NHR Portugal 2024: Changes and Updates to Qualify for Non-Habitual Residency

NHR Portugal 2024: Changes and Updates to Qualify for Non-Habitual Residency

NHR 2024: What has changed?

The Portuguese government has taken significant actions to terminate two prominent foreign investment programs. On the 6th of October, the “Mais Habitação Law” put an end to the real estate avenue to acquiring a Golden Visa, and just two days later, they announced the discontinuation of the Non-Habitual Resident (NHR) regime, with material implications hitting in 2024.

An alternative has been put in place however these are less likely to appeal or apply to Clients of Ingenium Financial and will likely not attract as many talented professionals who would have previously come to Portugal under the NHR program.

The replacement initiative is directed towards those deemed ‘researchers’ and ‘highly qualified workers’. It provides them with comparable requirements and advantages to the previous NHR program. These beneficiaries must establish their residence in Portugal for at least 183 days annually to be eligible for a special 20% IRS tax rate for a period of 10 years. As before, this is only applicable to individuals who have not been fiscal residents in Portugal for the preceding five years.

NHR 2024: Have I missed out on qualifying for NHR?

You may still be able to qualify for the previously popular NHR status but since January 2024 it has become more of a challenge and less certain your application will be waived through what was previously a quick and easy online process.

The Non-Habitual Resident (NHR) status must be applied for with the Portuguese tax authorities by March 31, 2024, if you are already resident for the preceding tax year ending December 2023.

NHR 2024: What are the requirements?

If you expect to become a resident in Portugal by 31 December 2024

or, on December the 31st  2024, you would be able to meet the following conditions to qualify as a tax resident;

Individuals, both foreigners and Portuguese, who have not been tax residents in Portugal in the preceding 5 years, but who have now become Portuguese tax residents and who meet one of the following conditions:

– Having a job offer or an employment contract, secondment agreement, or similar document signed by December 31, 2023, for positions to be carried out in Portuguese territory.

(The work contract element is more likely to be of importance to Portuguese nationals eyeing a return as typical Clients tend to be business owners or retired).

– Entering into a lease agreement or another contract that grants them the use or possession of a property in Portuguese territory by October 10, 2023.

– Having a reservation contract or a promise of acquisition of real estate in Portuguese territory, entered into by October 10, 2023.

– Enrolling or registering dependents in an educational institution located in Portuguese territory by October 10, 2023.

– Holding a residence visa or residence permit valid until December 31, 2023.

– Initiating the necessary procedures for obtaining a residence visa or residence permit by December 31, 2023, including scheduling an interview or submitting an application to the relevant authorities.

NHR 2024: The situation now

As mentioned, the implementation of the 2024 State Budget saw the Portuguese government repeal the NHR regime that previously offered numerous tax advantages, including exemptions on various income types like pensions and dividends.

Nonetheless, it remains feasible to apply for NHR status in 2024, provided that you establish tax residency in Portugal during that year and satisfy specific conditions.

In theory, The Non-Habitual Resident (NHR) status must be applied for with the Portuguese tax authorities by March 31, 2025.

Notwithstanding the mentioned deadline, the Arbitration Court (CAAD) has on several occasions decided that the obligation to apply for the NHR (Non-Habitual Resident) status by March 31st of the year following the year in which the individual became a tax resident in Portugal, is merely a declarative obligation and not a constitutive right, and the non-fulfillment of this requirement cannot result in the failure to obtain the NHR status. So if you don’t file on time, it may not prohibit the application however, the right to request taxation as an NHR can only be realised through the challenge of the IRS tax assessment act of the year in which the registration as an NHR was denied.

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Are you considering moving to Portugal and wondering whether it is still feasible in 2024?

The straight answer is a resounding ‘yes’!

If you are receiving or plan to drawdown from pensions to provide for your life in Portugal, then Portugal is still very much doable.

You must consider making some changes to the way and/or where your pensions are currently structured and held. You will need a good, suitably qualified Independent Financial Adviser to help you. They will be able to guide you appropriately.

Ingenium Financial is a bespoke financial advisory able to devote more time to providing you with an unrivalled personal service.

