Category: Taxation

Portugal has emerged as a popular destination for property investment, offering a blend of lifestyle and financial benefits. But, beneath the surface of this sunny paradise lies a complex tax system that can impact your returns. This guide unravels the mysteries of Portuguese property taxes, from annual levies to capital gains, ensuring you are well-prepared to navigate the landscape.

Dixcart have summarised below some of the tax implications applicable in Portugal (note that this is a general information note and should not be taken as tax advice).

Why is it Important to Engage with Dixcart?

It is not just the Portuguese tax considerations on properties, largely outlined above, but also the impact from where you may be tax resident and/or domiciled, that need to be considered. Although property is typically taxed at source, double taxation treaties and double tax relief need to be considered.

A typical example is the fact that UK residents will also pay tax in the UK, and this will be calculated based on UK property tax rules, which may be different to those in Portugal. They are likely to be able to offset the Portuguese tax actually paid against the UK liability to avoid double taxation, but if the UK tax is higher, further tax will be due in the UK. Dixcart will be able to assist in this regard and to help make sure you are aware of your obligations and filing requirements.

How Else May Dixcart Assist?

Dixcart Portugal have a team of experienced professionals who can assist with various aspects regarding your property – including tax and accounting support, introduction to an independent lawyer for the sale or purchase of a property, or maintenance of a company that will hold the property. Please contact us for more information: advice.portugal@dixcart.com.

Starting from 6 April 2025, the UK will implement significant changes to the taxation of non-UK domiciled individuals. The current remittance basis of taxation, which is based on domicile status, will be removed and replaced with a new tax regime based solely on tax residence under the UK’s Statutory Residence Test.

This article explores the benefits of the new Foreign Income and Gains (FIG) regime for recent arrivals in the UK, whether originally from the UK or not.

The 4-Year Foreign Income and Gains (FIG) Regime:

From 6 April 2025, the new regime will provide 100% exemption from UK taxation on foreign income and gains for new arrivals to the UK in their first four years of tax residence, provided they have not been UK tax resident in any of the ten consecutive years prior to their arrival.

Individuals who were UK residents as of 6 April 2025 will be able to benefit from the four-year FIG regime for the remainder of their initial four years of residence, provided they had ten consecutive tax years of non-UK residence before arriving and are still within their first four years of UK tax residence in 2025/26.   They will also have an opportunity to benefit from some transitional provisions available for previously earned income and gains, as well as accrued historical gains.

Importantly, an individual who was a UK tax resident for only part of the four year period will not be able to extend their exemption period by carrying forward any “unused” years to future tax years.

Individuals who qualify for and claim the FIG regime will not pay tax on foreign income and gains arising in the first four tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges.

This offers a significant advantage over the existing remittance basis regime, which while generally exempting tax on foreign income and gains, does charge such income and gains to UK tax if remitted to the UK.  There is also no fee for accessing the scheme as was the case for the remittance basis and for certain other countries which have similar remittance basis schemes.

As before, individuals will have to register with HMRC to make a claim for the FIG regime and will need to apply by completing a UK tax return.  The return will not only include details of the claim but also the amount of foreign income and gains for which exemption is being claimed. Crucially, if any foreign income and gains are not disclosed on a UK tax return, they will be taxable in full on an arising basis.

Once an individual no longer qualifies for the FIG regime they will be fully taxable on their worldwide income or gains as they arise.

Inheritance Tax Changes:

The current domicile-based system of Inheritance Tax will be replaced with a new residence-based system.

An individual who has been resident in the UK for at least ten out of the last twenty tax years will become subject to UK Inheritance Tax (IHT) on their worldwide assets and will remain in the scope of UK IHT for between three and ten years after leaving the UK. However, the government has committed to applying the Estate Tax treaties that the UK already has in place.

Conclusion

The new Foreign Income and Gains rules represent a major shift in the UK’s approach to taxing non-UK domiciled individuals. By moving to a residence-based system, there will be winners and losers, but for the first four years at least, the UK will offer an extremely generous tax position which could offer new residents some interesting tax planning opportunities, particularly those with significant income or gains generating events, such as a business exit or large dividend being planned.

For more information on the UK’s New Foreign Income and Gains Rules or to speak to one of our experts, please use our enquiry form or email us at advice.uk@dixcart.com.

