Pistolpete2

I think that we are going to bail out of NHR (not apply) (tax will still be too much of a headache) and go for a perceived easier arrangement of (re)becoming tax resident in a Caribbean country and routinely spending just less than six months a year in Portugal.

It is possible that we will still BUY in Portugal but would rent there for starters. It is my understanding that as a UK State Pensioner (if the Brexit negotiations still apply) we will be entitled to public health access in Portugal and could pay some sort of surcharge to access private care as and when. When there earlier in the year I used my EHIC card but I'm not sure that is what one uses once one goes through the residence process.

We will be in Portugal for almost six months at the end of 2019 and will probably file the post three-month residence papers in Tavira at that time. Does this filing for residence dictate how Portuguese state health is available and whether we have to fill out another form to access public health for services re-billed to the NHS?

Being in the Caribbean routinely for six months is going to mean that we will have to buy excess private health insurance for that stay alone but I believe the coverage we end up buying is likely to be global annual non-US so public health in Portugal will be fine unless there is an emergency, in which case this insurance could kick-in.

From reading on here, we are going to need to be very meticulous in our paperwork (leases, utilities, passport stamps) and in our itineraries in a tax year, to ensure we don't become Portuguese tax resident by accident and to show the authorities that we aren't.

Is this a plan?

Diddion

I'm not sure that it would matter if you did accidentally become a Portuguese tax resident, at least for ten years, if you applied for NHR status, because certain income is not taxed in Portugal for those with that status. You would need to check the taxation position of your non-Portuguese-sourced income; NHR is incredibly easy to apply, once you have your fiscal number in Portugal (which you will need anyway, resident or not, in order to rent or buy) Obtaining residency is also very easy, meaning a visit to a local office with your passport and rental contract. NHR application is merely the answering of three questions: Name, year you are applying for, and tick a box to confirm that you have not been a resident in Portugal in any of the previous five years. Don't knock it! We have now been in Portugal for just 2 months, and have that all sorted out with very little hassle. Presumably, after 10 years, you could end your residency should you wish.

This is one of those things which I think it really wise to seek personal, individual advice from an international tax expert - we did this and it saved us £50k in tax, and also prevented us making a tiny mistake which actually would have saved us £50k in UK tax but subsequently cost us an additional £60k in Portuguese tax........There may be additional tax consequences in the Caribbean, so the interactions may be quite complex.

For example, there are very clear rules about when you will be regarded as a UK resident and taxed accordingly, such as having a property available to you in the UK. These are not always self-evident. When you leave the UK during the tax year may also influence the outcome; we timed our departure for 6 April this year, which was ideal.

Sounds like a great life you have planned!! Going to buy a boat (or two: one in the Caribbean, one in Portugal!)?

Pistolpete2

Oh no! Just the simple life - on land. I've read your comments carefully. Thank you!

Have pensions from Bermuda and UK, UK and Caribbean (rented) real estate and fairly active US and UK portfolios incl ISAs. We are renters, so everything is working, if you get the picture. The arrangement, with back-up basic storage, allows us to check in and out of the UK while paying for only one place at a time. Ultimately our bones are going to start to ache more in the cold and we need to consider alternatives which are quality of life and tax efficient and Portugal also seems to stack up very well against the UK in terms of healthcare provision.

I thought the tracking of investment etc. activity for CGT and for tax returns would be too big a headache (it is a lot now even with self-assessment) and there could be administrative issues with that 'other' income which is not from DTT countries. Plus there would be the cost associated with annual professional help and some tax. Then the Mrs would have to pretty much go through the same routine though to a lesser extent.

So for me, the combo arrangement feels easier and it works the seasons better. I would come out slightly ahead of the game by saving on UK tax, where I try ever so hard to keep to and use the allowances*, and paying for the health insurance, though I recognise that the Portuguese cost of living is much lower than in the UK and overall the Caribbean isn't and in particular it usually costs a lot to get out of there by air.