Contact us to learn more about NHR 2024 and find out how we can help.

QROPS Portugal: Taxation Insights for UK Pension Transfers

QROPS Portugal: Taxation Insights for UK Pension Transfers

For UK citizens contemplating a move to Portugal in 2024 or already enjoying the Portuguese lifestyle, navigating pension transfers can be a complex yet rewarding endeavour. Qualifying Recognised Overseas Pension Schemes (QROPS) presents a viable solution for managing UK pension funds outside of the UK, offering potential tax-efficient drawdown opportunities depending on your country of residence.

We will now explore the nuances of QROPS in Portugal, shedding light on its benefits, taxation implications, and considerations for expatriates seeking financial stability in their new home country. According to the gov.uk website, they mention in 2017 there are between 10,000 and 20,000 transfers to QROPS each year, this may indeed be lower now.

Understanding QROPS: A Tax-Efficient Solution

Transferring your UK pension to a QROPS in the EEA presents a compelling proposition primarily due to its exceptional tax efficiency. Portugal’s tax system treats QROPS withdrawals in a favourable manner, typically taxing them under Schedule H. This means that a significant portion, specifically 85%, of the income from QROPS withdrawals is categorised as a return of capital. Consequently, only the remaining 15% is subject to Portugal’s prevailing marginal income tax rates.

This tax treatment stands in stark contrast to other jurisdictions and pension schemes, offering a distinct advantage for pension holders. By leveraging this tax-efficient framework and employing prudent drawdown strategies, expatriates in Portugal have the potential to achieve an overall effective tax rate that is lower than what is offered under Portugal’s Non-Habitual Resident (NHR) regime.

This advantage is particularly significant for individuals seeking to optimise their pension income while enjoying the benefits of residing in Portugal. With its favourable tax treatment and picturesque landscapes, Portugal has emerged as an attractive destination for retirees and expatriates alike. By capitalising on the tax benefits offered by QROPS in Portugal, individuals can enhance their financial security and maximise their pension income, thereby enriching their retirement experience in this enchanting European country.

Choosing QROPS jurisdiction for Portugal

When considering QROPS, it’s essential to recognise that the choice of jurisdiction plays a crucial role in the overall effectiveness and security of the pension transfer. Among the various jurisdictions available, Malta stands out as a popular and reputable destination for establishing QROPS. Malta boasts a robust regulatory framework, stringent compliance standards, and a well-established financial services sector, making it an attractive choice for pension transfers.

Malta’s regulatory environment provides confidence and assurance to pension holders, ensuring that their funds are managed and protected according to the highest industry standards. Additionally, Malta offers a wide range of investment options and flexibility in pension planning, allowing individuals to tailor their retirement strategy to their specific needs and objectives.

On the other hand, historically popular offshore centres such as the Channel Islands or the Isle of Man may not offer the same level of regulatory oversight and security for pension holders. While these jurisdictions may have been popular in the past, changes in regulatory requirements and increasing scrutiny on offshore financial activities have raised concerns about their suitability for QROPS transfers.

It’s important for individuals considering QROPS to prioritise jurisdictions with strong regulatory frameworks and a track record of stability and reliability. By opting for reputable jurisdictions like Malta, pension holders can have confidence in the safety and integrity of their pension funds, ensuring peace of mind and financial security in their retirement years. Therefore, while historically popular offshore centres may have been appealing in the past, the prudent choice is to avoid them and opt for jurisdictions like Malta that prioritise transparency, compliance, and investor protection.

QROPS 5-year tax rule

Under this rule, if a pension holder accesses their QROPS and makes withdrawals within the initial five-year period, HMRC reserves the right to impose taxes on those withdrawals. The taxation is typically based on UK tax rules and rates, regardless of the pension holder’s residency status at the time of withdrawal.

However, after the five-year period has elapsed, withdrawals from the QROPS are generally not subject to UK taxation, provided that the individual is considered non-resident in the UK for tax purposes at the time of withdrawal. This means that once the five-year period has passed, pension holders can potentially access their QROPS funds without incurring UK tax liabilities. Your pension moves to ‘non-reporting’ status.

