THE SUCCESS OF THE GOLDEN VISA PROGRAMME
Golden Visa investments represent more than €4 billion into the Portuguese economy. This influx of capital has a direct correlation to the massive inflation in house prices in areas such as Lisbon and Porto, where the majority of the GV investment is concentrated.
The Golden Visa program in Portugal has been a success when measured by total investment, diversification of investor base and origin, and the successful rehabilitation of abandoned urban areas.
THE NON-HABITUAL RESIDENT REGIME
Dovetailing with the GV program, the Non-Habitual Residence program, which is explained here, has reinforced the upward price movement. It is much more focused on attracting permanent residents who contribute to the local economy.
Residence under the NHR does not require the purchase of a property, with a rental contract being sufficient. Therefore demand for long-term rentals, and subsequently prices, has increased. Property owners were attracted by the allure of a constantly-improving tourism market and the arrival of wealthier, expatriate tenants. They registered rental properties with tax authorities at a faster rate than even that anticipated by the government. Long-term rentals, which attract higher tax and stamp duty, are much in demand by foreign applicants of the NHR program.
WHY REAL ESTATE IS SUCH AN IMPORTANT SOURCE OF REVENUE FOR THE GOVERNMENT
Real estate represents a major source of growth for the Portuguese economy. It has a knock-on effect on sectors such as tourism and construction, both labour-intensive. The country has achieved a rather unique result:
- it attracted investment, much of which at an average value well above previous transactions. Programs such as the Golden Visa had an inflationary effect on prices;
- the government “encouraged” (read, threatened) all owners of short-term rental properties to register them. Owners were encouraged to do so via initially low rental taxes. Accounting firms were also eager to generate additional revenue from this service; and
- it attracted expatriate residents eager to benefit from an exemption of personal income tax on foreign-earned income. This generated a major source of tenants for the newly available inventory, as well as buyers of real estate in their own right.
The government’s tax base (pool of taxpayers from whom taxes could be generated) grew significantly in less than five years. With Portugal suffering for many years post-2008 from a desperate need to generate inward investment to balance its books, these programmes achieved two important goals: an immediate injection of foreign investment into the local economy; and the widening of the tax base such that the sources of tax grew while the predictability of future revenues improved.
The Portuguese government has for years used real estate as a way of generating additional tax revenue. It is an easy source of income, and one which cannot easily (when compared to other asset classes) be sold. Stocks and shares, for example, which carry substantial exemptions on resale, can be quickly sold.
For those who monitor the market closely, changes to real estate related legislation have been predicted for some time.
CHANGES TO THE GOLDEN VISA AND NHR PROGRAMMES
Rumours about the possible revision to the zero-tax status of the NHR program started in 2018. Pressure on the government, which did not have a working majority, strengthened in 2019. Expectations were that any changes would only be implemented in 2021. But the government surprisingly introduced a proposal for a 10% tax, with a minimum of €7,500, for implementation in 2020. Although not expected to apply retrospectively, it will affect any new NHR applications submitted from around March.
That same pressure on the government also led to the sudden proposal for the abolishment of the Golden Visa in the greater Lisbon and Porto areas. This pressure also stemmed from years of complaints about overtourism, lack of access to housing for local residents, and the questionable value of the Golden Visa program beyond profits for real estate developers. The proposal garnered cross-party support. The message is that any legislative changes will not be retrospective but will apply to any applications from January 1, 2021.
Given these proposed changes, many people have asked us for our opinion.
WHAT WE THINK…
The first and most important thing we recommend is to allow time for the process to take its course. We recommend making decisions based on facts once Parliament has voted.
If you are considering a Golden Visa in Lisbon and Porto, either act quickly or put your application on hold. The threat of a potential change will always linger over these two large, residential markets. It is unclear what, if any, impact this may have on property prices, given the diversification of the market in recent years. But the Golden Visa has had a significant inflationary effect on property prices in these locations. Chinese buyers have been major contributors to this phenomenon.
Those who are seeking a Golden Visa investment without particular affinity for Lisbon or Porto, should immediately start to seek alternative options. Investors should classify themselves into one of two groups: those seeking the cheapest available real estate Golden Visa, might consider going north or inland; and those seeking an investment return should head south. Anyone who actually intends to spend more than the minimum requite time in the country, should overlay their personal preference of the regions of Portugal, on one of the groupings above.
Investors should be aware that agents, developers and sellers in regions outside Lisbon and Porto will naturally talk up their regions. Buyers should analyse fundamentals and ask for evidence. But they should not apply stricter criteria than they would have applied to Lisbon or Porto.
NOW IS THE TIME TO ACT…
Finally, we encourage investors to act quickly when you have the facts. While Portugal and the Portuguese can be quite dynamic and inventive, the country does not offer fiscal stability. Any decision should minimise the risk of future changes. Avoid overpriced purchases, buy properties with proven rental revenue history, buy in locations with resale values that have increased. Investors should also consider alternative approaches such as a small portfolio versus a single property. And for the more adventurous, development opportunities are still available in excellent locations.
The message here is change. Expect it, and do not be surprised when it happens. And more importantly, don’t be surprised when the change goes against you. If you are a pragmatist and understand that tax efficiency is the “icing on the cake” then Portugal continues to represent some wonderful opportunities, both in terms of investment and lifestyle.
* Disclaimer: a number of statements in this article refer to events which may happen in the future. The results may be exactly the same as, or completely different to, what is predicted. One of the objectives of this information is to make people aware of the possible changes. We encourage those interested to seek advice from duly qualified sources (of which Facebook is not one).
As someone who grew up in South Africa, I watched with anticipation and some sense of pride as the Springboks or the “Bokke”, pulled off a great victory to take the trophy home. But the naturally ebullient and optimistic feeling after a victory of such proportions was short-lived. The victory would, knowing the way the South African population react emotively to such events, convince many people that “everything was going to be ok”.
The rugby win would pull the country together, help it tackle its issues such as the constant power cuts, the consistent under-investment in education, the rampant corruption, the continuing HIV-AIDS epidemic which is a plight on the nation, the cycles of violence which cannot seem to be broken. Of course it would…not.
What we learn if we have lived in South Africa is that, no matter how much we admire the country, its people and its magnificent scenery, economically the situation has deteriorated consistently over several decades. There is no greater indication of this erosion of purchasing power than the demise of the national currency, the Rand, which has made the cost of living, although still competitive by international standards, hugely costly for the local population. Indeed, even for visitors, certain items are very expensive and one wonders how the local population afford these items. The answer, of course, is they do not and go without.
In the 1960s the Rand was worth almost $1.39, dropping to $1.15 in 1974 when it was delinked from the USD. I recall times in the 1970s when the Rand was around $1.12 to the Rand – we took a holiday to Disneyworld and it was very affordable. But the Rand has been on a downward trend since the early 1980s. By 2001, the USD was worth over R12, and today that level sits at R18. This represents a depreciation of over 2400% over a period of approximately 50 years, or around 40% per annum. Put another way, R1,000 deposited in USD would have become, when converted back, more than R1.1 million in 20 years, simply based on the average devaluation of the currency over time.
