Howard Bilton, Chairman of Sovereign Group – Feb 19, 2020
Since the writing these published articles it has been announced that the rules regarding the taxation of NHRs and the investment options available for Golden Visa applicants will change.
Henceforth from the operative date pensions received in Portugal will suffer 10% tax in Portugal. At the moment the operative date is unknown. The date is expected to be published shortly and we think it most likely to be 31st March. It could be earlier and be the date the new legislation was published and therefore already be too late for new NHR’s.
We do believe that the new tax regime will only apply to those who obtained NHR status after the operative date. Those who came in under the old regime will remain under the old regime.
Of more serious concern and interest to our clientele, is that they are also talking about taxing dividends at 10% in Portugal. It must be borne in mind that the ten year tax holiday does not give exemption from all taxes. However the standard planning technique was to convert all relevant income into dividends paid from a company located in a jurisdiction which had a tax treaty with Portugal and which is not totally exempt from tax. Malta is the favoured jurisdiction. It has been not completely certain whether a small amount of tax needs paying in Malta on those profits before they are paid out in dividends in order to exempt the dividends from Portuguese tax. Irrespective, Malta has previously provided either a very low tax or no tax planning opportunity for NHR’s in Portugal. Going forward we are fairly sure that dividends will be taxed at 10%. Again, we are also fairly sure that the 10% will only be paid by those who apply for NHR status after the date upon which the new tax regime comes into force and those who already have NHR status will not be effected.
In our mind, although none of this is certain, this is yet another reason to obtain NHR status as soon as possible so that: (a) NHR status still exists and (b) the status grants exemption from dividends as described above rather than those dividends being taxed at 10%.
Bearing in mind the simplicity of obtaining NHR status we would urge anybody who is interested to live in Portugal at any time within the next ten years to apply now while the status is certain. Why wait until these changes come into effect or, indeed, the NHR status may be abolished altogether.
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