Portugal After NHR | Becoming Tax-Efficient
Having NHR status in Portugal has helped thousands of British Expats retire in the region, with hugely favourable tax advantages. The NHR status in Portugal has allowed Expats to benefit from 10 years of 0% tax or 10% tax on pension and other income streams.
However, the NHR scheme is now closed for incoming Expats, as well as likely coming to an end for many in the country. This article will outline how to generate tax efficiency for the long term following the absence or end of your NHR status.
Post NHR Tax Portugal
Following the end of NHR, your worldwide income will be taxed at the marginal rates of income tax under Portuguese tax law, providing you spend more than 183 days a year there.
These tax rates are currently high when compared to the UK, or US for example. For worldwide income over 81,199 EUR, the applicable marginal tax rate is 48%.
Capital Gains Tax In Portugal
A common question separate to income tax after NHR is the treatment of capital gains, or the proceeds of any investment received as a Portuguese tax resident.
So, how are investments taxed in Portugal?
The answer depends on the type of investment and where they are held (subject to foreign source income rules). The standard rule is a 28% capital gains tax rate, which would be applicable to the sale of UK assets.
Note, Portugal does have blacklisted jurisdictions which will apply an additional tax penalty, taking your total capital gains tax rate up to 35%. You can find the list of blacklisted jurisdictions here.
Tax Efficiency After NHR Portugal
Expert and professional financial advisers can help you to reduce your tax bill, and benefit from long term tax-efficiency in Portugal.
Certain types of life assurance policies can be used to reduce your income tax by over 60% when held for long enough, as well as inheritance tax benefits. These types of investment accounts are called ICAEs (Instrumentos de captacao de aforro estruturado).
When held for several years, your capital is treated differently to typical investment and income streams in Portugal.
To understand the exact tax treatment and benefits, see our Portuguese bond page here, or arrange a free consultation using the menu above.
What Is An ICAE Portugal?
You can view the ICAE like the Portuguese version of an ISA in the UK. Essentially, it is a type of investment account available to residents that offers tax efficiency.
Technically, it operates as a life insurance policy with underlying investments. Working with your financial adviser of bank, you can structure your investments in line with your attitude to risk and long term goals, whether this is capital preservation or aggressive growth over the long term. Within the ICAE (Portuguese Bond) you can hold ETFs, low cost tracker funds, mutual funds and direct equity holdings.
The cost of a Portuguese Bond varies depending on the investment amount, and can be anywhere from 0.20% to 0.60% for the product itself. You will also have financial adviser management costs, which again vary from firm to firm.
At The Wealth Genesis, we charge all clients the same one-off, flat initial fee. We also charge an industry leading management fee (discounted for larger values), which ensures your money is in the best home to grow.
To understand our fee structure for investments in Portugal, see our fees here.
Financial Advice Portugal
Investing in a new country can be overwhelming, confusing and complex.
The Wealth Genesis has expert financial advisers with decades of experience based in Portugal (Lisbon, The Algarve, Madeira).
