A Guide To Tax-Efficient Investing In Portugal
Portugal has for many years been the destination of choice for British Expats and international retirees due to the favourable tax treatment of NHR individuals.
However, with the NHR coming to a close, and with many residents coming to the end of their 10 year NHR regime, the need for tax-efficient investments in Portugal has never been more prominent.
In this article, we'll provide a brief guide to investing in Portugal, curated by industry expert financial advisers.
How Are Investment Accounts Taxed In Portugal?
Investment accounts in Portugal are taxed at the local capital gains tax rate of 28% of the gain realised.
This is the general rule for all 'standard' investment accounts, when held with platforms, brokers or institutions.
However, Portugal treats life insurance investment policies under a different tax regime, and structuring your investments as such will provide vast tax-benefits and allow your investment growth to go further.
The Portuguese Bond
The Portuguese Bond is essentially a life-insurance policy with underlying investments. In simple terms, it's a tax-efficient wrapper around your investments which give you benefits under the Portuguese tax-system.
These benefits are maximised after holding them for 8 years and work as follows:
Premiums paid are exempt from stamp duty
No inheritance tax is due, therefore can be passed onto loved ones free of inheritance and stamp duty charges
No wealth tax
Withdrawals are taxed at a special rate of personal income tax
For policies held between 5 and 8 years, only 80% of the gains are taxed. After 8 years, only 40% of the gains are taxed.
The above means that the tax paid on any income payments after 8 years is 60% less than the tax you would be in a standard investment account in Portugal.
Expat Investment Accounts
The suitability of the product will depend on your investment amount, your need for liquidity as well as your risk profile.
The Portuguese Bond account is as risky as the investments you hold within them. For example, if you do not want to take market risk, you can invest in interest rate paying accounts. Alternatively, for long term growth you can invest in Emerging Markets, the US, Europe and any other regulated investment product.
Working with a professional, EU regulated financial adviser can aid with the product suitability, investment portfolio and tax planning requirements for residents in Portugal.
Note, for the Portuguese Bond, the minimum investment amount permissible for foreign investors is 100,000 EUR.
Taking Financial Advice In Portugal
The Wealth Genesis is fully independent and regulated to provide expert financial advice to British Expats residing in Portugal.
We have advisers based in Lisbon, Faro and Madeira, as well as providing free initial online consultations to understand your position and objectives.
To discover how we can help you, use the enquiry button below or the diary link to schedule a call directly with a member of our advice team.
