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UK Company and Residing in Portugal Tax

UK Company and Residing in Portugal Tax

Old Jan 19th 2022, 3:16 pm
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Question UK Company and Residing in Portugal Tax

I will be moving to Portugal later this year and I have an ltd company through which I contract, I have the option of opening a company in Portugal and contracting though that instead but would prefer to keep my current company. I'm trying to figure out which option would be better taxation wise and if I do keep the company in UK, to which country would I need to pay corporate/income and dividend tax? If anyone has been in a similar situation I'd appreciate any advice!
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Old Jan 20th 2022, 4:48 pm
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Default Re: UK Company and Residing in Portugal Tax

Do have a search on the forum, there are already several long threads on this topic with lots of useful information

I'd also suggest getting a copy of this book for a good overview: https://www.blevinsfranks.com/produc...g-in-portugal/

You need to consider social security as well as tax but in broad terms I'd say that your options are either to pay taxes in both UK and PT (with some offsetting) or to pay taxes in only PT. There's a whole mess of complexity there, so do a bit of reading and then probably you would be best advised to seek professional advice on a few points as well. It's all doable, but don't under-estimate the effort involved.

Personally I decided to close my UK company and get a perm role in Portugal, just to avoid the cognitive overload of setting up and learning a whole new system. It cost me some earnings but significantly reduced my stress level. But if you do decide to use a Portuguese company, do just check first whether your clients would be OK signing a contract with a Portuguese company.

If you do decide to close your UK company, think about whether you do an MVL before moving, or take dividends after moving (those being the two most tax-efficient strategies)
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Old Jan 24th 2022, 8:20 am
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Default Re: UK Company and Residing in Portugal Tax

My partner is in the same boat. Google "NHR" and check out rebase.co

As long as you invoice foreign clients, like your own UK personal services company or your actual clients, and those countries have double taxation agreements with Portugal (the UK does), then you wouldn't have pay any tax in those countries. You'd only pay in Portugal as a sole trader.

As a sole trader in Portugal eligible for NHR, you'd pay "20%" tax for 10 years... But it's more complicated than that. You don't pay national insurance the first year, only income tax at 7.5%. Income tax + NI in the second year is 11.25%. Income tax + NI in subsequent years is something like 26-33%, can't remember.

Not financial advice. I highly recommend you talk to a firm like Rebase.
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Old Jan 24th 2022, 9:18 am
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Default Re: UK Company and Residing in Portugal Tax

Originally Posted by a_user_has_no_name
My partner is in the same boat. Google "NHR" and check out rebase.co

As long as you invoice foreign clients, like your own UK personal services company or your actual clients, and those countries have double taxation agreements with Portugal (the UK does), then you wouldn't have pay any tax in those countries. You'd only pay in Portugal as a sole trader.

As a sole trader in Portugal eligible for NHR, you'd pay "20%" tax for 10 years... But it's more complicated than that. You don't pay national insurance the first year, only income tax at 7.5%. Income tax + NI in the second year is 11.25%. Income tax + NI in subsequent years is something like 26-33%, can't remember.

Not financial advice. I highly recommend you talk to a firm like Rebase.
By "sole trader" I think you mean Recibo Verde. It's a favourable regime generally, but it does have some downsides and it may be that a limited company+NHR might produce better results, especially if the business has expenses. Some more info here: https://www.doutorfinancas.pt/carrei...gime-escolher/

Be careful with using your own UK company BTW. If the majority (usually one) of directors are resident in Portugal then the company will likely be based in Portugal as far as corporate taxation is concerned
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Old Jan 24th 2022, 11:00 am
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Default Re: UK Company and Residing in Portugal Tax

Originally Posted by Alan PT
Be careful with using your own UK company BTW. If the majority (usually one) of directors are resident in Portugal then the company will likely be based in Portugal as far as corporate taxation is concerned
Thank you so much Alan PT!

Wow, I didn't realise that was the case, but from what I'm reading that's indeed true. We're double checking things with our UK and Portuguese accountants, but she's now likely to just work as an individual using recibos verdes (no UK personal services company). Fortunately, she hasn't made the switch and her current employer doesn't care either way.

