Why UK landlords are flocking to Portugal

by Mark Alexander

9:18 AM, 9th August 2018
About A year 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

Mark Alexander

22:49 PM, 3rd June 2019
About 6 months ago

Reply to the comment left by Property Peeps at 03/06/2019 - 22:35
Maybe, but please book a tax consultation to establish whether you would qualify for CGT relief on Incorporation, and whether you will need to refinance and/or whether the company will be eligible for Stamp Duty relief.

There may be better options for you to consider too.

Property Peeps

19:58 PM, 4th June 2019
About 6 months ago

Thanks again Mark Will definately book a consultation before committing to anything drastic. Are the consultations with you? ..... Family, kids etc. means it's a big decision and not something to be taken lightly! Understand that a Ltd co. is a separate entity and "transferring" in effect mean "selling" the properties and potentially incurs both stamp duty and CGT. Hopefully as a long time (full time) landlord I will have a good case to avoid the CGT if I transfer the whole portfolio, hoping to do a bit of consolidating, clear down all mortgages, then live in the sun l learn Portuguese... and golf on 19% tax for 10years.... wishful thinking but you've got to dream!

Mark Alexander

20:17 PM, 4th June 2019
About 6 months ago

Reply to the comment left by Property Peeps at 04/06/2019 - 19:58
We currently have three consultants, of which I am one. whilst I am the best at self-promotion, it could be argued that the other two are better consultants. Horses for courses I suppose.

We plan to expand to 30 consultants within 18 months. All will have legal and/or accountancy backgrounds.

When you book your consultation, if you specifically want to deal with me, please add that to your message on the consultation booking form.

AnaE

10:12 AM, 18th September 2019
About 3 months ago

Reply to the comment left by Lee Gough at 12/08/2018 - 11:36
Hi Lee

thank you for your post.
I'm Portuguese who left in 2005 and now due to NHR I have decided to return.
As I got family and friends in Porto we will create our new home up north.

In the UK, we are incorporating, so we got a mix in our property portfolio. Due to this level of complexity I'm struggling to find an accountant in PT whom is familiar with this situation.
Do you have a PT accountant that you would recommend?
Many Thanks

golf player

22:25 PM, 13th October 2019
About 2 months ago

Reply to the comment left by S Somerset at 10/08/2018 - 10:02
yes you can i believe

1 8 9

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