Are there any tax advantages to moving to Portugal or investing in Portugal?
Currently the Portuguese government is actively encouraging overseas investments; has put in place a tax regime that is incredibly alluring to entrepreneurs and high net worth individuals; and a number of initiatives have been introduced to make purchasing property in Portugal as straightforward as possible. In combination with a favourable climate and the relaxed lifestyle Portugal has become the ideal destination for those seeking their dream home in the sun.
Taxation of non-residents in Portugal
In 2009 Portugal introduced the non-habitual resident’s program incentive in an effort to tempt highly skilled foreign workers and ultra-high-net-worth individuals back to Portugal. The regime offers non habitual residents a reduced 20% PIT (Personal Income Tax) rate on salaries and business/professional income of a Portuguese source. If they receive a salary from a non-Portuguese source they will be exempt from PIT.
Common taxes payable in Portugal
Property Transmission Tax (IMT)
Property Transmission Tax (“IMT – Imposto Municipal sobre a Transmissão Onerosa de Imóveis”) is a municipal tax levied on the transfer for consideration of real estate located in the Portuguese territory. It is possible to obtain an exemption if the property you are purchasing is for use as a primary residence and the purchase price is not higher then €92,407.
Council Tax (“IMI – Imposto Municipal sobre Imóveis”)
All properties in Portugal are subject to IMI (similar to council tax) is calculated on the tax registration value of urban and rural properties located in Portuguese territory.The rate of taxation ranges from 0.2%- 0.8% of the rateable value of property.
The tax is payable on the following year and is charged either once (in April only), twice (in April and November) or 3 times (in April, July and November) the tax charge you receive will depend on the value of tax to be paid. It is possible to apply for an exemption for a fixed period by making a formal request of the Tax Department. The authorities will consider the tax value of the property, the use of the property and the economic growth circumstances of the owners when making the decision as to whether to grant the exemption.
From 2017 onwards to those tax payers whose real estate exceeds €600,000 of rateable value will be charged an additional IMI (from 0.4% to 0.7%). If the rateable value of real estate exceeds €1,000,000 than 1% will be charged additionally together with the normal rates.
There is no inheritance tax or gift tax charged in Portugal if assets are inherited/ gifted to a spouse, children or parents of the property owner. If assets are bequeathed or gifted to more remote relatives or non-relatives then there is a stamp duty payable at a flat rate of 10% of the value of the assets transferred.
There is no wealth tax in place in Portugal nor is there any obligation to make any declaration of assets owned in Portugal or overseas. Funds can be transferred freely to and from Portugal provided the prescribed procedures are followed to comply with anti-money laundering legislation.
If you are planning to purchase property in Portugal or to own or operate a business on Portuguese shores it is highly advisable to seek professional independent advice as to the tax benefits and consequences of any such investment.