Re: Non Habitual Resident Scheme
 

Yep.
It may be aimed at high earners, but I don't think they have excluded lower income people.
Don't think it's means tested :huh:
If you can get on it then it's worth it for the 10 years it runs.

Re: Non Habitual Resident Scheme
 

Of course it is means tested in a sense because you have to declare all your income to the PT tax authorities and it would be for them to decide which qualified for relief under the NHR scheme.

I would not qualfy having paid tax in Portugal for some years but I would have to have a much higher UK income than I do to warrent giving up my UK residence and tax status in order to export free of tax what we have to Portugal.
UK tax relief for those on limited incomes will increase over a period of 10 years.
Will the PT tax allowance grow at the same rate over the same period.
You could at the end of the NHR scheme find yourself much worse off than had you remained in the UK.

Eg UK income 15000 ( tax allowance 10,000) 5000 @20% = £1000 tax bill
10 years under NHR you could save £10,000
If the PT tax allowance is £5000 and the rate of tax is 25% in year 11 you would be paying £15000 -£5000 = £10000 x 25% = £2500
So in years 11-14 you would have to pay the PT tax everything you saved in years 1-10.
Had you stayed in the UK you can expect personal allowances and marginal tax rated to have increased so in all probability in year 11 your UK tax bill could be zero and that in the years 1-10 each year you would be paying less and less tax.
Of course we do not know what would happen to PT rates and allowances in that period but it is very unlikely that they will match movements in the UK.

This is why you should take qualified independent advice from someone who is an expert in not just the NHR scheme but also that of your home country.
Every time I go to Portugal I see adverts from estate agents promoting NHR.
Estate agents are NOT tax experts.

Re: Non Habitual Resident Scheme
 

It's quite simple really if you're moving from UK to live in Portugal with pension from the UK only.

Unless your pension is one of those which must be taxed by the UK (eg Civil Service and local government pensions) then you do not have an option as to where it is taxed - it should be declared and taxed in Portugal with nothing payable to the UK.

If you qualify for NHR status, you would get exempted from paying tax on this income in Portugal for 10 years. Just to make it absolutely clear, under these circumstances it means NO tax in the UK and NO tax in Portugal. There are also exemptions on tax for other forms of income.

Despite the constant assertions that this is a scheme for the wealthy only, it is not. You don't have to be in receipt of very much pension in order to be liable for tax, so it's definitely worth pursuing for those who move here full time, even on a modest pension.

As for anyone who wants to keep a foot in both camps in order to avoid paying what other residents pay, good luck with that. Personally I think a 10 year exemption is a pretty generous offer, though grossly inappropriate under the current circumstances. I expect there'll be a few Greeks heading this way shortly....

Re: Non Habitual Resident Scheme
 

Lots of confusion here - the basic principles are as follows:

If a person is resident in Portugal (more than 183 days in the tax year or has a permanent home in Portugal as at 31 December) then that person is subject to taxation in Portugal on his/her worldwide income.

Then you have a look at the double tax treaties entered into by Portugal - some types of income, are by rights (determined in the double tax treaties) taxed by the paying countries, others, by Portugal.

Pensions (not civil / military - but gain, not in all treaties), are normally taxed in Portugal - though disclosable in Portugal and will be taken into account to determine the tax rate on other income. Portugal has with the non habitual residency scheme foregone the right to tax this income for a period of 10 years - this does not mean then that the paying country has the right to tax it. Of course, there are formalities to make sure that the paying country does not tax income when they are not entitled to it. Normally, local tax offices and home country help desks are not very informative in the steps to be taken, but all this information is available on official sites.

Re: Non Habitual Resident Scheme
 

I'm still trying to wrap my head around why Portugal has made this NHR law. They way TonyJ1 describes it, it doesn't seem that attractive for someone like me (software expert, good salary) to relocate to Portugal. It seems like it could benefit some people from being taxed on certain investments and pensions but is that really attractive enough?

I worked in Denmark under the foreign expert scheme and I paid 25% income tax with health insurance and social security/pension included. The Danes are smart in that they know that hardly anyone in their right mind would relocate there and pay 65% income tax when you get better elsewhere in Europe.

