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Let's see if I can get this thing to work

Let's see if I can get this thing to work

Old Jun 18th 2020, 11:43 am
  #1  
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Default Let's see if I can get this thing to work

Looks like the border opening arrangements here in the Caribbean are going to make things claustrophobic.

Will have established Tax Residence here for the 2020 tax year prior to any potential departure.

Let us suppose that come mid-September I choose to relocate to Portugal on a permanent basis, get a NIF number using the address of a property I am renting on a short-term basis. Come 15th December or thereabouts apply for residency registration.

I need to do what it takes NOT to become tax resident in 2020 as I have a property to sell in the UK though would best need to have had that exchange BEFORE arriving in Portugal.

To assist this ALL, I would plan to BUY a property in Portugal only early in 2021 and I would then live in it or use it only for family, when not there.

SO, in a nutshell, I need to tidy up UK property interests without having to worry about Portuguese CGT. I want to pay the local's rate of tax on any PT property purchase and don't really want to be tax resident in 2020 - might therefore have to leave Portugal temporarily over New Year's?

I need Portugal as my base (and happily so) so that there are no concerns down-the-road due to UK CGT temporary non-residence issues on that UK property.

Not sure if any of this will wash with the authorities in Tavira.

My UK property is worth more than I would intend to spend on anything in Portugal.

I can tidy up my investments incl ISAs before arriving so that any concerns regarding PT CGT are minimal or non-existent.

I would apply for NHR for 2021 onwards.

Is this a plan? Thank you so much for your continued indulgence.

Last edited by Pistolpete2; Jun 18th 2020 at 12:16 pm. Reason: Will have established Tax Residence here for the 2020 tax year prior to any potential departure.
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Old Jun 18th 2020, 11:58 am
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Default Re: Let's see if I can get this thing to work

Originally Posted by Pistolpete2
... Let us suppose that come mid-September I choose to relocate to Portugal on a permanent basis ...
I'm not an expert but it seems to me that you can potentially be considered a resident (and therefore tax-resident) from your date of arrival in September as you have admitted having the intention of living in Portugal. Others may claim it's the date when you register your residence or when you associate your NIF with a Portuguese address but you would appear to be intending any/all of those in 2020.

If you sell your UK property before you go to Portugal you should be OK as Portugal operates a partial tax year basis for your first year but it does mean losing ~9 months tax benefits from your 10 years of NHR.
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Old Jun 18th 2020, 3:54 pm
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Default Re: Let's see if I can get this thing to work

Originally Posted by RichardHenshall
I'm not an expert but it seems to me that you can potentially be considered a resident (and therefore tax-resident) from your date of arrival in September as you have admitted having the intention of living in Portugal. Others may claim it's the date when you register your residence or when you associate your NIF with a Portuguese address but you would appear to be intending any/all of those in 2020.

If you sell your UK property before you go to Portugal you should be OK as Portugal operates a partial tax year basis for your first year but it does mean losing ~9 months tax benefits from your 10 years of NHR.
Thanks for this - had forgotten the split-year treatment.

May need to finesse things to accomplish goal of being resident in 2020 but tax resident 2021 and onwards because I don't want to gear up my investments and record keeping just yet to meet PT reporting requirements.

It was Dennis Swing Greene at Eurofinesco who indicated that a short lease or residence not over year-end and not in one's own place would work to establish residence for registration but not imply tax residence from Day1 BUT I will need to check further in this particular year and year-end. There is no second chance other than appeal.

I had heard of his approach before and was surprised that it was that straight-forward but there have been many on here who said that it was otherwise - i.e. the way you have said that it would be taken.

Am not intending to be a Eurofinesco client now so can't really double-check. So will check with my new source in Tavira, if need be.
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Old Jun 18th 2020, 8:10 pm
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Default Re: Let's see if I can get this thing to work

I remember seeing a post from a year or two ago, saying that PT residents selling their home would not be liable for cgt if they bought another property somewhere in the EU.
If that is the case, you could establish residency and after that, sell you UK home, buy a PT property and not be subject to cgt.
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Old Jun 18th 2020, 8:19 pm
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Default Re: Let's see if I can get this thing to work

That exemption applies to Portuguese residents selling their primary residence. By definition it must be in Portugal. Once resident in Portugal, a UK house is a second home and (potentially) taxable as such in the UK.
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Old Jun 20th 2020, 10:56 am
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Default Re: Let's see if I can get this thing to work

I got a response in general terms to my approach for advice ref residence and NHR from my Tavira solicitor. It seems that I am not well-placed to take this further until actually on Portuguese soil to get a NIF number and then move onwards with the 'project' from there. The NIF number would be needed for the NHR application and I would need to be sure that my temporary accommodation upon arrival met the requirements of a residence for the purposes of an address, in spite of it likely being an Airbnb. However, I wouldn't want to do 'residence' unless NHR is straight-forward as that would be a deal-breaker.

