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Establishing NHR in Portugal leaving UK advise

Establishing NHR in Portugal leaving UK advise

Old Oct 19th 2019, 2:03 pm
  #16  
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Default Re: Establishing NHR in Portugal leaving UK advise

Hi, I have just done my residency by coming over to the Algarve for a week to get the local paperwork done before Oct 31st. It is an easy process which took 2 elapsed days waiting for the Residency document to be printed and signed. 10 euro for the NiF and 15 euro for the Residency Document in Lagoa area.
With Regard to finances I too contacted Bevins Franks but was put off by them wanting firstly to do a full financial projection document for me at a cost of 4000 euro, I explained I had one of these already from last year when I opted out of my Final Salary pension scheme in the UK and my goal and requirements had not changed but they would not accept that. Secondly they wanted to charge 3% of my fund total to move it from a UK Cash pension account to an international one. I declined their services.
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Old Oct 19th 2019, 2:35 pm
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Default Re: Establishing NHR in Portugal leaving UK advise

Bevins Franks tried to justify advising to move my fund out of the UK by saying that some other EU countries were considering or indeed had moved to taxation at source which if the UK were to do that would restrict the ability of NHR 10 year tax advantage for any wealth still located in the UK.
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Old Oct 19th 2019, 3:06 pm
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Default Re: Establishing NHR in Portugal leaving UK advise

Originally Posted by AlgarveAndy View Post
Bevins Franks tried to justify advising to move my fund out of the UK by saying that some other EU countries were considering or indeed had moved to taxation at source which if the UK were to do that would restrict the ability of NHR 10 year tax advantage for any wealth still located in the UK.
First I heard of it. Do you think that BF are giving disinterested information? I will do some research on this. And I would be concerned at this proposed transfer anyway. As I see it, if you transfer the pension plan to Portugal, then I can’t see (but I could be wrong) how the plan could still be regarded as an overseas (ie non Portuguese) investment. Even under NHR, investment income and gains in Portugal remain taxable.

UK personal pensions are taxable in the country of residence. Under NHR, of course, the applied tax rate for UK pensions is zero. However, should you consider that pensions will become taxable in the UK, then the obvious solution is not to transfer the pension elsewhere (at no doubt very high fees) but when 55 and as a holder of NHR, to encash the whole fund, perhaps investing the proceeds in a UK investment or in a European compliant investment bond.

When you encash the pension (ie take benefits) the first 25% will be paid to you free of tax. The remainder will be taxed at source. However, on your following UK tax assessment you can claim the tax paid, and will get it all back. So the net result....in the end...is the tax free payment of your entire fund. It makes sense, therefore, if birth dates permit, to claim those pension benefits before the end of the UK tax year, April 5th, and on or shortly after April 6th to submit the tax return.

Hope this helps.

Last edited by Diddion; Oct 19th 2019 at 3:29 pm.
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Old Oct 19th 2019, 4:37 pm
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Default Re: Establishing NHR in Portugal leaving UK advise

Originally Posted by AlgarveAndy View Post
Bevins Franks tried to justify advising to move my fund out of the UK by saying that some other EU countries were considering or indeed had moved to taxation at source which if the UK were to do that would restrict the ability of NHR 10 year tax advantage for any wealth still located in the UK.

The other country they will be talking about is Finland. I think they altered their double tax treaty so that their pensioners didn't benefit from the Portuguese NHR.

I don't think the UK would do that, they have much bigger political issues that will be keeping them occupied for the next few years.

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Old Oct 19th 2019, 4:40 pm
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Default Re: Establishing NHR in Portugal leaving UK advise

Ah yes that is the country they mentioned thank you Caroline :-)
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Old Oct 19th 2019, 4:52 pm
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Default Re: Establishing NHR in Portugal leaving UK advise

Thanks for the comprehensive information and I had not considered the second possibility you outline whereby the null rate could be achieved by claiming back in arrears. my current thought is to take out 80-90% of my pot as soon as I hit 55 and invest it some rental property (and pay the flat 20% rate tax NHR allows) and some european (non portuguese) funds and bonds as once I am in 'draw down' mode then I don't see what value the pension wrapper actual provides.... or am I missing something ?.

