Why UK landlords are flocking to Portugal

by Mark Alexander

9:18 AM, 9th August 2018
About 9 months ago

Why UK landlords are flocking to Portugal

Make Text Bigger
Why UK landlords are flocking to Portugal

Did you know that UK landlords do not have to pay tax on their UK dividend income from incorporated rental property businesses if they live in Portugal?

Have you ever heard of the Portugal non-habitual residents scheme?

By the time you have finished reading this short article I think you will probably want to find out more, and I will be pleased to help.

The non-habitual resident (“NHR”) taxation regime came into force in Portugal in 2009 and is proving very successful at attracting individuals of independent means to establish residency in Portugal for tax purposes, while not being subject to minimum or maximum stay requirements.

The NHR regime essentially grants qualifying individuals the possibility of becoming tax residents of a white-listed jurisdiction whilst legally avoiding or minimising income tax on certain categories of non-Portugal sourced income and capital gains for a period of 10 years.

Taking the UK/Portugal convention as an example, if you are a resident of Portugal but receive dividends from the UK, then the UK has the power to tax them under article 10, although it does not do so if the recipient is not a UK resident. On the other hand, Portugal will not tax such dividends in the hands of a NHR either, because the UK has the ability to tax them under the convention but doesn’t do so. Accordingly, the non-habitual resident of Portugal may receive dividends from UK sources completely free of tax. Similarly, there is no CGT to pay in Portugal on capital gains realised in the UK and HMRC only tax capital gains made after April 2015 for non-residents.

So, for landlords who have already incorporated their rental property businesses, they could take advantage of the NHR scheme and pay no tax at all on their dividend income.

For landlords who have not incorporated, perhaps due to having “latent gains” (mortgages exceeding base costs), the NHR scheme also provides an opportunity to re-set those base costs at the April 2015 value of their portfolio.

If you are already a UK landlord living in Portugal I would love to hear from you in the comments section below. Questions which immediately spring to mind are:-

  • Do you already have NHR status?
  • What are the advantages and disadvantages of emigrating to Portugal?
  • Are you happy you moved?
  • How has it changed your life?
  • Have you incorporated your business and if not, why not?
  • Can you share any tips?

If you would like to learn more about incorporating your property rental business, and how the NHR scheme could help you to optimise your tax position pre and post incorporation, please book a tax consultation with me.

Show Form To Book A Tax Planning Consultation

Form To Book A Tax Planning Consultation

Consultations include new client compliance checks, fact find via email with complimentary software, expert analysis, a detailed written report and recommendations and a 30 minute Q&A session via Skype or telephone. We GUARANTEE total satisfaction or a full refund.
  • Please provide an overview of your circumstances and what you are looking to achieve.


Comments

Luke P

10:47 AM, 10th August 2018
About 9 months ago

Reply to the comment left by Appalled Landlord at 09/08/2018 - 14:39
I wonder how an EU country gets away with double-charging VAT?

Mark Alexander

11:29 AM, 10th August 2018
About 9 months ago

Reply to the comment left by Luke P at 10/08/2018 - 10:47
They pay the fines, it’s cheaper!

Malta do it too.

They make the rules, only the UK and Germany follow them (well most!)

DALE ROBERTS

19:42 PM, 10th August 2018
About 9 months ago

Reply to the comment left by Mark Alexander at 09/08/2018 - 15:30We are South African investors who reside in South Africa and own property in the UK on a BTL basis. We utilise "tax-filer" to fill in our HMRC's tax forms. It costs GBP24 per submission. We have not had a single problem in the past seven years. Tax-filer generates HMRC's tax forms as though one resided in the UK. It's simple and cost effective.

Mark Alexander

19:48 PM, 10th August 2018
About 9 months ago

Reply to the comment left by DALE ROBERTS at 10/08/2018 - 19:42
Is it tax effective though?

GWhite

13:41 PM, 11th August 2018
About 9 months ago

Hello Mark, I'd be interested to have a chat about this. Could you send me your contact details? Thanks.

Mark Alexander

8:31 AM, 12th August 2018
About 9 months ago

Reply to the comment left by GWhite at 11/08/2018 - 13:41
Thank you for your interest.

Please book a consultation via the link below.

https://www.property118.com/book-a-consultation/

Lee Gough

11:36 AM, 12th August 2018
About 9 months ago

Do you already have NHR status?
What are the advantages and disadvantages of emigrating to Portugal?
Are you happy you moved?
How has it changed your life?
Have you incorporated your business and if not, why not?
Can you share any tips?

