How Are My Investments Taxed In Portugal?
LEARNING OBJECTIVES
We provide high quality, relevant and up-to-date investment advice to British Expats in Portugal.
IN THIS ARTICLE, YOU WILL LEARN THE FOLLOWING:
How overseas investments are taxed in Portugal
The difference between capital gains tax and local income tax
Which jurisdictions are blacklisted in Portugal
How to minimise your tax bill as a Portuguese resident
Portugal remains a favoured destination for British expats wanting to start a new life abroad. With stunning scenery, low cost of living and slow pace of life, it’s no wonder so many British citizens move to this vibrant country every year.
One of the biggest draws that Portugal offers is undoubtedly its reputation for being tax-friendly for foreign residents. However, this is subject to eligibility and various criteria, some of which can be hard to navigate.
The tax regulations in Portugal vary greatly to those in the UK, so gaining an understanding of how your international and local investment accounts will be taxed once you move is crucial.
British ISAs, pensions or even offshore investment accounts may all be taxed differently in Portugal, and any tax owed will ultimately eat into your investment returns.
Capital Gains Tax In Portugal
Portugal imposes capital gains taxes on profits made from any asset sale, investment accounts, stocks or shares.
These are taxed at 28% of the full gain amount (for real estate, the 28% tax rate only applies to half of the gain).
Blacklisted Jurisdictions For Overseas Investment Accounts
While it may seem tax efficient to hold assets or investments in offshore accounts, you may want to avoid doing this if you plan to become resident in Portugal.
For many years, the Portuguese tax authorities have been protecting their domestic interests by imposing higher tax consequences for income and gains made from assets held in various ‘tax havens’ around the world.
If you are found to have made any profits or gains from accounts held in any of the named regions, they will be subject to a penal tax of 35%, compared to the usual fixed rate of 28%.
The blacklist names over 80 jurisdictions, including the Channel Islands, Isle of Man, Gibraltar, Panama, Monaco, Bermuda, Cayman Islands and the UAE. A full list can be found here.
If you hold any accounts or assets in these jurisdictions, you may end up with a much higher tax bill than necessary.
How To Minimise Investment Tax In Portugal
Thankfully, there are tax-advantaged investment solutions available to British expats who wish to stay in Portugal long-term.
The Portuguese Bond is a savings and investment account available to Expats resident in Portugal. The bond combines elements of both life insurance and investment to allow for medium to long term growth, with considerable tax benefits.
This savings and investment vehicle will be most rewarding when held for a period of at least 8 years. By holding a Portuguese Bond, you have the potential to grow your wealth from the underlying investments held in the account, whilst simultaneously protecting your money thanks to the considerable reduction of local taxes.
The bond is available to Portuguese residents who intend to stay in the country for five years or more and can make an initial investment of £100,000. As with all investments, this product can carry market risk and the growth you may see will be dependent on the investments in the account.
Expats in Portugal who meet the requirements for this bond could benefit from a reduced investment tax rate of just 11.2% (down from 28%) after holding the bond for 8 years, as well as investment opportunities.
Speak to one of our advisers based in Portugal to determine if you are eligible for the Portuguese bond and whether it would be a suitable choice for you.
Specialist Financial Advice For British Expats In Portugal
The Wealth Genesis is fully regulated and independent, providing flat-fee financial advice, regardless of the investment value.
Our advisers are based in Portugal, with specialist in-depth knowledge of the Portuguese system to ensure your assets are invested in the most tax-efficient way possible.
Book a free discovery call with one of our advisers today using the diary link below.