It’s essential for individuals considering a QROPS transfer to be aware of the implications of the 5-year tax rule. Proper planning and understanding of this regulation can help pension holders avoid unexpected tax liabilities and make informed decisions regarding their retirement savings. Contact Ingenium Financial for an initial complimentary consultation.

Seeking advice from financial professionals with expertise in QROPS transfers and taxation can provide valuable insights and guidance on navigating the complexities of the 5-year tax rule and optimising the benefits of pension transfers abroad.

QROPS: Things to watch out for

The HMRC could impose an overseas transfer tax of 25% if you become a non-resident of the EEA within five years of the transfer.

If you transfer to a QROPS based outside the European Economic Area (EEA) or Gibraltar and you’re not resident in the country the QROPS is based in the tax may also be applied. (You can apply for a refund if you move to the country your QROPS is based in within five years of the transfer).

QROPS 10-year rule

There is also a 10-year rule.

For a period of 10 years after a transfer completes, QROPS providers must report any unauthorised withdrawals from your pension to HMRC – this means if you take benefits from your QROPS before age 55, you could face a 55% tax charge for doing so.

The benefits of Qualifying Recognised Overseas Pension Schemes (QROPS) are multifaceted and can significantly enhance the financial security and flexibility of pension holders. Seek advice from trusted and qualified financial professionals. Ingenium Financial acts under the best European MiFID II license and has specialist experience in UK pension transfers on behalf of Portugal residents. We follow the latest Portuguese and UK tax regulation updates to provide you with the most valuable advice.

Useful resources:

Investing in the Electric Vehicle Revolution

Investing in the Electric Vehicle Revolution

Investing in the Electric Vehicle Revolution

So far, the US has imposed three rounds of tariffs on more than $250bn worth of Chinese goods. The duties range from 10% to 25% and cover a wide range of industrial and consumer items – from handbags to railway equipment.

What is the impact so far?

Both US and international firms have said they are being harmed. Fears about a further escalation have rattled investors and hit stock markets. The IMF warned a full-blown trade war would weaken the global economy.

How to Invest During a Trade War?

Goldman Sachs gave its take early last week, forecasting that services-oriented companies (think Amazon, Google, and Microsoft) that are “less exposed to trade policy” will likely have an easier time than goods-producing companies (such as Apple, ExxonMobil, and Johnson & Johnson) that are more vulnerable to trade headwinds.

The overall message is being balanced and diversified. Structured return products are also coming into their own during times of volatility.

High quality merchant bank are currently offering returns of between 6-12% p.a.in USD

“It’s just important to have your risk controls in place to be able to weather the storm.”

Trade Deficit

Today statistics were released regarding the size of the current trade deficit – the catalyst for the current trade war.

It doesn’t appear to be going the way President Trump envisaged.

By the end of last year, China exported $324bn more in goods and services to the US than it imported.

That’s a record surplus, more than a quarter bigger than it was before Mr Trump came to power!

China Debt

Also the market appeared to express concern that China’s economy was slowing and that National Dept compared to GDP has mushroomed.

It has mushroomed in the last 10 years due to in the main part the construction of infrastructure spending.

Thousands of miles of new railways and dozens of new underground systems and airports constructed.

To my mind they are good things for a country to borrow money to do?

So called ‘good debt’

Debt as a proportion of the economy has soared, from 140% of GDP in 2007 to nearly 260% now.

Japan has 253% but the press don’t talk about it at all.

Greece 178.60% and seems to spend it on social welfare provision including allowing early retirement at the age of 50 for trombonists bakers, hairdressers and masseurs, who are allowed to retire early because of the nature of their work.

OK  – so may be they reduced this list of eligible people down to 100 in 2016 , but you get my point!

When President Trump send a tweet that upsets the market  – China tech mamoths such as Tencent and Alibaba seem to be affected.

Their business models are so diversified and their long term prospects they represent a great opportunity.

Holding them in a balanced fund such as the Fidelity China Consumer could be a good medium term hold.