*The US portfolio is a dividend generator which has better treatment for UK tax, though the allowances for dividends are declining by the year

Ukkram

What a complex fiscal situation you have. Have you thought this through?
Living half a year in each country will be very expensive rent wise. You will not be able to find a "long term" rental for 6 months in PT. You will end up with a holiday rental at 3 to 4 times normal rent pm.

If you purchase a property in PT you will have a hard time convincing the tax man that your "center of life" is in the Caribbean and therefore your tax residency must be there. If you have a property permanently available to you here and not in the Caribbean then your center of life would be here. End of story.

CGT is a residency based tax so you will only pay tax here if you are tax resident here or in the Caribbean if resident there regardless of the source country. Tax here is a fixed rate of 28% with no exclusions. NHR status will not give any relief at all.

Dividends however can be taxed at source as a withholding tax but the amount of tax cannot be more than 15%. If this is not withheld then it is taxed in the country of residence at not more than 15%. You will pay zero tax here if you have NHR status and zero at source..

Diddion

The only thing I disagree with Ukkram about is the 6-month rental - we are in the third month of an extendible six-month rental, obtained via an estate agent, and to make things easier and more attractive to the landlord we paid the 6 months in advance.

Other than that, yes, there are a lot of valid points Ukkram has made. We did manage to avoid cgt by leaving the UK on the 6th of April, crystallising the gain on that date, and entering Portugal on the 11th - so we were non-resident anywhere and nobody has the rights to claim CGT. This plan was devised by our international tax adviser, and there were a couple of other things we had to do to ensure that we were non-resident (such as not entering Portugal on the 6th, not having a property in the UK on that date available for us to live in).

And the UK statutory residence test could mean that you are subject to UK tax even if you believe you are not.

Let me agains stress that, in this complex situation, I feel that there is real danger of missing a small but critical element in your plans, despite the evident care and competence you have taken to generate your plans. An international tax adviser would, at the very least, confirm that your plans are robust, and at the best, save you a lot of worry and cost.

Pistolpete2

Posts 4 and 5 have very valid points which I have been batting around since we spent time in Portugal over last winter - trying ever so hard to come up with a reasonable workable and not over-complicated lay-out of our annual residence plans once we plan to leave the UK next autumn 2019.

Indeed, I have pondered the useful examples given in the HMRC SRT online document to ensure I have it right regarding periods allowed in the UK and having a HOME there and having a home somewhere else. The Portugal section of BE has been very useful with putting in practice plans which involve leaving the UK at tax expedient dates and risks of being subject to CGT even after departure as well as chats on the ease of expediting NHR on an on-going basis.

We will ensure that we create a permanent HOME in the Caribbean (per the SRT definition) on a year-round basis. We own property there which we could possibly occupy but there are other possibilities for homes in both St Lucia and Grenada (safer from hurricanes in the longer term, though clearly not entirely safe) which could work. I've been in touch with the Grenada High Commission here this week and the answers received were favourable to spending six months just there and there are reasonable negotiable lets for that time-frame (particularly if we can show 'residence' elsewhere in the Caricom area) though we are very conscious that winter is 'season' there. We already have good connections for renting in Portugal which meet our budget so we might not need to consider buying and I fully appreciate it would be in our favour NOT to confuse residency by implying that we are in PT with a degree of permanency.

The toughest decisions relate to having the healthcare to hand - originally we thought our Caribbean islands well-suited to provision of healthcare and long-term care. We will check whether this is still feasible. The other issue is the potential disposal of our UK property and ensuring that there is no CGT to be paid. So we need to be absolutely certain that we would NOT need to fall into UK tax residence within the full five tax years to get clear.

We used a UK tax specialist for CGT issues before we returned to the UK so as to get the timing right for arrival and disposal of property then before being tax resident. Indeed we should do that again. Before we jump, I will go to see Eurofinesco to give them our plans for vetting.

Another problem which I have is, as with ALL investing, if I do sell the UK property, I don't know what to do with the money. Possibly, annuities with survivors will be more attractive by then, as well as being tax expedient.