Even for the most ardent and passionately loyal South Africans, those who under no circumstances see themselves leaving the country, it would seem to make sense to hedge by having some form of investment or holding in a foreign currency, to protect against the devaluation of the Rand.
The challenge with South Africans or those who have lived in South Africa is that they justify the risks in the country – physical, economic – with the “quality of life” and “lifestyle” which they believe is not attainable or replicable anywhere else in the world. Until one extricates oneself from this environment and has the opportunity to observe the country from afar, and to compare it to other places, it is an almost impossible task to convince a South African resident to look objectively at the situation in the country. No other country is likely to compare, and using logic is often counter-productive when discussing a hugely emotive subject.
The result of this “insular” perspective, not helped by the fact that it is far and expensive to travel to other first world locations, is that many residents become unwitting economic prisoners of their own circumstances. The term may seem emotive and even extreme, but the cases of retired South Africans who, through lack of planning brought on by their South-African-centric view of the world, have found themselves suddenly unable to do anything but live out their lives where they are, with no ability to, for example, join children who have emigrated or to be able to do some international travel, is all too frequent. This is not to say that suddenly all South Africans or residents will want to leave the country, but to many it is complete taboo to even discuss a life outside South Africa. This is a pity because these decisions will affect multiple generations of families, and essentially a lack of planning and action has left many South Africans without a choice.
After the World Cup win, we saw an obviously elated Bryan Habana appeal to the emotive side of the nation, and to vocalise what many hope, namely that the event would be a catalyst for change in the nation. While sport has historically had huge transformational potential in the country, most South Africans considering their financial situation, are increasingly detaching their emotions towards the country from the reality of fiscal prudence and creating financial security for themselves and their families.
And with the changes foreseen to be implemented by the South African Revenue Services (SARS), the usual 183-day rule will now be replaced with a ZAR1 million threshold rule, which will have an immediate and substantial effect on the tax position of high earners. The “expat tax” will be a big factor for wealthy South Africans in terms of deciding whether they commit, fiscally, to South Africa or look for a permanent alternative.
I note that the raising of the foreign remuneration exemption limit reminds me of a distracting tactic designed to take away attention from the fact that the average historical annual devaluation of the Rand against the USD has been substantially higher, and even in a period of greater stability, a portion of the increase in the exemption level is eroded by currency devaluation.
There is talk of South Africans now coming under the remit of worldwide taxation under the new regime, but it should be noted that a country like Portugal applies exactly the same rule in terms of its residents, namely the taxation of worldwide income. So the decision to emigrate fiscally from a country such as South Africa to Portugal cannot be based solely on taxation but on a combination of factors such as inheritance after naturalisation, tax exemptions under programmes such as the Non Habitual Residence scheme, and lifestyle and safety factors. In an African spirit, the generation making the decision must see this as “African” in the sense of the decision being the first step in a multi-generational decision. A decision to move from Africa to Europe involves so much more, emotively, socially, culturally, linguistically, than simply moving one’s tax position, that anyone considering it must look at it from a multi-generational impact perspective.
South Africans have historically felt comfortable with emigration to English-speaking countries in the Southern hemisphere such as Australia and New Zealand. Notwithstanding the obvious benefits of being the same hemisphere so the seasons being the same, and of English being the first language, Europe offers a huge array of options, especially for a younger, professional generation. If, after consideration, South Africans consider Portugal a good choice (and both Portugal and Spain offer excellent lifestyle options although Portugal, linguistically, makes for easier integration because of the level of English spoken), then it cannot be overstated how important choosing your residence is.
Selecting a location and a property in which to live with your family will be a key step in the decision to move. And with so many South Africans being sold overpriced villas in Cascais, for example, it is important that South Africans moving to Portugal ensure that they do not undermine their financial planning strategy by overpaying for real estate. If necessary, consider a rental for an initial, even indefinite period. You will still be eligible for residency under programs such as the income-based D7 visa. Importantly, don’t be convinced that you must invest in a Golden Visa when other options might be equally available for your situation. And don’t be persuaded by agents who have sold to many South Africans in the “same location” and now argue that that buying in the same areas are the only sure-fire way to quickly integrate into the South African community in Portugal.
South Africans, like all nationalities, are often comforted by proximity and contact with other South Africans. So are the French, and the Finnish and the Swedish. and the Brits. But with few exceptions all these nationalities eventually form a multinational circle of friends based on their interests. So if you are accustomed to space, want affordable real estate yet proximity to an international expat community, don’t hope to find the former in Lisbon or the latter in the Silver Coast. If you like the opera and ballet every week, don’t expect to have that option in the Algarve without travelling up to the capital or to Seville.
Any country move is a process. What starts as a multi-faceted decision involving emotions, aspirations, finances and much more, quickly becomes a practical search for housing, schooling and even investment such as a local business.
With so much changing in South Africa and in Portugal (both Golden Visa and NHR programmes will change), timing and speed is crucial. If you are seriously thinking of Europe, and specifically Portugal or Spain as your destination, getting in touch with a local expert who has experience in navigating this process themselves, is an absolute must in ensuring as smooth a journey as possible.
TAX-free Retirement in the Heart of Europe
Anyone who is nearing or at retirement age wants to protect his or her hard-earned pension. What better way to do this than via tax-free retirement?
Many want to do this in a safe country with a warm climate, friendly people and a great lifestyle. And in a region voted Europe’s best golfing destination by the World Travel Awards.
Now one country has made it easy to do all the above.
Portugal has recently improved legislation aimed at attracting foreign residents and investors to the country. The Non-Habitual Resident (NHR) law allows qualifying individuals to receive a private pension or non-Portuguese income, tax-free for a period of ten (10) years. To qualify, applicants may not have been fiscally resident in Portugal during the previous five (5) years. Foreign or non-Portuguese income is exempt from taxation if the country from which it is paid has the right to tax the payment (even if it does not). Qualifying individuals include EU/EEA/Swiss nationals, who have the automatic right to settle. Those obtaining residence via programs such as dependent employee, entrepreneurship, study, business investment or the Golden Visa, can also apply.
The Golden Visa allows non-EU citizens (extending to close family members) to benefit from permanent residence. This may be converted into citizenship after a period of 5 years. Golden Visa real estate investments begin at €280,000 and rise to €500,000, depending on the location. With property values still at very competitive levels, the combination of the two solutions may provide a tax-free entrance for non-EU nationals to the European Union.
Although Portugal does not implement strict controls on the movement of individuals, especially within the Schengen space, the formal requirement for residency is 183 days per year. Alternatively possessing what could be deemed as an habitual (owned or rented) residence on the 31st December of the respective tax year is also accepted. Exceptions to this exist, such as the Golden visa, where permanence requirements are significantly lower.
The Non-Habitual Resident regime
Under the NHR law, a flat rate of 20%* (less than half the highest taxpayer rate of tax) is levied on any income originating from Portuguese sources.