In the meantime, I went back through NHR threads on here and found this extremely useful OVERALL arrival in Portugal thread, got to post #15 and that was it, along with input from post #51 supported by post #52. (Big) Thread also addresses the 'issue' of Airbnbs for address purposes.

IF I arrive in Portugal and haven't retained a residence anywhere else, in my typical globe-trotting style, it will be hard to convince the authorities otherwise that after setting foot and obtaining registration, I am anything other than tax resident from day1 and that is not ideal with such a tight deadline to get things sorted and such complex financial arrangements times 2 that need to be worked through as in post #51 above.

Step by Step - Arrival in Portugal

I don't think that it was meant to be. So we will have to work around three months in every six.

Last edited by Pistolpete2; Jun 20th 2020 at 11:00 am.
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Old Jun 20th 2020, 5:34 pm
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Default Re: Let's see if I can get this thing to work

Once resident in Portugal, a UK house is a second home and (potentially) taxable as such in the UK.
Do you mean that in the situation I described, the OP might have to pay tax in both countries?
I thought that cgt was only liable in the country of residence.

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Old Jun 20th 2020, 9:54 pm
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Default Re: Let's see if I can get this thing to work

Originally Posted by ricko
Do you mean that in the situation I described, the OP might have to pay tax in both countries?
I thought that cgt was only liable in the country of residence.
CGT on property (real estate) is normally taxable first in the country where the property is located and then in the country of residence. Tax paid in the first country is usually offset against the liability in the second. Consult the relevant double taxation treaty for confirmation. Outcome is usually paying CGT at the higher of the two country's rates.

CGT on equities, for example, is normally taxable in the country of residence.
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Old Jun 21st 2020, 11:13 am
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Default Re: Let's see if I can get this thing to work

Originally Posted by ricko
Do you mean that in the situation I described, the OP might have to pay tax in both countries?
I thought that cgt was only liable in the country of residence.
In spite of being non resident for UK tax purposes now, I will still have to pay UK CGT on any increase in value post 6th April 2015 (date CGT for non residents became effective for residential property which was NOT a principle residence). The property is and always has been an investment property.

IF I moved to Portugal, seemingly under NHR, CGT, is only payable in the UK under the double taxation treaty with PT since "UK/Portugal treaty says that immovable property gains may be taxed in the country the property is located".

RH has indicated that there is split-year treatment for arriving tax residents - I'm confused on this as I have now read here (in that big thread quoted above - I think that you were in on that thread ricko) that split-year treatment does not apply in the first year or rather partial year of residence IF one applies for NHR for that first calendar year. I suppose a way round that, if need be, is to take up residence much later in the tax year and hand-on-heart apply for registration at the last moment of the transition period with sufficient evidence of commitment for it to still safely sail through. Then apply for NHR in the second year. Might be a big risk.


"We met with our accountant today. She advised that a new resident with NHR tax status will declare their income from 1 January to 31 December of the year in which they became resident, regardless of the exact date they became resident. However, if a new resident does not have NHR tax status, they will declare their income only from the date on which they became resident. This is the answer she received from Finanças/AT."

As regards a property which was (in theory) my principle residence in the UK, one would need further guidance as to whether the fact that one sold that property quick enough after ceasing to reside in it and thus paying ZERO UK CGT changed things so far as Portugal and CGT under NHR and the double taxation treaty. One would think that if it is NOT taxable in the UK then it is taxable in Portugal - will leave that to you to check.

As I indicated in my OP, one of the big reasons to choose a perceived stable place of residence for the longer view is the need to feel secure in the plan to remain outside the UK for a full five tax years so as to avoid any further CGT liability in the UK from the date of purchase rather than said 6th April 2015 - property was bought in the 90s. IF I can't be certain about this, I probably would not attempt to sell the property. Horse may have already bolted in that market anyway.

Last edited by Pistolpete2; Jun 21st 2020 at 11:31 am. Reason: "We met with our accountant today. She advised that a new resident with NHR tax status will declare their income
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Old Jun 21st 2020, 1:19 pm
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Default Re: Let's see if I can get this thing to work

Remember that you can only apply for NHR commencing for the year in which you become resident - get that wrong and you're stuffed. Registering residence as a Brit before the end of the Withdrawal Agreement and then trying to argue tax-residency beginning the following year seems very risky to me, since AT can consider tax-residency to apply from the day of arrival. See CIRS Artigo 16.º for the law.

Many tax-related matters are dealt with on a year by year basis, such as the obligation to make a tax declaration or the application of NHR status. However the first (partial) year's return covers the whole year with the first part declaring income as a non-resident and the remainder as a resident (both with or without NHR status). While you must be a new resident (terms & conditions apply) to obtain NHR you do not need to remain resident for the rest of the 10 years. If you leave after 5 years and return at 8, you will still have NHR status as a non-resident for ~3 years and as a resident for the final years.