Lee Gough

11:36 AM, 12th August 2018
About 9 months ago

I would like to thank Mark for taking the time to share this article.
After Section 24 was announced, I arranged meetings with accountants to find how this would affect my business. After the meetings I had two options. Incorporate or become a non-resident.
I chose to become a Non Resident as I wanted to reduce the portfolio as I could only see the UK government doing a lot more landlord bashing in the future. This was not an easy decision as we had our children, family, friends, animals and the UK ‘Was’ our home. What seemed at the time devastating has now turned into a blessing.
I now have the NHR, and this was a fairly simple process which took about 48 hours to obtain by my accountant here in Portugal, as long as you meet certain criteria.
Where do I start with advantages of moving to Portugal...? Foremost is my family’s happiness and wellbeing. My children go to an International school and they smile every day they go and also when they come back. My wife and I have made many good friends while we have been living here over the last 3 years. The obvious advantage is the weather; I certainly don’t miss the rain.
Yes there are disadvantages as in previous posts about cars being expensive; to be honest nobody really bothers about having the best and newest car. As long as the car is roadworthy and it gets from A to B most people seem happy. I think it must just be a UK mentality where we need to have a new car all the time.
Has it changed my life? In so many ways, it’s not just the big things but lots of small things which have made a big difference. In the UK my wife would walk the dogs, normally it was raining. Now I suggest we walk them as its pleasure. Exercise used to consist of going to a gym looking at a screen now it’s on the beach boot camp in the sun. Eating out can be expensive in UK but once you live in Portugal you can have a 3 course meal in the sun with wine 10 euros. I think one of the best changes is that it has opened my children’s mind to think the world is a small place and that they can live and work anywhere.
I believe this is Europe’s best kept secret. I was advised of eight of the best countries for tax purposes. Portugal came out number one for me personally. Why. It just ticked all my boxes.
1. Easy and cheap access for friends and relatives, sometimes as cheap as 1 euro!
2. Safety, personally and politically ‘Ranked number 4 on The World Peace Index’
3. Weather
4. Easy access to other countries by air, train or road
5. Countryside is greener than most other hot countries
6. Schooling
7. Price of property
8. Council tax 42 euros for the year on our rural house compare that to UK
If I had any tips to give it would be if you have ever dreamt about living in the sun do it now.
The NHR won’t be around forever and the advantage of no CGT to pay in Portugal on capital gains realised in the UK and to pay HMRC only tax on capital gains made after April 2015 for non-residents make it a compelling reason.
Take professional advice as there can be pitfalls. If Mark is offering this service take it. I am sure it must be tax-deductible.

Mark Alexander

11:50 AM, 12th August 2018
About 9 months ago

Reply to the comment left by Lee Gough at 12/08/2018 - 11:36
Brilliant post Lee, thank you so much for sharing and I look forward to meeting you and your family in September, after all these years of being ‘virtual friends’ via social media.

Please take a look at the linked article below, which explains how you could take your tax planning to another level.

https://www.property118.com/expat-landlords-tax-planning-opportunity/

This could benefit you massively when your NHR status eventually expires, or if you ever decide to move elsewhere in the world. Meanwhile, it could mean the only tax you would pay would be corporation tax in the UK, which could well save you a packet, whether you and up having mortgages on the remainder of the portfolio you retain or not. Incorporation using this strategy would also crystallize your CGT position as of now and cap any future tax on capital appreciation to the rate of corporation tax when you sell further properties.

CazT

12:53 PM, 12th August 2018
About 9 months ago

Reply to the comment left by Lee Gough at 12/08/2018 - 11:36
Makes me wish I’d looked at Portugal- Spain is so flaming hot!

1 2 3 8

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Tenant Fees Act 2019 – Elephant trap for the unwary!

Landlord incorporation and tax planning presentation

Landlord incorporation and tax planning presentation

Incorporation relief and latent gains explained

Incorporation relief and latent gains explained

Incorporating your property portfolio without having to refinance

Incorporating your property portfolio without having to refinance

Capital Account Restructure – Case Study

Capital Account Restructure – Case Study

Stamp Duty when transferring the ‘whole business’ of a Partnership into a Limited Company

Stamp Duty when transferring the ‘whole business’ of a Partnership into a Limited Company

Software to analyse the viability of transferring a property rental business into a Limited Company

Software to analyse the viability of transferring a property rental business into a Limited Company

Inheritance tax and legacy planning for property company owners

Inheritance tax and legacy planning for property company owners

HMRC Internal Manuals ‘Landlord Incorporation’

HMRC Internal Manuals ‘Landlord Incorporation’

On-demand webinar explaining the uses of Limited Liability Partnerships “LLP’s” for landlord tax planning

On-demand webinar explaining the uses of Limited Liability Partnerships “LLP’s” for landlord tax planning

Guide for landlords on forming an LLP for property investment

Guide for landlords on forming an LLP for property investment

Partnership taxation and associated rules

Partnership taxation and associated rules

Hybrid Tax Structure – Landlords BEWARE!

Hybrid Tax Structure – Landlords BEWARE!

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More