Why UK landlords are flocking to Portugal

by Mark Alexander

9:18 AM, 9th August 2018
About 10 months 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

Miascot

18:08 PM, 19th December 2018
About 5 months ago

Reply to the comment left by Mark Alexander at 19/12/2018 - 17:48
That is tragic!!
Puts life and our woes into perspective.
My thoughts are with him and his family

Appalled Landlord

12:07 PM, 23rd January 2019
About 4 months ago

“The Portuguese government has publicly confirmed its intention to protect the rights of UK nationals registered as resident in Portugal in any EU exit scenario. Read the Portuguese government’s leaflet on your residency rights after the UK leaves the EU.”
https://www.gov.uk/guidance/living-in-portugal?utm_source=ab06741e-e357-41b1-b24d-6f0e5bdfc273&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate#visas-and-residency

This includes
“IN CASE OF A NO-DEAL SCENARIO As there would be no agreed implementation period, the guarantee to acquire the right of permanent residence would only apply to UK nationals who are resident in Portugal by 29 March 2019; all those UK nationals and their family members who are already in Portugal by that date would have until 31 December 2020 to apply for a registration certificate.”

https://www.portaldiplomatico.mne.gov.pt/images/pdf/Folheto_Brexit_EN.PDF

Appalled Landlord

12:12 PM, 23rd January 2019
About 4 months ago

The Foreign Office says, not just re Portugal,:
“Holders of UK driving licences who are resident in an EU country should exchange their UK licences for a driving licence from the EU country you are living in before 29 March 2019.”

https://www.gov.uk/guidance/living-in-portugal?utm_source=ab06741e-e357-41b1-b24d-6f0e5bdfc273&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate#driving-in-portugal

Chris Bunn

9:39 AM, 27th March 2019
About 2 months ago

Hi Everybody,
I have just read a few comments and thought I would add my experience of Portugal. I left the UK in 2009 having decided I no longer wanted to live in my country. I have served in the RAF for 22 years and did not take the decision lightly. I moved to Cape Town South Africa.
A lot of South Africans are now moving to Portugal for the sake of their children. I came to Portugal to visit a friend on the on the 25th of March having never been here before. Two days later having visited a few government department I now have a 5 year permanent residency (which allows me in all EU country's ) and after 5 years I can apply for a Portuguese passport whilst, retaining my British Passport. I am staying near Lisbon and have enjoyed my time here so far. In fact I flew my Daughters from Cape Town a few days ago and they also have their residency here after 2 days. In view of the UK Brexit position I consider it a very good insurance policy going forward.
So if anybody is considering getting permanent residency in Portugal it is not to late but the clock is ticking it only cost 17.5 Euros per person for the residency so don't let the cost or time it takes to do this put you off. After all our government is not helping us as landlords.
It will take much longer once the UK is out of the EU, if that ever happens. The cost will be around 500,000 euros as a property or business investment to get the same residency.
Right that's it I am of now to explore the country.
I hope this helps
Chris

Mark Alexander

10:10 AM, 27th March 2019
About 2 months ago

Reply to the comment left by Chris Bunn at 27/03/2019 - 09:39
Thanks for sharing Chris, and if you've not already done so, make sure you apply for NHR status to secure your CGT position and no tax on UK dividends or pension income.

See our main Tax Planning page if you would like to book a consultation. It may well be worth transferring your rental properties to a company if you can secure NHR status.

Appalled Landlord

12:11 PM, 27th March 2019
About 2 months ago

Reply to the comment left by Chris Bunn at 27/03/2019 - 09:39
Hi Chris

Very quick work! But in case the last bit of your post puts people off, it would like to make the following points.

The minimum is 350,000 euros if the property is over 30 years old.
https://nomadgate.com/portugal-golden-visa-guide/#what-are-the-available-investment-options

Belion say the minimum can even be 280,000 euros
https://www.belionpartners.com/portugal-golden-visa-guide.html

Belion think that British citizens will be able to continue to use the current system during the Brexit transition period if there is one.
https://www.belionpartners.com/portugal-residence-permits.html

On the same page they explain that even for citizens who do not belong to an EU country, a Golden Visa is not the only option. .
Under Residence Permits For Non-EU/EEA/Swiss Citizens, and immediately after the sentence about Golden Visas they say “People who have retired, have a significant passive income, or are high net worth individuals may also qualify.”

More information about passive income earners, including retired people, is given here:
https://www.belionpartners.com/portugal-passive-income-visa.html

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