Most double tax treaties (conventions) allow for the taxation of income at source. In practice, many countries do not exercise this right if the person is non-resident. It thus follows that, under the NHR law, most foreign income will be tax-free. Each sub-category of assets must be analysed in order to ensure that maximum tax relief is obtained. These will include dividends, royalties, and bank interest, among others. The use of a suitably qualified tax advisory professional is recommended and the investment is quickly recouped. Costs are typically between €1,500 and €3,000 depending on complexity of an individual’s financial affairs.
The NHR law provides an excellent solution for pensioners as well as liberal professionals. These include consultants, company directors, doctors, dentists, architects and engineers, and anyone promoting active investment in the country. Occupational pensions, as long as deemed not to be sourced in Portugal, are exempt under the NHR law.
The possibility of a tax-free pension, the absence of inheritance or gift tax, no wealth taxes (other than annual taxes on real estate), access to the state health system for residents and EU citizens, a lower cost of living than most of the EU-18, and the availability of quality and cost-effective private health, have earned Portugal the Telegraph accolade of the “2nd best place to retire abroad”.
As an alternative to the purchase of real estate, we have launched a rental-based site for long-stays in the Algarve. www.algarvelonglets.com. Rentals also afford NHR status to qualifying individuals, who do not need to purchase a property.
* In 2013 there is a 3.5% surcharge imposed on all personal income tax in Portugal, linked to the ending of Portugal’s bail-out from the EU/ECB/IMF.
Planning for the Golden Years:
the modern-day “Gold” rush in the California of Europe
Anyone who is nearing or at retirement age wants to protect his or her hard-earned pension. Many want to do this in a safe country with a warm climate, friendly people and a great lifestyle.
Equally, many people from outside Europe aspire to have free access to, or live on, the “Old Continent”. As do those who have a highly mobile lifestyle but want a base in a low-tax environment.
Now one country has made it easy to do all the above.
Racking up the accolades
World’s and Europe’s Leading Destination 2017. 3rd safest country in the world. 7th friendliest people. 12th best healthcare. World’s best golfing destination. Europe’s best beach destination. Lowest cost of living in Western Europe. Lowest property purchase taxes of any Southern European country. Near the top of the rankings in the Quality of Nationality Index meaning its passports makes it among the best options for visa-free travel.
Portugal. The ugly duckling turned swan.
A few years ago, no one wanted to touch it. The IMF was bailing it out. The English were calling it names – one of the PIGS. Even the Prime Minister publicly encouraged its youngsters to emigrate (interestingly, many are now returning, with half a decade of additional international expertise to offer their land of birth).
Now, fastest growing European economy in Q1 2017. Eight years of record-beating tourism numbers. New host of the Web Summit, the world’s premier IT and emerging technology investment conference. Land of the birth of the President of the European Commission, President of the Eurogroup, and the UN Secretary General. 10th largest exclusive economic zone in the world, 97% of which is sea. A country punching above its weight.
Whimsical waves: a replica caravel sails over tranquil waters along the pristine Algarve coastline near Benagil And home to Europe’s most popular Golden Visa program.
The most golden of Golden Visas
Why, you may ask, if Spain has several times more visitors than Portugal and there are more Spanish-speaking people in the world, and if Greece has a Golden Visa investment level half that of Portugal, has this small country on the Western edge of Europe become the most popular destination for those looking for residence in Europe via investment?
The reasons for the approximately €4 billion invested in this program to date are varied and many:
⦁ In addition to the Golden Visa itself, the Portuguese nationality and passport, are highly sought-after. With visa-free travel to 157 countries, a Portuguese passport is among the world’s top 5 for hassle-free travel;
⦁ Portugal has 79 double tax treaties signed with other nations. This is relevant because it underpins the country’s highly successful NHR (Non Habitual Resident) program, which broadly allows eligible applicants to pay no tax on any foreign-earned income (including pensions);
⦁ Portugal has no wealth taxes (except for a newly implemented real estate tax for individual property ownership greater than €600K (based on fiscal value which is generally lower than market value or purchase price) or joint ownership above €1.2 million)
⦁ There is no inheritance tax and owning property in own name is very efficient
⦁ Property is sold freehold, with rare exceptions. The land registry is among the most reliable in the world. Property is fully documented and protected
⦁ Permanent right to reside after 5 years (with no requirement to reside, unlike Spain and Greece)
⦁ Easy family aggregation providing the family with the full right to reside, work and study
⦁ Very few nationalities are “excluded”: it is the analysis of the person’s individual circumstances and history, together with the source of funds, which are relevant to any application.
The Portuguese Residency by Investment (better known as the Golden Visa) was launched by the Portuguese government in October 2012, but only saw its first approved candidates in the second half of 2013. It is a fast track method for foreign investors from non-EU countries to obtain an authorisation to reside in Portugal and can be summarized as follows:
⦁ Permanence requirements include 1 week in the first year and two weeks in every subsequent two-year period. Applicants are free to travel within the Schengen vis travel area
⦁ First entry must be via a valid Schengen visa or visa waiver program
⦁ Applicants have the right to work if they wish
⦁ Citizenship and a Portuguese passport can be obtained after 5 years of residency. A basic Portuguese language test must be passed
⦁ Applicants must not have a criminal record, be banned from entering the country or be flagged in the Schengen system
⦁ Initial application fees are around €5,200 per family member with two-yearly renewals at 50% of that value. Legal fees can be just as high but many smaller solicitor firms and other expert partners are able to deliver this service for a much lower cost – in some cases absorbing it into their conveyancing fee. Find a local partner who can make suitable introductions to a range of experts.
The most popular route to investment is via the purchase of real estate, under the following rules:
⦁ Standard investment is €500,000, sourced from funds brought from outside Portugal without recourse to credit or debt financing. Any amount above the GV threshold may be financed
⦁ Any type of real estate qualifies. Shared or co-ownership applies as long as the minimum threshold is met per investor
⦁ A reduced level of €350,000 for approved rehabilitation projects in properties of at least 30 years. The criteria for qualification are strict and for most investors this is not a practical solution
⦁ Either of the above levels maybe reduced further by 20% if located in a low population density area. An excellent opportunity exists in key municipalities in the country, one of which is discussed in this article
⦁ The Golden Visa investment can be sold after the 5 year period
Setting out your stall and claiming your stake
Just as those who trekked across the US to find fortunes in California depended on staking their claim to the right plot of land, so too selecting the right region for investment is crucial in Portugal. Factors such as ease of resale, likelihood of appreciation, and rental yields, must be taken into account before deciding where to invest. Crucially, if the property is to also become a family holiday home or a permanent place for work or enjoy your golden years, then a match to holiday requirements for the family, to airports with good international connections or to a place which offer a balanced lifestyle and cost, must be factored.
Experience has shown that most, if not all, who visit it will fall in love with something: those from Canada and the US love the authenticity combined with first-world infrastructure; those from Latin America see the gateway to Europe as an opportunity to have a foot in Europe while retaining traces of home, including a similar language; those from Asia are impressed by the family-friendly environment and the openness to multiple cultures.