As a newcomer I'm really impressed with the assistance on the Forum :-)
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Old Oct 19th 2019, 6:01 pm
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Default Re: Establishing NHR in Portugal leaving UK advise

Originally Posted by AlgarveAndy View Post
Hi, I have just done my residency by coming over to the Algarve for a week to get the local paperwork done before Oct 31st. It is an easy process which took 2 elapsed days waiting for the Residency document to be printed and signed. 10 euro for the NiF and 15 euro for the Residency Document in Lagoa area.
With Regard to finances I too contacted Bevins Franks but was put off by them wanting firstly to do a full financial projection document for me at a cost of 4000 euro, I explained I had one of these already from last year when I opted out of my Final Salary pension scheme in the UK and my goal and requirements had not changed but they would not accept that. Secondly they wanted to charge 3% of my fund total to move it from a UK Cash pension account to an international one. I declined their services.
Once you are "here" and have an address in Portugal surely the sensible thing to do is to apply for NHR - a relatively simple process on the Portuguese Finanzas site . Simultaneously , as a Portuguese resident you can file a Double Taxation Agreement with the UK which then exempts you from UK tax. With this document and NHR I see no reason why you cannot draw down your UK pension pot without any tax charge. Just thinking aloud.
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Old Oct 19th 2019, 6:03 pm
  #23  
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Default Re: Establishing NHR in Portugal leaving UK advise

Originally Posted by AliceCaroline View Post
The other country they will be talking about is Finland. I think they altered their double tax treaty so that their pensioners didn't benefit from the Portuguese NHR.
Sweden has also negotiated and signed (in May this year) an alteration to their tax treaty with Portugal, yet to come into force as I understand it.

Not necessarily to eradicate any benefit at all as far as Swedish sourced income is concerned but they were certainly objecting to complete exemption from tax on Swedish pensions etc, so they may be satisfied with the generally anticipated forthcoming alterations to NHR, provided they're implemented within the time specified in the altered treaty.
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Old Oct 22nd 2019, 11:20 am
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Default Re: Establishing NHR in Portugal leaving UK advise

Hi All, My Nif was ...( FREEEEEEEEE)
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Old Oct 22nd 2019, 12:13 pm
  #25  
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Default Re: Establishing NHR in Portugal leaving UK advise

Originally Posted by AlgarveAndy View Post
Thanks for the comprehensive information and I had not considered the second possibility you outline whereby the null rate could be achieved by claiming back in arrears. my current thought is to take out 80-90% of my pot as soon as I hit 55 and invest it some rental property (and pay the flat 20% rate tax NHR allows) and some european (non portuguese) funds and bonds as once I am in 'draw down' mode then I don't see what value the pension wrapper actual provides.... or am I missing something ?.

As a newcomer I'm really impressed with the assistance on the Forum :-)
Andy, I think you are missing something....two things, actually......

First, tax on rental income. Under NHR UK rental income is untaxed in Portugal. However, it is taxable in the UK, but (at least for now) you would be eligible for the personal allowance, hence that rental income would be free of all taxes. However, even under NHR, income from rented property in Portugal is taxable, but the rate is not 20% (which is the tax rate for special occupations under NHR). The rate is a maximum of 28% this year, but I believe will be 26% next year (2020).

Now the pension investment. There are significant benefits for keeping your fund within the pension plan. Remember that gains within a pension plan are free of tax, whereas (crystallised) gains in a Portuguese plan are indeed taxed, at 28%, or on different rates if held in a bond. The financially wise thing to do, therefore, seems to be to retain the investment within the pension plan, but to encash and withdraw it fully shortly before the end of your NHR status. Under current NHR rules this will all be tax-free. You will not have incurred any costs on the fund and it’s gain, and can invest at that point in a suitable non pension investment plan.
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Old Oct 22nd 2019, 7:15 pm
  #26  
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Default Re: Establishing NHR in Portugal leaving UK advise

Is there a document that details the anticipated alterations to NHR that you mention ?, would it be the situation that if you are already granted NHR then any revisions would only apply to new applicants.
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Old Oct 23rd 2019, 2:09 am
  #27  
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Default Re: Establishing NHR in Portugal leaving UK advise

The current rules are just that: correct as of now. This is not meant to imply that any changes are expected. Again, if there are changes, then they would be applicable to new immigrants, and less likely - but possible -for those already in receipt of the benefits. However, changing the benefits for someone mid-way, as it were, could well be open to challenge in the European Court.

Last year a change to NHR was mooted: that of applying some (a low rate of perhaps 5 to 10%) tax to pension income, but this did not make its way to legislation. I have not heard any more of this - indeed, in 2020 the range of professions eligible for the now tax rate has been increased.

Basically.....keep your ears open, and don’t worry!

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