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Old Jun 21st 2020, 3:41 pm
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Default Re: Let's see if I can get this thing to work

Again I must admit to being a novice at taxes.
However, I think I should still raise issues, as other forum members may have similar
misconceptions, and airing the issues will hopefully correct them.
Having said that, I find a couple of points troubling in Pistolpete's last post.

IF I moved to Portugal, seemingly under NHR, CGT, is only payable in the UK under the double taxation treaty with PT since "UK/Portugal treaty says that immovable property gains may be taxed in the country the property is located".
I find the 'may' quite ominous, because it doesn't specifically say that taxes won't be applied in PT.

Quote:
Then apply for NHR in the second year.

This would break the NHR rule of not having paid PT taxes in the last 5 years - was it this rule
that you were trying to circumvent in your discussion about timing your arrival?
IF so, is it so much more difficult to gain residency as a non-EU citizen.
If it's not particularly onerous, could you get residency at your leisure, arriving in 2021?



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Old Jun 21st 2020, 4:20 pm
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Default Re: Let's see if I can get this thing to work

Originally Posted by ricko
... I find the 'may' quite ominous, because it doesn't specifically say that taxes won't be applied in PT. ...
The 'double taxation treaty' predates NHR by decades. It is NHR status that may neutralise the Portuguese CGT liability if the conditions are right, one of those being that the other country may (ie has the right to) levy tax.
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Old Jun 21st 2020, 4:20 pm
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Default Re: Let's see if I can get this thing to work

Originally Posted by ricko
Again I must admit to being a novice at taxes.
However, I think I should still raise issues, as other forum members may have similar
misconceptions, and airing the issues will hopefully correct them.
Having said that, I find a couple of points troubling in Pistolpete's last post.


I find the 'may' quite ominous, because it doesn't specifically say that taxes won't be applied in PT.

Quote:
Then apply for NHR in the second year.

This would break the NHR rule of not having paid PT taxes in the last 5 years - was it this rule
that you were trying to circumvent in your discussion about timing your arrival?
IF so, is it so much more difficult to gain residency as a non-EU citizen.
If it's not particularly onerous, could you get residency at your leisure, arriving in 2021?
Hi ricko, well I have to confess that Portugal has been on and off the front-burner for a while and so one moment I gen up on the NHR rules only to move on to other things/priorities (just extricating myself from being UK tax resident was a major deal with being eligible for split-year treatment) and forget about some of the finer details when trying to 'get it done'.

I further confess that I forgot that I would be ineligible for NHR IF I so much as became PT tax resident in 2020 BUT did not actually apply until 2021 (or to be exact by 31st March 2022). Richard Henshall highlighted this fact for me. I wasn't trying to circumvent it - I was trying, in my ignorance, to go through registration in 2020 but not become immediately tax resident because I needed more time to get things in order. Clearly it is not possible.

Indeed it is possible to get a passive income visa and still get into Portugal post 12/31 but I might find it a bit hard to put up the requisite pension income which is approx 23,000 euros for the principle candidate.

At the end of it all, it all boils down to being absolutely sure that one has EVERYTHING that is involved in the ensuing TAX from being NHR. I'm just not sure about that and its cost in admin because we have potential CGT from investment income from portfolios and ISAs, property income from a tax haven, pension income from a tax haven and other investment income which could be problematic, quite aside from that UK property. A lot of things to go wrong. Plus there is now that 10% tax on pension income. NO single item is a big number, believe me, but the whole is a headache when one is trying to make the most of things in spite of very reasonable cost of living in Portugal.

We are NOT too put out by having to revert to Plan B because we think we can still build a fairly simple routine to get in and out of Portugal and spend time in Europe/Morocco without putting ourselves under pressure by being only in the UK for 90 days or less in this process. Our base will just have to be here in this region. I suppose lock-down and curfew has completely changed my overall perspective. We now realise that we can lead a perfectly acceptable life on a shoestring. Flights out of here would be nice though.

Last edited by Pistolpete2; Jun 21st 2020 at 4:27 pm. Reason: typo
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Old Jun 21st 2020, 4:27 pm
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Default Re: Let's see if I can get this thing to work

@Pistolpete2, could you send an eligible spouse ahead to secure residency, NHR etc for him/her prior to 31/12/20, with you joining in 2021 under family reunification rules?
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Old Jun 21st 2020, 4:33 pm
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Default Re: Let's see if I can get this thing to work

Originally Posted by RichardHenshall
@Pistolpete2, could you send an eligible spouse ahead to secure residency, NHR etc for him/her prior to 31/12/20, with you joining in 2021 under family reunification rules?
SNAP! I just suggested that or a very similar approach on the thread that is running in 'tandem' with this one. Didn't really think that it could work in my case BUT I would be the one to have to do it and I am the problem.

Suppose I could follow Andy Dufresne's plan in Shawshank Redemption - "do you trust you wife?"

Last edited by Pistolpete2; Jun 21st 2020 at 4:40 pm.
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