To become a resident using an EU passport the process is relatively straightforward which involves a trip to the local town hall for the residency certificate which is then registered at the tax department for the individual to become tax resident.
For those without an EU passport the residency application is made using the Golden visa by investment route (requires a minimum investment of 350k€ in funds or 500k€ in property) or through a D7 passive income application (which requires passive income in the form of pensions, dividends, investments, rental income or self-employment).
Sovereign Group can assist with both residency solutions and details can be found on our website. – sovereigngroup.com/portugal/
Once residency is completed at the tax department the Non Habitual Residency (NHR) status can be applied for providing the individual has not been deemed a tax resident of Portugal in the five years prior to the application. Anyone becoming a resident should avail themselves of the NHR programme with its ten years tax benefits and Sovereign has a full concierge service for NHR applications and will assist with the full understanding of how this impacts personal circumstances.
However, before anyone becomes resident it is important to ensure that they have correctly structured their assets and income sources outside of Portugal in order to gain maximum tax benefits from their Portuguese residency.
Sovereign’s Head of Business Development for Portugal, Shelley Wren, has over thirty years’ experience in investment advisory working with high net worth investors. Shelley works closely with the full remit of the SovereignGroup Services and can make recommendations according to clients’ needs and objectives, to guide them through the complexities of detailed tax guidance, residency in Portugal, the use of corporate structures, and how best to protect assets for secure wealth succession planning. Working in conjunction with our International team of experts we are well placed to support cross border planning and solutions for our diversified client bank.
In addition, and working with the Sovereign Portugal team, Shelley can advise clients on their Non Habitual Resident, Golden Visa and D7 Passive Income visa applications to ensure maximum tax benefits.
Many recent enquiries to the Sovereign offices are from people who were not aware of their tax obligations and suddenly they now find themselves in a precarious tax situation with the Portuguese tax department. (See Sovereign’s article in last week’s The Portugal News).
It is important for new residents to be aware of their fiscal obligation in Portugal. They must declare their Worldwide income via a yearly tax return. How they will be taxed depending on whether they are registered with residency at progressive rates (between 14.5% - 48%) or whether they have the NHR status.
Sovereign can prepare and submit tax returns for clients. The tax year runs from January to December and the returns are submitted between April – June each year. Late submission incurs a fine and interest charges on any tax due.
Many foreign residents are unaware that they can offset certain expenses on their tax returns.
Whenever anyone buys something in a shop or contracts a service they will be asked if they want an invoice with their fiscal number. The answer can be yes because many of these invoices can be used for certain concessions on the individuals yearly tax return. Again, a topic for understanding on a personal basis of the benefits.
When contracting a firm or individual for the provision of a service, or when completing a purchase, individuals should ask for a FATURA (proper invoice) with their name, fiscal number and property address on it. This invoice is thus automatically logged on the individual’s file at the tax department and may count towards the tax return.
Eligible expenses are:
- Medical expenses (doctors, hospitals, pharmacy invoices)
- Education expenses for children
- Veterinary invoices
- Hairdressers, beauty salons
- Car and motorbike repairs
- General household expenses - supermarkets, utilities etc
- Restaurants and Hotels/accommodation
- Old age residential homes in Portugal.
Faturas for the above sectors will be considered in calculating the final tax due in Portugal on the individual’s worldwide income. However, note that only a percentage of the Faturas is used, with a maximum limit for each member of the household. For instance, for medical expenses 15% of the expenditure is allowed up to a maximum of 1000€ per person whereas for general expenses it is 35% with a maximum of 250 Euro.
It is important to note that in respect of structural improvements on a Portuguese property, Faturas from the previous twelve years may be offset towards reducing a capital gain on the sale of the property.
Equally for residents, the sale of a property abroad must be reported in the tax return in Portugal as part of the worldwide income. This also applies to the sale of shares, stocks and investments.
At Sovereign we so often hear new clients say “Oh but I pay my taxes in the UK, I do not have income in Portugal” but there is a constant exchange of information between countries and it is no longer a simple matter of paying tax in the country of source. Double tax treaties must be triggered for individuals to obtain, for instance, their pensions gross of tax, and therefore plan to have the funds to pay the tax in Portugal when requested.
Sovereign’s Portugal office has a full complement of long-standing bilingual personnel with a large team of qualified accountants who are experienced in dealing with complex tax returns with the various income sources of resident and non-resident clients. In addition, the office provides rental accounts services and fiscal representation and now has concierge services for assisting clients with their tax residency applications.
The Sovereign Group has over 450 employees spanning Europe, Asia, the Middle East and Africa, offering ranges across market entry, trustee and director services, accounting, payroll, occupational and personal pension plans, employee benefit packages and incentive plans, local licenses and permits, company secretarial and company management.
Additional specialist services include asset management, foreign property ownership, retirement planning, residence and immigration, bespoke corporate and private client insurance, as well as yacht and aircraft registration, ownership and management.
The Sovereign Group is proud to have a global reach from a local point of delivery.
Whatever your fiscal query, contact us on email@example.com or telephone (+351) 282340480.