Another thing is that IF some political sense returns to the UK in the interim, I might choose to change this arrangement somewhat. Fat chance! The politicians have ceased to be interested in public opinion of late - running the show entirely for their own purposes - and the daily garbage doesn't help.

Further on tax, Caribbean islands typically do not tax dividends or capital gains so if you meet the tax residence - typically six months in the calendar year - you should be ok. Also, it is up to the investor to check a stock's prospectus to ensure there is NO withholding tax - such as on preferred stocks (but most Wells Fargo and JPMorgan preferreds seem to have withholding tax). If you are not ordinarily resident, there is no tax on overseas property income and there is never tax on overseas pension income. Barbados taxes world income.

One other thing, on the issue of flying, we would likely be able to be 100% loyal to BA for all travel to/from Faro, Lisbon (LCY) and Porto to LGW and St Lucia and Grenada which helps in terms of cost and kick-backs for the miles.

Ukkram

The sale of fixed property (real estate) may be taxed by the state in which the property is situated.
The sale of movable property (shares and other investments) are ONLY taxed by the state where the alienator is resident.

If you have no residential property available in either country or have so in both and your residency cannot be determined then you will be deemed a resident of the country of citizenship. If you are not a citizen of either country then the 2 states will come to an agreement as to residency.
So this means that you will always be a tax resident of some country..

Pistolpete2

Indeed! So best to try to be tax resident somewhere that is not going to charge you income tax for the foreseeable future. Which is why I decided to ultimately seriously consider re-acquiring tax residency in St Lucia (over six months in the calendar year) so that I would be able to show that, and the tax residency allowances granted, to anybody else who inquired ref same.

I need professional advice regarding the position where my tax centre of gravity was Portugal rather than the Caribbean, as in not six months in either but more time in Portugal than anywhere else - playing with fire! I see what you are saying but need to work on a viable construct, if there is one. Maintaining a permanent HOME in the Caribbean, in some fashion, paid for, with belongings there, and used for the requisite period, should help.

You lose indexation of your State Pension typically when in the Caribbean and of course go it alone on healthcare until State systems are put in place, if ever. Your ISAs would hold whatever was in them from the UK residence period. All other investments would best be shipped back offshore. And as per earlier, you need to ensure that there is no withholding tax on income as you can't recoup it.

So far as HMRC would be concerned, I would go back to annual completion of the residence forms (sa109) as an attachment to my annual tax return 'filings'.

Ultimately also with a view to potentially re-establishing domicile offshore (for Inheritance Tax purposes) since:

HMRC will treat you as being domiciled in the UK if you either:

• lived in the UK for 15 of the last 20 years
• had your permanent home in the UK at any time in the last 3 years of your life

Ukkram

Granada in Central America or the one in Spain? The Caribbean has many islands belonging to different countries. The tax laws may differ.

Pistolpete2

GrEnada, as in the Windward Islands. The Spice Island. Grenada, St Lucia, St Vincent are part with others, of the OECS, and the larger group of Caricom, have the same currency the EC$ issued by the Eastern Caribbean Bank, pegged at approx 2.7 to the USD and their tax laws are pretty similar in terms of typical tax for non local income earners.

Grenada is known for being a yachting centre. Part of the attraction is that it is below the typical line of Atlantic hurricanes and though it has been hit badly in recent years it is hit far less frequently than islands to the north.

Caricom is to the point where it functions in a similar way to the EU, as does the OECS, for freedom of movement for citizens of member states and their spouses.

I know for starters that St Lucia is NOT very responsive when it comes to tax matters and I would think it possibly a hurdle to getting past some of the certifications required for NHR. Bermuda? I don't know!

DiDAN

You shouldn't become a tax resident in Portugal "automatically" until you go to Financas and provide your permanent address in Portugal (converting your NIF to a resident one) even if you buy your "holiday home". Am I wrong?
A there's quite a big choice of private health insurances for less than €100/month that should work well without a hassle of public health services.

DiDAN

And you have access to public health services no matter of your status - you just come to your nearest health centre and register there.

Ukkram

Having a NIF number does not make you tax resident. What was discussed above does.

Diddion

Diddion