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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:-
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
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