portugal to revise its tax exemption rules for non-habitual residents.
In the meantime, and according to newspaper Diário de Notícias, the Portuguese government is looking to streamline the process for EU nationals to adhere to the NHR programme by allowing potential beneficiaries to make their applications via the Finance Ministry’s website, as it seeks to significantly reduce the waiting time for approval.


I don't really understand Dave from Portos comment. As I understand if you retire on a UK company pension it it taxed in your country of residence. If you live in Portugal and are accepted on the NHR scheme you are exempt from tax in Portugal for ten years, so you definitely benefit.

by Alice from UK on 20-04-2016 10:32:00

Portugal has one of the worst tax systems in the world. It is not really a progressive system and the NHR status is just a con. Under the Double Tax Agreement which the UK has with Portugal, you are either taxed in one country or the other, namely your country of Residence. By claiming NHR status, it is not made clear, whether you have to be taxed back in the UK on your income and if you have been here, for more than the first 5 years, forget it!

by Dave from Porto on 13-03-2016 11:23:00

I would agree with Andy from the Algarve. I realize that the tax environment faced by EU nationals (such as citizens of the UK) is different from my own, but (as a citizen of the US) my family and I were forced to leave Portugal after fighting the Financas people for nearly 4 years. After spending nearly every (but not quite all) summers from 1992 onward in Portugal, my wife and I decided that we would accept the offer of my Lisbon university to relocation to Portugal. Even though the salary and terms were in no way comparable to what we had been enjoying in the US, we grew over the years to feel entirely at home in Portugal, and in many ways we considered it our second home. However, because my university (perhaps unknowingly) brought me into the country on what-turned-out-to-be very unfavorable terms, the government pursued every cent of our US-sourced income and (even) pension savings, our Portuguese tax attorney eventually told us (after fighting Financas on our behalf for nearly 4 years) to "leave this country and don't ever come back." My wife and I reluctantly decided to fold our tent and head back to the US, a place we had hoped never to return to. The moral of the story is this: while the experience of many EU nationals is no doubt very different from our own, be very careful about coming to Portugal if you are, say, a resident of the US or Canada. While we love the country, and miss is very badly, our decision to relocate to Portugal (and me to teach a few classes at my Lisbon university) has nearly destroyed our plans to retire. Now at our age (we are both in our late 60s), we have had to find whatever poorly-paying jobs we could in the US in an attempt to recover some of the money we lost to Portugal. That being said, we were always treated with kindness, respect, and compassion by the Portuguese people. Even my former Lisbon university administrators are deeply ashamed of how we were treated. They tried everything they could to save us from the government but in the end it was all for nothing. Still, my wife and I envy those of you lucky enough to find a way to live there. Wish we could rejoin you!

by Robert Stinerock from USA on 12-03-2016 01:03:00

Tax should be paid in the country that the income was earned, as in Portugal.

by Andy from Algarve on 11-03-2016 11:02:00
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