wellinever

Met another new accountant yesterday to discuss tax residency in Portugal.
The fact that I became resident (temp) in Dec 2020 and have not yet changed fiscal residency to Portugal did not seem to phase her at all.
But during the meeting 2 things came up, which I was not aware of (despite having had paid for meetings with other accountants)
1) That there is proposed legislation pending in Portugal to allow UK residents with property in Portugal to continue to be treated as an EU resident for tax purposes when selling.
That is the option to pay taxes on 50% of any capital gain rather than the normal non Portuguese resident paying at 28% flat rate.

2) That when it comes to pension income, a sum of €683 per month was given as tax free on top of the €4100pa
Meaning that a pension can be €683x12 + 4100 = €12296 pa without any tax.....never heard of this before.
Yes I had known about the €4100 of pension income not being taxed but not this other figure.
Time ran out before I could delve deeper, anyone with any more info on this...is it correct??

Rooftile

Hi, very interesting update, if true. I am in exactly the same position, resident on paper last year but not PT fiscal resident. We wish to remain UK tax residents as we have all our financial affairs in the UK and will probably spend the majority of time in the UK. Some say be both UK/PT tax residents you will pay 0 tax in PT anyway but we sold our UK house after PT residency with huge gain being there 30 years, the PT taxman might say this is your second home given we have a small house in PT...and then a mega bill at 28%. Unlikely but still possible...and I want to sleep at night!

So yes if anyone has any news on these proposals, very much interested too especially when we sell our small PT property with a 50% reduction in CGT.

Red Eric

That doesn't ring any bells with me and I can't find reference to anything which would tally exactly.

The nearest I can get is the mínimo de existência, which establishes an amount you must remain with if income tax would reduce it to below. That figure is set at 9,315€ for 2021, equivalent to 665.36€ * 14 (as per PT pay years - or 776.25€, if you want it in 12ths). You wouldn't then add the 4,104€ specific deduction back, because it would already have been taken into account in calculating the tax.

Red Eric

You may want to look into that in a little more detail :
Brexit - Frequently Asked Questions

If you're a recent registree, I don't see how you're going to comply with the minimum 6 months presence, without also being considered tax resident.

I don't know anything about the proposal to include the UK but it isn't necessarily a 50% reduction in CGT.

What happens is that you would be required to declare your worldwide income, which establishes at what scale(s) your capital gain should be taxed. Currently anything from 10,732€ taxable income is taxed at a rate of 28.5% and upwards (35% at 20,322€, another 2% at 25,075€, 45% at 36,967€ ...).

wellinever

No it all depends on the level of Capital gain against the taxable income. With high levels of Mais Valias and low declared income then to pay on only 50% of the gain can work out cheaper, not suer if they are intending to allow reinvestment in the EU as well.
Best way oif you dont need the money immediately is to be a tax resident of Portugal and make a reinvestment in Portugal of say 70% of sale value of property, and only pay on 50% of 30% of the gain.......keep that property for 6 months then sell it at same as you pay for it,,,,,,,no capital gain tax then due....bt risky, but Portugal in great demand, so buy newish property, much easier to sell than old one

Red Eric

It would always work out cheaper, since the top rate of tax isn't 2 x 28%, so even if you paid top whack on all 50% of the gain it'd still be lower than 28% on the full amount.

But not necessarily as little as half. As you say (and I was trying to but probably didn't get it across clearly enough), it entirely depends on your other income.

wellinever

I think if it comes to pass then it will be a step in the right direction for continued UK investment in Portuguese property, even if it doesnt always save so much tax, its the thought that counts.
Not sure if anyone has the figures for the value of UK property investments in Portugal in the last 40 years, but I guess it has been significant to Portugal coffers

TonyJ1

There might be some truth on the capital gain issue as it does clash with one of the basic rules in the EU agreement ie freedom of movement of capital, though I have not seen EU case law specific to this issue.
My comment on pensions - unlikely. The first €4100 is tax free on pensions (not under the nhr rules though), and due to tax credits, may mean that another €1700 would be also tax free. Further, the tax authority does not collect tax if the tax bill is under €50 - therefore another €300 tax free. Cannot see this being increased to a €12000 level, but I would like to proved wrong.

TonyJ1

If you have the nhr - then there is no effective tax on the sale of foreign fixed property (this rule does not apply if the property is in a black listed country) - no matter if primary or secondary residence, or investment property - the tax authority has published rulings on this.

Red Eric

I was going to mention NHR provisions but on reflection couldn't see how that poster could possibly qualify if he hadn't already lodged an application.

TonyJ1

I have not searched high and low - but some of these posters, refer that they were not tax resident in 2020 - therefore still (at least for those) to apply for the nhr status

wellinever

Well I am going to ask her to confirm in writing what she said, after all it was yet another paid meeting, so I expect her to be able to back up what she said.
But I have talked with a few accountants over the years, and I had never come across this before.
But in any case before any replky from her, what could she be getting at with the figures that she used???
Clearly some sort of min salary I would think

Bomber Harris

Clearly not, the minimum salary in Portugal is 9300€ a year.

atlasthemonk

N.B Im out off my depth here not being a pensioner nor an accountant, but I think the PT tax threshold is 4100 and depending on UK NI contributions the UK state pension rate is approx £700 a month . Any of that relevant to Welinevers figures.

wellinever

I have asked for an explanation....someone was in the room at the time and they confirm my understanding of what was said, but only as far as the context not the explanation.....must admit to thinking some misunderstanding here.