Once you have purchased property in Portugal, you will need to assess what tax considerations will affect you.

The best piece of advice we can give you when it comes to dealing with any taxes is to speak to a qualified tax lawyer and good accountant who understand Portuguese taxation issues for expats or second homeowners – and can explain everything to you, and assess all you liabilities. We partner with trusted legal professionals in Portugal, who can help you with this.

The tax year

Unlike the UK, the Portuguese tax year follows the calendar year (Jan to Dec), which can be something that British expats struggle to get their heads around at first. Tax return completion dates depend on a number of factors, such as your types of income and how your file your return. The paper filing deadline for those who earn only salary or pension income is March 31, while for other types of income this is April 30. For those filing online, the deadlines are one month later for each option.

Unlike the UK, the Portuguese tax year follows the calendar year (Jan to Dec), which can be something that British expats struggle to get their heads around at first.

Income tax

In theory, you are (legally at least) fiscally resident in Portugal if you spend more than 183 days in the country during one year. You will therefore need to know exactly what this means for your tax situation, especially if you still pay (or need to pay) tax in the UK. All incomes, even any in the UK that you still pay tax on, must be declared on your Portuguese tax return – but you won’t pay tax on the same income twice thanks to the double taxation treaty. You may, however, find that you are liable for higher rate tax on some aspects if you are fiscally resident in Portugal, so you will need to pay the difference.

Deadlines for the payment of income tax will usually be several months after filing, but these have been known to change so make sure you are in touch with a professional tax adviser to ensure you do not end up having to pay a fine for a missed deadline.

Finance-Taxplanningafter-healthcare

You will generally need to pay into Portugal’s social security system to ensure your eligibility for healthcare and other benefits.

Second home owners

You may not need to complete a tax return if you do not live in the country long enough to require residency – but make sure you check this with an accountant. If you rent your property out, you must declare this and pay the appropriate tax on your rental income.

Social security and healthcare

You may only receive healthcare and benefits and Portugal if you pay into the social security system – unless you are over 65 and in possession of an S1 document from the UK. How you make these payments will depend on your employment status – and you may well have to make significantly higher contributions than you might expect if you are self-employed, making it very important to assess this.

What you may not be aware of is the non-habitual resident tax scheme, which allows those with a UK pension who are fiscally resident in Portugal to receive their pension tax-free for ten years.

Other types of tax

In addition to income tax and social security, you will need to consider whether you are required to pay IMI property tax, and if you are liable for capital gains tax if and when you sell your Portuguese property.

Non-habitual tax benefits

What you may not be aware of is the non-habitual resident tax scheme, which allows those with a UK pension who are fiscally resident in Portugal to receive their pension tax-free for ten years.

This regime was introduced in 2009, aiming to attract new people to Portugal and make it beneficial from a tax-perspective to become resident in Portugal. There a number of benefits that those meeting the criteria can take advantage of, including:

  • Tax exemptions
  • Passing on wealth without inheritance or gift taxes
  • Enjoying retirement without tax on their pensions

It’s really important to make sure you speak to a solicitor to go through your paperwork and assess if you are eligible for this scheme.

Whatever your tax concerns for living in Portugal, the most prudent thing that you can do is speak to a Portuguese lawyer with extensive knowledge of tax planning. Get in touch with our trusted partners today.

Get in touch with an Independent Financial Advisor

Pin It on Pinterest

Share This