But beware Portugal’s beguiling charms: not every region is a match for every investor. Tourism is one of Portugal’s largest industries and exports and there is a reason why the Algarve and greater Lisbon are, respectively, the two largest tourist destinations in the country.
Sunshine is a main factor. And the further north one goes, the less you see it, especially in the rainy winters. So even if you are enamored with the Douro valley, spanned by myriad bridges and traversed by port-wine bearing barges, consider whether you will accept gray skies in the winter and less intercontinental airline connections.
People. Another major driver. While you may fall in love with an inland area such as the beautiful Alentejo, with its world heritage sites and golden fields of barley, it is an area with small villages and with low population density. Great for buying cheaper properties but not great to obtain a yield. Greater travel distances. Less English spoken. Very quiet in the winter.
Planning your approach
Keep your options as open as possible. If you are looking for a Golden Visa and residence, then stay as close to the purchase limit as possible. That way, you ensure that you are able to resell or, if you need to keep the property, you will stand a better chance of not being out of pocket.
Look for reduced investment Golden Visas, avoiding areas which have seen huge price increases. Look for regions which might still be undervalued. And most importantly, if you want to generate revenue, look at where the source of demand is.
David vs. Goliath?
Lisbon. Nation’s capital and center of government and power. A fantastic weekend destination, with plenty of historical monuments, culture, gastronomic options, cheap travel and excellent beaches not far away. Great for workers, especially mobile ones. Pretty good for retirees if you don’t mind the hills, are happy to take safe and cheap public transport or hop in an equally inexpensive cab. Best range of healthcare options.
One problem: a booming real estate market that is starting to look very much like a bubble. Think Golden Visa. Add exploding Chinese middle market. Overlay with a €500,000 Golden Visa limit. Net result: any owner of a 2-bedroom apartment in the city thinks they can ask for €500,000 from a foreign buyer. Local buyers don’t even bother trying to buy those types of properties anymore.
The Algarve. One of the world’s top tourist destinations. Portugal’s number 1 spot for both national and foreign visitors. Great for sports lovers: walkers, ramblers, surfers, golfers. Excellent for fish and sea food lovers, but then again, so is Lisbon. OK for culture. Good set of public and private healthcare options.
Two advantages: much better bang for your buck in real estate terms. And better weather.
Algarve: Best Place in the World to Retire
The tourism crown jewels are the country’s southernmost province, the Algarve, with beaches of golden sands, cliffs of golden light and sea of azure that many mistakenly think is on the Mediterranean. Even the cool Atlantic seems to be warmer in the Algarve, voted seven years in a row “Best Place in the World to Retire” by the Overseas Retirement Index.
The Algarve has mostly been overlooked until now as a destination for the Golden Visa, primarily for the following reasons:
- Those nationalities showing most interest to date, namely Chinese and Brazilian, who have jointly invested almost €4 billion, want urban locations such as Lisbon;
- Many who like a more suburban feel, such as South Africans, Americans, Turkish, Russian and the remaining Brazilians, have been shown Cascais by local agents. Only some investors have managed to remain at the €500,000 level due to the upmarket locations and property which are being shown. Investors are almost inevitable being upsold into spending more than the required amount;
- With Lisbon prices climbing to historical highs and buyers priced out of the market, the Golden Visa wave has broken on the shores of Portugal’s northern city, Porto, which has seen its real estate prices also rise dramatically;
- The first wave of GV buyers was looking for new or recently refurbished properties. As the country has seen new construction at a standstill since the 2008-9 crisis, there has simply been insufficient inventory available. The Algarve reflects this situation, with new-build properties representing a price per square metre at the very top end of the national average.
However, the region offers a very interesting variety of Golden Visa options and much more variety, in our opinion, than any other highly desirable location in the country. With the Algarve already the country’s top tourist destination and the region’s economy relying heavily on this sector, Golden Visa product should not affect the local residential market nor disproportionately inflate prices, as has been the case in the Lisbon and Oporto markets, because its appeal will continue to be to the foreign market. In fact, the Algarve’s Golden Visa product should increasingly act as a catalyst for the injection of more investment into the region’s tourism sector, by diversifying the “simple” €500K which has typified the region to date.
Research and knowledge: your pick and shovel
If the residence visa is your main aim, stick to your objective. Numbers first. Many beautiful villas can stretch your budget by hundreds of thousands of Euros. And there is always a more beautiful and more perfect property to be found.
Choose a partner who will be aligned with your objectives and budget. Consider entering into a buyer agreement with someone who can work for you rather than earning their fee from the seller.
If you are thinking of settling, ensure you take a Discovery Tour. Get an experienced company to show you the areas and examples of real estate within each, before taking the plunge. Rent before you buy if you are not sure. Ensure that you have found a place where you can live in the quieter winters and the busier summers.
Be aware of the regional subtleties:
⦁ Higher yields are more difficult to achieve in the greater Lisbon area because prices are higher (even though rentals are also higher)
Properties in the Algarve come furnished, increasingly to a high standard. Lisbon properties are unfurnished unless specifically set up for short-term lets
⦁ Lisbon is a year-round destination even though the winter is slower than the summer. Either weekly lets or annual lets are the preferred model. The Algarve still experiences great variations between summer and winter. But as properties are furnished, weekly summer rentals can be combined with monthly winter lets for maximum return.
his is realistically only possible in the Algarve.
Eldorado: combining location with value for optimal Golden Visa value
With Lisbon overpriced and good deals increasingly difficult to find, the Algarve should at least be on investors’ short-list. The key should be to look for good value for money opportunities. The Algarve is a narrow strip of land where most of the development is concentrated near the coastline. The main factors for optimal value in the region are proximity to the coast (15 minutes maximum, less is better), distance to golf course (again, near the coast and you are guaranteed to be within 15 minutes of one) and being south of the region’s A22 highway.
When overlaying this with quality real estate or modern or contemporary construction, many of the region’s properties are priced well above €500,000. Well known for the extremely exclusive (and equally pricey) real estate is the Golden triangle which encompasses Quinta do Lago and Vale do Lobo, where two bedroom apartments are easily between €650,000 and €1 million, and a 3 bedroom villa worth millions of Euros. Upmarket areas such as Vilamoura, Carvoeiro and the Lagos municipality are less expensive but all of them still require a minimum €500,000 Golden Visa investment.
Travel to the province’s western-most municipality, most famous for Henry the Navigator’s maritime school in Sagres and the country’s second most popular surfing location, and you will find an area of stunning natural beauty, of imposing cliffs, mile-long beaches and one of the country’s largest natural parks along the Costa Vicentina. Because its natural landscape is mostly untouched by large-scale development, the number of residents is still low.
