The Benefits of Moving to Portugal

Are you thinking of moving to Portugal? Portugal isn’t generally recognized to be one of top tax heavens, however the tax system in Portugal is extremely lenient. People who have recently relocated to the country are known as”non-habitual residences” (NHRs) and enjoy the benefit of a flat 20 percent income tax.

Most types of incomes from foreign sources are tax-free within the nation, contributing to the generous system more.

Financial Climate

Portugal became a member of in the European Union back in 1986 and, since then there has been a process of economic diversification occurring. Portugal’s economy is competitive at a global level, and, according to the World Bank doing Business Report the country ranks 31st out of among 189 countries in terms of their economic competitiveness.

Tourism is among the sectors that contributes significantly to Portugal’s gross national product (GDP). In 2012, the sector contributed 5.7 percent of Portugal’s GDP, a study by the World Travel and Tourism Council indicates. It is predicted to increase even more in the near future.

Government is investing money in upgrading the infrastructure for tourism and increasing the recognition for the nation as a top European tourism destination. There has also been advancements in the areas of technology and information that have helped diversify the economy of the country. All of these are contributing to the development in the property market and.

The government has recently has launched the new economic development strategy. The goal of the strategy is to encourage the investment of foreign direct investors and improve the exports of Portugal. These efforts aim to improve Portugal’s economic stabilityand turn Portugal into a desirable destination for a lot of NHRs.

The Profil of NHRs

Anyone who decides to change their status to Portuguese tax-residents will enjoy the benefits of the Personal Taxpayer Tax (PIT) program. When they are accepted NHRs they can benefit from this status for a time that is 10 years. The registration process is quite easy and tax authorities have introduced all of these advantages to encourage highly skilled foreigners as well as to encourage the movement of these individuals to Portugal.

NHR regime is showing to be a huge success, with over 1000 people registered. The country is currently processing applications of 400 people who are mostly EU-member countries as well as Brazil.

A large proportion of these people are self-employed. A lot of NHR applicants earn a substantial retirement income, or different sources of earnings in their countries of the residence.

The Application Process and Tax Requirements for NHR

Anyone who is looking to obtain the NHR status should reside living in Portugal for minimum 183 days throughout the year. Additionally, they must own properties in the country and plan to use it for their primary residence.

When individuals receive the NHR classification, they are able to benefit from the benefit of a flat 20 percent income tax. The tax policy is applicable to income from salary, and also to the earnings generated by an enterprise.

There is no tax for personal income on the salaries earned from an employer located in a country other than Portugal. The only requirement is these salaries to be the tax payer in the country in question. It’s not difficult to see how many companies can gain from moving their operations to Portugal. Portuguese employers also stand to gain by employing NHRs.

Any kind of income that results from high-value-added services that are of a scientific, artistic, or technical nature in another country is exempt of taxation by Portugal. There is a restriction – this type of income has to be taxed under the dual tax treaty. It is much more crucial that the country from which the income is derived to be able to tax it than taxation to occur. NHRs are also exempt from taxation following the sale of property in a different country, or if they earn rental income.

If it’s retirement funds coming from other countries the same rules are in place. NHRs benefit from the absence of gift tax and inheritance taxes, which can be quite useful when making decisions on the transfer of assets to the next generation.

Many Other Benefits of a move to Portugal

The tax reforms and fantastic real estate purchasing possibilities are sure to make many people contemplate moving to another city and apply to apply for NHR status. Other benefits that are important to be discussed and also.

The tax burden can be reduced further as a result of the favorable treatment offered by the government for life insurance.

Companies that are based in Portugal with a permit to conduct business in the Madeira International Business Centre (MIBC) receive an all-inclusive five percent company income tax. The rule will be in force until 2020, and covers all sorts of transactions even those that involve non-residents.

As of now, Portugal has signed double tax treaties with 67 nations. Of those, 61 are in effect. Understanding the potential and doing a study on the tax policy of the country is crucial to understanding this NHR application process, and getting the most of the opportunity.