In September 2017, it was announced that the Portuguese Government, following pressure from Sweden and a number of other European countries, was looking to water down the country’s non-habitual residency (NHR) tax regime, potentially bringing to an end a programme that has worked in the interests of expats since 2009. The uncertainty this proposed move provoked certainly threatened to put a dampener on the financial plans of quite a number of expats and would-be expats as they moved into 2018.
However, the budget proposal presented by the Portuguese government in November seemed to allay these fears. There was not a single mention of the scheme, which would have seen the introduction of a flat rate of tax of either 5% or 10% on income drawn from the pensions of NHRs.
In all probability any such move would have seen the pensions of existing expat NHRs unaffected; however, it would have presented a significant stumbling block to the retirement plans of many looking to move both their wealth and their residence status to the country.
It now looks like both existing expat residents as well as those on the cusp of making the move will continue to enjoy the NHR’s tax-free pension income status as well as tax-free interest, tax-free non-resident dividends and tax-free royalties; it is worth noting that the latter of these things is of particular interest to high profile expat entertainers and musicians such as Madonna, Monica Belluci and Eric Cantona.
So, as 2018 moves swiftly on, expats can feel reassured that they will continue to enjoy ten years of the following benefits from the NHR scheme:
- No minimum investment requirement
- Tax-free royalties, interest and dividends
- Tax-free lump sum or regular income pensions
- 20% flat rate tax on high value activity
Keeping Portugal appealing for expats
The apparent about-face regarding the NHR regime means that Portugal remains the leader when it comes to favourable wealth management and residency planning jurisdictions. It also means that the country has every reasonable expectation of again finishing at the top of the pile of an exhaustive list of the most desirable countries in the world to migrate to, following on from its success in topping a 2017 survey.
The survey, which was carried out for the third year in a row, was administered by Henley & Partners, a UK-based firm that specialises in fiduciary-based citizenship planning. It looked at the relative merits of various country’s immigration and residency programmes and then ranked them accordingly.
Although the Southern European archipelago of Malta outperformed all challengers when it came to the attractiveness of its investment schemes enabling citizenship in exchange for a minimum level of investment, Portugal’s golden visa scheme ensured it finished top of the list of countries which allow residence in exchange for investment.
Each country’s residency-by-investment attractiveness was based on scores out of 10 for the following categories:
- International standing
- Visa-free access
- Visa processing times
- Quality of visa processing service
- Financial and taxation requirements
- Bureaucratic and financial transparency
- Residency requirements
- Relocation flexibility
- Physical visit requirements
Portugal’s outstanding candidacy was founded on the strength of its Golden Residence Permit Program and earned a score of 79 out of 100, meaning it finished one point ahead of Austria and two points ahead of Belgium.
Those who currently enjoy the many benefits of expat life in Portugal are likely to agree with the findings of the survey while also taking enormous relief from the fact that the Portuguese government has appeared to accept that expat money is invaluable to the country’s economy and that every accommodation should be made to ensure the influx of expats is encouraged.
However, the alarm provoked by the proposed changes to the NHR programme should remind expats in the country of just how quickly things can change. Whatever happens, sound wealth management advice remains the best way to plan for a secure and prosperous financial future.