Re: Non Habitual Resident Scheme
 

rhody. You don't say if you intend looking for work here. If you do, then forget about it. No jobs here for non Portuguese speakers.

That aside, I earn my income from South Africa. The DTA states that PT has the right to my tax or can also tax me. Criptive indeed.

Where is "source"? Source is where you apply your mind, wit and capital for your income. So if you dabble with stocks in Timbuktu here, then the "source is here. Not Timbuktu. Same applies to internet business even if your clients are in the UK only.

So for me that trades here in PT on the South African stock exchange, it would give PT the right to tax me. But to enforce it, I will get an International Residency Certificate from the PT tax office and send it to SA tax office. That will close my file at the SA tax office.
This will pave the way open to get NHR and not pay tax anywhere for 10 years.

Re: Non Habitual Resident Scheme
 

Hi Ukkram, no I don't intend to look for work in P but if I wanted to, I could easily get a job but I would be in demand in Lisbon not the Algarve. Even without fluent Portuguese.

You hit the nail on the head - the source being my mind and my creative work means that if I am in P more than 183 days then that is where my work is taking place. Even if the German or American company is paying my salary. Then there are all kinds of tricky stuff in the tax treaties. If you have a home available in both countries and are a citizen of one of them, then that country can get priority to tax you. There was a big discussion on that over at Expat Forum as well.

The best thing is to get professional advice but even then until you actually go ahead and commit to living in P will you get finality in the answer as to how you will be taxed.

Re: Non Habitual Resident Scheme
 

does anyone think it's worthwhile applying for NHR if you are a uk state pension holder getting the normal state pension with secondary pension increments. it's not taxed in uk as it's under £10000 and i wonder if it will be taxed in Portugal as it is over £5000.

Re: Non Habitual Resident Scheme
 

Honestly NO, the UK tax allowance will increase again next year and if the tories are elected they have promised more to come.
UK marginal rates are lower than Portugals so if you do the maths its a no brainer.

Re: Non Habitual Resident Scheme
 

Although if you are Portugal for more than 183 days per year you will be tax resident by default and will need to declare income from the UK and pay the tax due in Portugal. Of course many people do go under the radar and take the associated risk of heavy fines etc if found out, something I don't condone. If you became NHR then the Portuguese tax due would be zero for 10 years. If you are in Portugal for less than 183 days then it's not relevant. I think you really need to have a chat with an accountant if you have any doubts

Re: Non Habitual Resident Scheme
 

we have just become residents over here and will not be returning to UK so i think a chat to an accountant might be a good idea.

Re: Non Habitual Resident Scheme
 

Deffo worthwhile then - income above 4,104€ is taxed.

Just a quick example :
£5,000 at an approximate current rate of 1.40€ to the £ gives 7,000€
If you were declaring as a single person or separately from a partner, the tax before deductions on that would be 420€ give or take a few cents. If it were £7,000 you were declaring, the tax would be 825€ ish

The deductions bring that down a bit - up to 250€ per person for household expenditure where invoice with tax number is requested (this requires expenditure of 715€ in total, so obviously easy to claim the full amount), and 15% on most health expenditure being the main two.

I think you'd be well advised also to consult on whether it would be better for you to be taxed separately or individually if you're a couple.

The claim for NHR needs to be made at the latest by 31st March of the year following that in which you became resident.

It's relatively straightforward to do your tax returns online once you've got the gist of it - if you don't yet have online access to Finanças, I'd suggest you apply for that.

Re: Non Habitual Resident Scheme
 

If you are already in receipt of your OAP that means you are over 65.
10 years is a long time when we reach an age when health etc starts to become an issue.
It is a decision that needs to be given a lot of thought before reaching the best option for you.

Time is on your side .

Re: Non Habitual Resident Scheme
 

Just got back from Financas re NHR. Impossible to do it yourself. You must have an accountant do it for you so I am now in contact with TonyJ1.

Re: Non Habitual Resident Scheme
 

Just a thought to qualify for NHR do you not have to own a property ?
Would just renting disqualify you ??
I ask because one of the reasons for the large number buying retirement property in Portugal from France Sweden etc is to qualify for NHR.