Therein lies the opportunity for Golden visa applicants: in low- density population areas the investment threshold is reduced by 20%, to €400,000. In this region, some stunning Golden visa opportunities exist. Quality contemporary properties; resorts (including golf resorts) with multiple services; and amenities and well-located properties perched atop coastal villages, offer excellent opportunities in a region which combines natural beauty and proximity to wonderful beaches, with the benefit of the Algarve’s tourism growth.
The municipality continues to benefit from the Algarve’s eight years of record-beating tourism as well as the demand by permanent residents, many of whom retirees, for sunshine, great lifestyle and low taxes / cost of living.
Examples of the great Golden Visa deals on offer include a fully furnished executive 3 bedroom golf course villa, with shared pool, expansive golf views and access to a wide range of amenities including golf, on-site restaurants, spa, and tennis, for under €415,000 and which comes with a fixed guaranteed income in the first year. This property, well managed, can easily generate a gross yield of 6-7%. A smaller 2-bedroom property on the same resort with two years of guaranteed 5% revenue is for sale at €400,000.
Just down the road, luxury 4 and 5 bedroom villas on a leading eco-resort can be bought for between €400,000 and €500,000. It is also possible to “package” up several plots, complete with full planning, which can be held for later resale or used to build single-family villas or townhouses.
Finding residence, lifestyle and solid investment is very much possible if you know where to look! Enjoy your golden years the best and smartest way!
IS YOUR ANNUITY FAILING YOU?
CONSIDER INVESTING IN FIXED-INCOME CARE SUITES
It was the day after the referendum of June 23rd 2016 that I realised that my British Pounds would not buy me as much as the day before. In fact, about 20% less, although that has now “recovered” to 15%!
Suddenly, travelling to Europe, living my retirement in Europe and even making my hard-earned British pension stretch had just become 15% more difficult. And much less predictable than before. Worse, since the referendum, inflation in the UK has risen to around 3% which means that the pitiful returns the banks are giving us on our own money, typically less than 1%, are eroding our capital. Each year money in the bank is worth less.
There is a simple distinction between working life and retirement: in the former, we work for money, in the latter money must work for us so that we can enjoy our later years. Many retirees have been let down by underperforming annuities, a depreciating currency, and most recently higher inflation. All this means that the quality of life in later years is at the risk of getting worse. It is therefore crucial that everyone think seriously about how to protect and grow their retirement pot.
Expat retirees with a new life in Southern Europe still have family or financial links to the UK. Not everyone is comfortable severing all links with the UK. With Brexit looming, a majority of those retiring abroad are wondering how to ensure they retain rights and protect income in both the UK and EU.
Dealing first with the question of right of residence in the EU: even if no deal is reached between the UK and the EU, from a procedural point of view, a “cliff-edge” Brexit will place the UK in the same category as those applying to reside in Europe, whose origin is outside the EU. Such applicants need a visa to enter the area and to remain as residents. In countries such as Spain and Portugal a Golden Visa category exists which allow people to invest in exchange for residence.
While it may be difficult for expatriate residents to apply to be “new residents” in a country where they have lived for some time, it is very feasible for expats in Spain to seek, for example, residence in Portugal, with those who are eligible also applying for tax-free status, a way to protect and maximise pension payments. One of the criteria is not to have been resident in Portugal during the last 5 years.
Expat retirees will also want to make sure that their assets, savings and income in the UK are maximised. However, in later years, our appetite for risk (understandably) decreases. With this in mind, and with many financial groups admitting that annuities do not deliver viable long-term solutions, the search is on for alternatives.
One sector of the market presents interesting opportunities for capital protection and steady capital growth. A sector which most expats in Southern Europe understand: social care.
Currently care in the UK is privately funded until one’s estate is worth just £23,000 (this is under discussion). Care home places are limited, means-tested and include value of your home. Retirees often need to sell their home to fund care. Most residents in care homes have a life expectancy of a further 10-15 years, creating long waiting lists. Care home occupancy is currently running at almost 90% and fees average £700 per week.
In the UK, 8 million people will be aged 80 or more, and 1 in 4 people will be 65 or more by 2050, double current levels. The failure of small care homes due to a number of factors including rising costs (which will be exacerbated when the UK leaves the EU), create knock-on effects leading to problems such as “bed blocking”. There is huge pressure on existing care homes and an urgency to create new care home places.
As a result, a number of companies have taken on the refurbishment of old or abandoned care homes, or are improving operating facilities.
This new wave has created the opportunity for individual investors to become part of the social care revolution. With investment levels typically in the £50,000-£100,000 range, this sector is accessible to most retirees with a pension pot.
For some it presents the opportunity to use their 25% tax-free draw-down in exchange for a fixed income which is much higher than an annuity. For others, it may make sense to release equity from a debt-free primary residence to ensure that assets are growing at a faster (and more predictable) rate than the currently stagnant housing market. For yet others, it may mean that some money released from selling a primary residence can be invested while the rest can be used to move abroad.
The returns from these investments range between 8-10% per annum, after costs, which is substantially higher than most other real-estate backed investments. This is a relatively low-risk investment given the demand described above. Importantly, it targets a sector which retirees understand. After all, we will all at some point need care.
With a fast-changing world, it is important that expat retirees consider not only ways in which they can efficiently manage their lifestyles abroad, but also protect their assets and sources of income in the UK. A combination of tax-free retirement abroad and fixed-income investments at home might just be the winning combination.
Low-Cost, Universal-Access Healthcare
Portugal’s healthcare system is broadly based on a universal franchise, which will not turn anyone away. Most hospitals will put patient before price (one of the reasons that the health system runs a deficit, but also the reason the country is generally known for its personalized and humane treatment of patients). With the tightening of financial controls, expect this to be slightly different if you are not resident or don’t have a European card. As in many European countries, state hospitals such as the one located at Portimão, 5 miles from both Lagoa and Silves, are normally better equipped for emergency situations than private hospitals. However, two large private hospital providers own and operate hospitals across the Algarve, with the closest being the Hospital Particular in Alvor. The hospital at Faro has an excellent reputation for cardiology and for successfully treating tourist visitors who have suffered heart attacks.
All residents are eligible to use the state’s healthcare system, called the SNS (Sistema Nacional de Saúde). European residents should ensure that they are in possession of the European Health Card (EHIC), issued by their home country, and which guarantees them access to the health system in the country that they are visiting. Access should not be confused with cost, and some services may cost more or less than in one’s home country, depending on the national policy in each of the 28 EU member states.
For non-Europeans retiring to Portugal, permanent residence authorization must first be issued by the SEF (borders agency) after the completion of usual background checks (see the “Residency” section below). The foreign resident must then register with their local health center, a simple process involving filling in some forms and having a local (owned or rented) address. Residents are assigned a doctor or in some cases go into a general pool, depending on the number of doctors per inhabitant (which can fluctuate with population growth or doctor retirements). Even without an assigned family doctor, there are general slots available and Lagoa, for example, runs a daily (including Saturday) local ‘emergency’ service, which can attend to up to 40 people who need see a doctor without an appointment, and who do not need the services of a hospital. Co-payment (if the person is not exempt) is €5 (outpatient copayments are around €7.75), regardless of whether one has an assigned family doctor or not.
