Why UK landlords are flocking to Portugal

by Mark Alexander

9:18 AM, 9th August 2018
About 2 years ago

Why UK landlords are flocking to Portugal

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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.

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Comments

user_17131

23:39 PM, 14th August 2018
About 2 years ago

Obfuscated Data

user_17009

22:07 PM, 15th August 2018
About 2 years ago

Obfuscated Data

Mark Alexander

4:08 AM, 16th August 2018
About 2 years ago

Reply to the comment left by Will stillman at 15/08/2018 - 22:07
Don’t let Brexit uncertainty stop you from doing anything Will. It’s an excuse for many people and an opportunity for others.

user_17009

7:27 AM, 16th August 2018
About 2 years ago

Obfuscated Data

Appalled Landlord

9:58 AM, 16th August 2018
About 2 years ago

Reply to the comment left by Appalled Landlord at 09/08/2018 - 19:05
Hi Will

Click on the link on the top line of this post to go back to my previous description of how the application process will be less easy after the UK leaves the EU next March.

If there is a transition period in which the UK continues the free movement of people, like Norway and Switzerland,,then the current system might continue for a while, but who knows?

If not then UK citizens will have to apply for a residence permit, valid for one year, then renewable every two years. Some categories will have to apply for a special-purpose residence visa from a Portuguese consulate in their current country of residence before they can go to Portugal to apply for a residence permit.

https://www.belionpartners.com/portugal-residence-permits.html

That is how Brexit will affect the application process for NHR.

It will have no impact on the existence of the NHR scheme itself. Brexit will not stop the Portuguese government from attracting people from around the world to spend their money in its country.

Mark Alexander

10:09 AM, 16th August 2018
About 2 years ago

Reply to the comment left by Appalled Landlord at 16/08/2018 - 09:58
Thank you for this clarification, it is very much appreciated 🙂

user_17131

11:23 AM, 16th August 2018
About 2 years ago

Obfuscated Data

user_17131

11:25 AM, 16th August 2018
About 2 years ago

Obfuscated Data

Appalled Landlord

14:24 PM, 17th August 2018
About 2 years ago

Miascot

8:59 AM, 18th August 2018
About 2 years ago

Reply to the comment left by Lee Gough at 14/08/2018 - 12:25
Hi Lee

Can you suggest any good websites for long term property rentals as the wife and I would like to spend some time there before purchasing anything. Perhaps you have friends that have something nice to let?

We have been to Madeira and it is gorgeous but a bit limited in things to do being a relatively small Island. Mainland might suit us better for long term living.

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