Last edited by a_user_has_no_name; Jan 24th 2022 at 11:01 am. Reason: typo
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Old Jan 24th 2022, 5:12 pm
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Default Re: UK Company and Residing in Portugal Tax

Originally Posted by a_user_has_no_name
Thank you so much Alan PT!

Wow, I didn't realise that was the case, but from what I'm reading that's indeed true. We're double checking things with our UK and Portuguese accountants, but she's now likely to just work as an individual using recibos verdes (no UK personal services company). Fortunately, she hasn't made the switch and her current employer doesn't care either way.
Yeah, it's one of those nasty little gotchas, all fine for big companies with lawyers, PITA for normal people

We took some expensive tax advice when we moved and my conclusion at the end of it was to keep things as simple as I could, then I didn't get caught out and didn't invite any tax audits, even if I could theoretically have made more money/paid less tax by doing some more complicated stuff.

The tax guys had some fancy idea of setting up a Malta company with extra dummy directors to keep it offshore, then bringing money onshore as dividends tax free. I gave that about 5 mins consideration before deciding that I wouldn't sleep at night for worrying about it!

In the end I decided to bin contracting and just work for a PT company, but doing receibo verdes is also pretty straightforward and so common that a (cheap!) Portuguese accountant will have no problem helping you when needed

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Old Jan 29th 2022, 10:56 pm
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Default Re: UK Company and Residing in Portugal Tax

I don't know anything about recibo verdes. But instead of working for a PT company why don't or didn't you just work for yourself as a self employed person if you moved your tax base to Portugal?

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Old Jan 30th 2022, 10:26 am
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Default Re: UK Company and Residing in Portugal Tax

Originally Posted by BlackBeardie
I don't know anything about recibo verdes. But instead of working for a PT company why don't or didn't you just work for yourself as a self employed person if you moved your tax base to Portugal?
It's a personal choice of course and not everyone will have the same opportunities or make the same choices, but I found the benefit in simplicity and integration outweighed any loss of independence. However, I did manage to find a company in Portugal which had a very open, process light culture, so I still had a lot of freedom. I'm not sure I would have got on so well working for big dinosaurs like EDP!

It was good to not have to worry about things like getting a social security number, getting a phone plan, getting healthcare because they were all things the company sorted out. They even gave me support with things like looking for apartments and arranging Portuguese classes and there's also the benefit of working closely with a lot of Portuguese colleagues and forming friendships.

On the financial side, from my limited understanding of the market, there also weren't the same monetary advantages to contracting as there were in the UK, partly due to the different market dynamics, partly due to NHR effectively negating the tax advantages relative to employment. Contracting directly for UK/US companies would be more lucrative of course, but then that introduces an extra level of complexity and uncertainty and I was looking for less stress in my life, not more
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Old Feb 1st 2022, 10:51 pm
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Default Re: UK Company and Residing in Portugal Tax

Alan PT Boa noite, thank you for the lengthy reply. Yes,you are right, you have a lot more to look out for if you do decide to go it alone in Portugal and - as you say, it does depend on one's circumstances.
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Old Feb 18th 2022, 3:26 pm
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Default Re: UK Company and Residing in Portugal Tax

I was looking at something similar and wonder of anyone has used the 'employer of record' companies that are cropping up everywhere? Seems an interesting option if costs are reasonable and a short term solution needed?
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Old Feb 18th 2022, 5:57 pm
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Default Re: UK Company and Residing in Portugal Tax

Originally Posted by happy_pt
I was looking at something similar and wonder of anyone has used the 'employer of record' companies that are cropping up everywhere? Seems an interesting option if costs are reasonable and a short term solution needed?
Those do seem like a good idea, though more directed at employers than contractors, as far as I can see?

In the tech area in PT, there's a bunch of longstanding consultancy companies who perform a similar role Decskill, Ranstand, Innotech, Novabase etc etc

They seem to be somewhere between a classic consultancy and a UK style contractor umbrella company. I suspect they may cost you a higher %age, but they do have a lot of ready made contacts and roles
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