Diagnostic exams are very affordable if ordered by a doctor within the national healthcare system (SNS). The Clínica de Lagoa, a private diagnostic and complementary exam center, offers a range of exams via its agreement with the national healthcare system, and most exams, such as ultrasound, X-ray, and mammography, will cost between €3-10 when prescribed by a doctor on the SNS. Several laboratories conduct blood tests at between 50 cents and €2. A full barrage of tests, including cholesterol, urine, and PSA (prostate tests for men) should cost between €15 and €20. A walk-in cholesterol test conducted at any local pharmacy will cost between €4-5.
It is recommended that foreign arrivals in the process of acquiring residence take out medical insurance for at least the first year, to cover bureaucratic delays and other unforeseen circumstances. Even thereafter, private medical insurance is not expensive when compared to the US and there are several private medical insurance providers available. IMG (including a policy which can be taken out even after your departure) and Bupa, for example, offer expat solutions and a range of national providers such as Medis and Multicare provide policies for those who are permanently in the country. There are also a number of brokers focusing on obtaining car and health insurance for foreign residents. Other foreign visitors not included in one of the above categories should ensure they carry adequate foreign insurance to allow them to use thenational health system, which is of good quality.
Maló Clinic, founded by a Portuguese immigrant, is now one of the largest private dental clinics in the world, present in dozens of countries in the world and whose founder is regularly flown to the US to perform dental surgery on wealthy patients. A Maló Clinic can be found about 10 miles from Lagoa and Silves, but Silves has three dental clinics where a clean and check-up costs around €40-50 (free on most dental plans), and Lagoa has several foreign-language dentists. The climate of the region means that convalescence is both quicker and more pleasant than in many countries further north. Doctors and specialists are largely multilingual.
Eye tests at local opticians are free if eye glasses are purchased in-store. A number of promotions are available—a recent one offered designer glasses with progressive lenses at €169. Consultations with ophthalmologists on the SNS are generally free but waiting times can be long.
One of our friends from the US needed to repair his $6,000 hearing aid, an imported Norwegian make. The estimated cost to perform the repair in the US was $900. He posted us the two hearing aids and €40-plus-postage later he had a fully functioning hearing aid at his home in Miami.
Health tourism is on the up in the region and the Algarve is well known for its health & wellness industry, with a number of spas in the region. A thalassotherapy center exists at Vilalara resort in Lagoa. And medical tourism is on the rise with several private hospital groups in the region investing extensively in the marketing of their services, primarily around discretionary (aesthetic) surgery, hip implants, and dental surgery. Although the region does not yet compete with the prices in more established medical tourism destinations, it places great emphasis on the pre-op preparation and post-op convalescence benefits that come with a warm, essentially dry (not humid) climate. Complementing this are the quality services and accommodation options, and a location within Europe.
Education And Culture
Silves is the location of one of the region’s private universities. The Jean Piaget University campus, opened in 2002, focuses on health including undergraduate and Masters programs in the areas of nursing, occupational therapy, and
pharmaceutics. It is in the area of physiotherapy, however, where it has garnered an enviable reputation. Its graduates are spread across Europe, poached by many countries that have made the most of Portugal’s woes post-2008 crisis. The trend is slowly reversing, with local projects providing a muchneeded source of employment for the qualified labor force. Residing in this area guarantees a flow of well-qualified health professionals, many of whom will, it’s hoped, eventually find themselves supporting the region’s senior residents.
Lagoa is one of the region’s centers of international (foreign language) primary and secondary schools. The International School of the Algarve, which comprises two sections, one teaching the British and the other the national (Portuguese) curriculum, was established in 1972. Although it allows children of English-speaking residents to attend school in their native English tongue, residents with children of school-going age should bear in mind that the range of subject options and in some instances the quality of teaching may not be the same as an equivalent private school in the UK or USA. In recent years, a German school has opened and now shares its premises with the Dutch school. The area is now a multi-lingual, multicultural hub with native teaching in four languages.
Lagoa is also an artistic hub housing a thriving musical academy, a cultural academy, an art center, and some of the region’s largest publications including Portugal’s principal foreign newspaper, The Portugal News. The musical academy, which forms part of a multi-city musical project, is headquartered in Lagoa and has an active orchestra comprising of a strings, woodwind, percussion, and brass sections, with musicians aged from eight to 65!
The orchestra plays frequently at public events, television concerts, open air shows, and at the well-equipped auditorium in the town. Lagoa’s cultural association, Ideas do Levante, promotes activities ranging from dance to music.
Becoming A Resident
U.S. visitors to Portugal do not need a visa under an agreement which allows for visits to Schengen countries of up to 90 days. However, all foreign citizens intending to move to Portugal must in the first instance request their long-stay (residency) visa at the Portuguese consulate in their home country. This will allow the Borders agency to issue a residency permit, valid for one year, and renewable for two further two-year periods. After five years of temporary residence, foreign citizens may apply for permanent residence.
The main requirements for a residency visa application include being able to prove sufficient income for subsistence, providing relevant identification documents, having no criminal record, travel documents, and proof of address in which the applicant will initially take up residency. Proof of medical insurance may also be requested but as a precautionary measure it is recommended that any non-EU citizens have private medical insurance when traveling to Portugal. Some companies such as IMG allow medical policies to be taken out when the person is already in the destination. Documents are normally submitted via the local consulate and they eventually make their way to the Borders agency (called Serviços de Estrangeiros e Fronteiras or SEF). I recommend traveling with a copy of the full application process and any relevant correspondence, to avoid any possible misunderstandings on entry. Once the residency authorization has been issued by SEF, applicants should register with the local finance office to obtain their fiscal number.
Recently, the Portuguese government has further improved legislation to allow anyone who has not been resident in Portugal for the previous five years to register for Non-Habitual Resident Status, which allows people to receive pensions and foreign income tax-free for 10 years. Once an individual has an authorization to reside in Portugal, such as via the Golden Visa program (see below), or has obtained a visa to enter Portugal with a view to permanent residence, then the process of applying for NHR status is relatively simple. A qualifying individual should meet two main criteria: they must not have been resident in Portugal in any of the previous five years, and they must be retiring to Portugal or fall into one of the approximately 30 occupations listed by the
government including architects, lawyers, engineers, senior management, health professionals, and individuals who will be fostering inward investment.
The applicant, probably accompanied by someone local who speaks Portuguese, must go to the local tax office (Finanças) and make a written statement that he-she meets all the criteria of eligibility, and then present a tax identification number (or request one), show their passport, indicate the residential address in Portugal (which may be a rented property), and show the residence permit. All applications must be received no later than the 31st March of the year following the one in which the applicant wishes to declare themselves resident under the NHR law.
The legal requirements to obtain residency in Portugal is to stay either 183 days in the country or a residential address on the 31st December of the corresponding tax year, which can be considered one’s habitual residence. While the latter condition may not appear at all stringent, it can be deceiving, for the simple reason that it is often not Portugal, but the applicant’s country of origin, that determines that they may not declare themselves resident in Portugal because they have spent too many days in their country of origin. As with all such matters, people intending to take up residency should carefully analyze the residency requirements of all the countries with which they have or plan to have ties to.
The Golden Visa program has proved to be one of Europe’s most popular resident visa-via-investment programs. Although there are three types of applications possible, it is the real estate option, involving the purchase of real estate with a value of at least €500,000 without recourse to credit, which has proved to be most popular. The Golden Visa is an excellent way for non- EU residents to obtain an authorization to visit or remain in the 26-country Schengen space for the duration of the visa, and after five years to apply for permanent residence and thereafter citizenship (after six years). The biggest advantage is that there are minimal requirements for remaining in the country, namely seven days in the first year and a total of 14 days in each of the subsequent two-year periods. Further, the Golden Visa allows the applicant and direct family members the right to enter, live, and work in Portugal, even if not resident in the country. Given that real estate values have suffered significant erosion as a result of the 2008 economic crisis, the Golden Visa is an attractive option for foreign investors.
When compared to comparable programs elsewhere in the world, the Portuguese Golden visa does not appear to have any disadvantages, even though a few other European states have implemented cheaper programs. The flexibility of the scheme, allowing for multiple property purchases, and the use of debt on values above €500,000, together with family-friendly legislation allowing close family members to benefit from the Golden Visa of the main applicant, have made Portugal’s program very popular. Unlike the US’s equivalent $500,000 EB-5 program that targets predetermined areas and projects, Portugal’s Golden Visa rules apply to any real estate in the country. Normal U.S. investor visas are $1 million.
US Presidential Election: Supercharged Brexit or a Rubicon of Difference?
Two days after the US presidential election, the world observed how America deals with democracy in a very different way to the British. A long and intense (and very expensive) presidential campaign was followed by dramatic decision. Universal and bipartisan commitment to the transition to a new order followed. Unlike America’s rust belt which one wonders will ever recover no matter how much stimulus is injected, all protagonists adjusted to new roles with the ease of a well-oiled machine. Fundamental to this apparent “settling in” regardless of some discontent in the streets, is the fact that the system has defined clearly the path to power in the case of a public vote.
Contrast the US presidential election to Brexit where the failure to clarify the scope, remit and due process of the referendum, and to clearly communicate this to all affected, has meant 5 months of continued debate, hesitation and uncertainty. The referendum of June 23rd continues to be scrutinised for legitimacy and intent. It is now clear that much is unclear! Clearly Brexit is not Brexit inasmuch as no one is able to define just exactly what detailed policies and approaches will be defined. Teresa May’s enthusiastic recounting of her conversation with president-elect Trump shows just how much the government was anxious for a chance to reiterate that the UK would be able to forge new trade agreements with its closest ally, with whom it has a “special relationship”.
Her comment might have carried more weight had not Boris Johnson, well known for his contradictory positions on a range of matters, immediately called on an end to “collective whinge-o-rama” (sp?), making it clear that the UK government senses an opportunity to deliver positive news amidst practical difficulties of trade negotiations yet to ensure.
Depending on their agenda, politicians will describe the two dramatically important events as exactly the same or completely different. Retirees and seniors in both markets, post these votes, will have surprisingly similar objectives, and the speed at which those elected are able to deliver on their promises, may encourage many to look at other options for a peaceful retirement…just in case:
- Access to quality, affordable (public and private) health care (70-90% lower than in the US and comprehensive private insurance premiums for over-65s from around €40 per month)Stable and affordable cost of living (easily 40% cheaper than most US metropolitan areas, and still 15-20% cheaper than the UK, after the depreciation of the Pound);
- Freedom to travel without being treated with suspicion (a weekend break in a different country, a drive over the border without being suspected of being a criminal)
Tax-free or low-tax living for those who have save for retirement (up to 10 years tax-free for eligible new residents);
- Peace of mind and living in a safe region with minimal political, racial or social unrest (where most foreign residents can afford to live at a comfortable level and have moved through choice)
Quality rental accommodation (easily 50% cheaper, and in considerably better locations, than comparable accommodation in the US or UK);
- Purchase a property where you are protected by law (knowing that fundamental ownership rights will be protected regardless of nationality or origin, and where direct heirs can inherit tax-free).
We don’t think that the Algarve will remain “Europe’s most famous secret” for long…
PORTUGAL: TAX HEAVEN TO TAX HELL?
What a difference a week makes! A month, well that is life-changing. Three months, an eternity for tax.
As recently as six months ago, it was unquestionable that Portugal was among Europe’s best investment destinations. For seniors or retirees, it was the uncontested number 1: a growing economy; falling unemployment; a rapidly recovering real estate market; a real estate investment surge driven primarily by the very successful Golden Visa program; a wave of (mostly) wealthy foreign retiree immigration driven by the Non Habitual Resident program; and all this fuelled by 8 successive record-breaking years in the tourism industry.
However, since then, the government has insisted on a strategy of (not-so-gradual) assault on those perceived to be wealthy. And, unfortunately, as houses and apartments elicit a much more visceral response than pieces of paper known as shares or even a pile of intaglio paper known as money sitting in bank coffers, the government has set its sights firmly on ensuring that all those who own real estate pay for the right to bring investment into the country.
It started with what appeared to be a notion so ridiculous that it would be impossible to implement: taxing a “good” view. What was a good view? A sea view: definitely. A golf view: most probably. A country view: well, we know the countryside, under threat, may be considered a scarce resource. So that will probably come into play. Surely not a warehouse: well, under normal circumstances no one would think such an absurd thought. But these are not simply warehouses your house overlooks: they are refurbished historical buildings which are part of one of Europe’s most successful regeneration projects. So, yes, warehouses are probably in. In consulting it is called scope creep.
Now, all owners of real estate in Portugal know they will be taxed more via their IMI (municipal tax) but they have no idea of who decides, as least subjectively as possible, how good their view is. Is it perhaps too much of a coincidence that this increase comes at a time when many owners requested the official revaluation of their properties (only possible every 5 years) after falling construction prices, which saw a sudden drop in municipal tax revenue?
That followed closely on ongoing chatter that inheritance tax would be implemented in the next budget. A strong call for wealth redistribution pervades the conversation and as the long-suffering Portuguese citizen is well aware, when a rumour hits the airwaves, it is certain that the details are already being ironed out.
Then came the wealth tax. Weeks in the publishing, but one suspects cooked to perfection over a long period of time. An absolute uproar that a far left party had made a “suggestion” about taxing property. But within days it was hailed as a constitutional breakthrough eschewing the principles of equality.
Surely, all wealth would be taxed in the same way? Wrong, only property.
But what about property that had debt on it and which was being repaid by the owner? The answer was swift: everyone knows that official property values are well below actual property values. It seems that the members of parliament have not yet had the chance to visit one of the many golf course developments scattered around the country where frequently the opposite occurs.
But what if my neighbour owns stocks, shares and stockpiles his cash? Clever neighbour indeed…
Who will it affect? The “wealthy” of course. Anyone with real estate worth more than €600,000 (double the exemption for married couples).
What about primary residences? First and second homes will be exempt, was the government’s first response. One week later, an announcement that a sliding scale mechanism would be implemented, with no first and second home exemptions.
Our prediction: the exemption limit will fall to €500,000 and the government will embark on an upward home revaluation program.
While investors and owners rushed to legalise or register their investment properties under the AL (local lodging) law, spurred on by a threat of prosecution and a legion of tax advisory and consulting firms eager to capitulate on a new revenue stream, the “dark” side of the law began to emerge:
- the government can charge CGT on what is now considered a business, if you decided to cancel your AL license;
- a continued prejudicial regime favouring short-term lettings over long-term lettings, the latter subject to an effective tax rate of around 7 times that of short-term letting (although recent changes now mean that this difference is only around 2.5 times);
- a creeping up of IMI based on the notion of “lettable” properties (which conveniently were now easily identifiable by virtue of their registration under AL);
- and the latest uncertainty which has assailed owners who are not, despite what the government may say, professional landlords: the apparent need to withhold government taxes, in addition to dealing with VAT, for values over €10,000 per annum, meaning complex accounting which is contrary to the “simplified” regime which was launched as a motif for the law.
Add to this the fact that the country will almost certainly implement a IHT or inheritance tax (and even those who have gifted assets in life are under threat of IHT being applied retrospectively), and in six months Portugal has seen uncertainty caused by a change of the real estate fiscal environment on parallel with Brexit in the UK.
With all this going on, it is no surprise that until some sense of stability or normality returns, clients looking to make the most of the positive personal taxation environment will continue to seek long-term rental solutions that currently do not have any of the disadvantages of a property purchase.
SKATTEFRI PENSIONERING I HJÄRTAT AV EUROPA
Vem som helst som närmar sig pensionsåldern vill skydda sin välförtjänta pension.
Många vill göra detta i ett tryggt land med ett varmt klimat, med vänliga människor och med en fantastisk livsstil.
Inget enskilt land har en särskilt underlättad procedur till ovanstående.
Portugal, som röstats Europas bästa golf och strand destination av World Travel Awards, har nyligen förbättrat sin lagstiftning som syftar till att locka utländska medborgare och investerare. Non-Habitual Resident (NHR) lagen tillåter kvalificerande personer, som inte har varit bosatta i Portugal under de fem (5) föregående år, att bli bosatt i landet och få privata pensioner eller icke portugisiska inkomster, skattefria under en period av tio (10) år. Utländska eller icke portugisiska inkomster är skattefria om landet från vilket de betalas äger rätt att beskatta betalningarna (även om det inte gör det). Kvalificerade individer innefattar medborgare i EU, EES och Schweiz samt de som kvalificerar sig genom speciella program såsom beroende anställda, företagare/entreprenörer, studenter, investerare i företag och det Gyllene Visumet (Golden Visa).
De formella krav för att få uppehållstillstånd är antingen 183 dagars vistelse eller vad som kan betraktas som en stadigvarande bostad (som ägs eller hyrs) den 31 december i resp. taxeringsår. Undantag från dessa finns, till exempel det Gyllene Visumet, vilket gör att icke EU-medborgare får uppehållstillstånd genom att köpa fastigheter till ett värde av minst €500.000.
Enligt NHR lagen, ett schablonbelopp på 20%* (mindre än hälften av det högsta inkomstskattesats) tas ut på alla inkomster som härrör från portugisiska källor, arbete som utförs i landet eller utländska inkomster som inte beskattas eller som inte omfattas av källskatt.
Enligt de flesta dubbelbeskattningsavtal, beskattningen av pensionsinkomst sker i det land där personen är bosatt. Enligt NHR lagen följer det att de allra flesta utländska inkomster blir skattefria. Ett viktigt undantag till lagen omfattar pensionsutbetalningar till f.d. offentliganställda då varje regering normalt förbehåller rätten till källskatt. Detta innebär att full befrielse från källskatt inte kommer att vara möjligt. Människor som hamnar i denna kategori kan dock kompensera eller mildra beskattningen med hjälp av dubbelbeskattningsavtalet mellan Portugal och ursprungslandet.
Det blir också viktigt att analysera varje underkategori av tillgångar, såsom utdelning, royalties, bankräntor o.s.v. för att se till att i varje enskilt fall den maximala skattelättnad uppnås. Hjälp av en professionell och kvalificerad skatterådgivare rekommenderas och kostnaden av en investering på mellan €1,500 och €3,000 (beroende på komplexiteten i en persons ekonomiska angelägenheter) tjänas in vanligtvis snabbt.
Processen för kvalificerade sökande (d.v.s. de som uppfyller förutsättningarna som förklarades ovan) är enkel: Det handlar om att registrera sig på den lokala Finanças (eller skattemyndigheten) för att få ett skattenummer, ge uppgifter om bostaden (bevis på ägandet eller ett långsiktigt hyresavtal) och en skriftlig begäran till den relevanta myndigheten. Alla ansökningar måste lämnas in senast den 31 mars av året efter det år som avses i ansökan. Ansökningarna kan ta några månader att behandla så det rekommenderas att alla behöriga sökande lämnar in sina ansökningar så snart de har tagit beslutet att ta steget, så att resultatet är känt, om möjligt innan slutet av de relevanta beskattningsåren (inte bara i Portugal utan också i ursprungslandet).
NHR lagen ger en utmärkt lösning för pensionärer samt fria yrkesutövare såsom konsulter, företagsledare, läkare, tandläkare, arkitekter och ingenjörer samt alla som aktivt främjar investeringar i landet. Tjänstepension som anses inte köpta i Portugal är undantagna enligt NHR lag.
Möjligheten till en skattefri pension, frånvaron av arv eller gåvoskatt, ingen förmögenhetsskatt (förutom den årliga fastighetsskatten), tillgång till en tillförlitlig statligt hälsosystem för både invånare och EU-medborgare, lägre levnadskostnader än de flesta EU-18 och tillgängligheten till en förstklassig och kostnadseffektiv privat sjukförsäkring, har tjänat Portugal utmärkelsen för “Bästa stället i världen att gå i pension i” från den 2014 Overseas Retirement Index.
Utöver den traditionella vägen för inköp av fastigheter för pensionering eller långa vistelser, har en lösning baserad på att hyra nyligen lanserats i Algarve. Tillsammans med medicinsk och andra relevanta tjänster, lösningen riktar sig för dig som vill prova-innan-du-flyttar, för att njuta av vinter vistelser i din favoritdestination som även ger NHR status till kvalificerade individer som väljer att tillbringa merparten av sin tid i landet.
* Under 2014 finns det en 3.5% (2015: 2.5%) avgift som åläggs all personlig inkomstskatt i Portugal, kopplat till slutet av Portugals räddningspaket från EU / ECB / IMF