As the tax season progresses in Portugal, it is crucial for residents to be aware of upcoming deadlines to ensure compliance and avoid potential penalties. Our team at Dixcart Portugal are here to provide clarity and support in navigating these obligations. This article highlights some critical dates and actions you should consider.

New Non-Habitual Resident (NHR) Applications: Deadline Approaching

A particularly important deadline for individuals seeking to benefit from the Non-Habitual Resident (NHR 2.0/IFICI) tax regime is fast approaching. Applications for NHR status for the 2024 tax year must be submitted by March 15, 2025. This regime offers attractive tax benefits for new residents in Portugal, but the application process requires careful attention to detail. We strongly urge anyone considering applying for NHR status to contact us immediately to discuss their eligibility and ensure a timely submission so they do not miss this opportunity. More information can be found here.

Other Important Personal Tax Deadlines:

Beyond the NHR application deadline, several other personal tax obligations require attention. While the specific dates may vary slightly each year, it is wise to prepare well in advance. These typically include:

• IRS (Personal Income Tax) Declarations: A tax year in Portugal runs in line with the calendar year and the deadline for submitting your annual IRS (Imposto sobre o Rendimento das Pessoas Singulares) declaration in Portugal is 30 June of the following year. This declaration covers income earned in the previous year. Gathering all necessary documentation, such as income statements, receipts for deductible expenses, and bank statements, is essential for accurate and timely filing.
• Personal Tax Deductions: To benefit from deductions on expenses such as healthcare, rent, education, gym memberships, and vehicle maintenance, it is essential to validate all relevant invoices on the e-Fatura portal by 25 February. This validation process is vital for those seeking to reduce their taxable income in Portugal.
• IMI (Municipal Property Tax): While IMI payments are typically spread throughout the year, understanding your payment schedule and ensuring timely payments is crucial to avoid penalties. Here’s a simple breakdown of IMI payment deadlines:
  • €100 or less: Pay the full amount by 31 May of the following year.
  • €100 to €500: Pay in two instalments: one by 31 May, and the other by 30 November of the following year.
  • €500 or more: Pay in three instalments: one by 31 May, one by 31 August, and the final one by 30 November of the following year
• Social Security Contributions: If you are self-employed or receive income from specific sources, you may be required to make regular social security contributions. After the first year of exemptions, you must submit a report to the social security system quarterly and pay the contribution monthly. Read here for more information.

Understanding your obligations and payment deadlines is vital to ensure compliance and avoid penalties.

Plan Ahead for a Stress-Free Tax Season:

Tax efficiency is a year-round process, not just a last-minute scramble. We understand that navigating the complexities of the Portuguese tax system can be challenging, that is why we encourage you to reach out to our team of experienced tax professionals well in advance of any deadlines.

Why Contact Us Now?

• Sufficient Time for Preparation: Early engagement allows us to thoroughly review your financial situation, identify potential deductions and credits, and ensure all necessary documentation is in order.
• Personalised Service: We provide tailored service based on your specific circumstances, ensuring you optimise your tax position within the legal framework.
• Peace of Mind: Knowing that your tax obligations are being handled by experienced professionals provides peace of mind and allows you to focus on other priorities.
• Avoid Penalties: Missing deadlines or submitting inaccurate information can result in penalties. Proactive planning helps you avoid these costly mistakes.

Contact Information

Contact Dixcart Portugal today to schedule a consultation. We are here to assist you in navigating the Portuguese tax landscape and ensuring compliance. Let us help you make this tax season as smooth and efficient as possible.

For more information, please contact us at: advice.portugal@dixcart.com.

Estate planning is necessary, as Benjamin Franklin would agree with his quote ‘Nothing is certain except death and taxes’.

Portugal, unlike some countries, does not have inheritance tax, but makes use of a stamp duty tax named ‘Stamp Duty’ that applies to the transfer of assets upon death or lifetime gifts.

What Succession Implications Exist in Portugal?

Portugal’s succession law applies forced heirship – implying that a fixed portion of your estate, namely world-wide assets, will automatically pass to direct family. As a result, your spouse, children (biological and adopted), and direct ascendants (parents and grandparents) receive a portion of your estate unless expressly stated otherwise.

If it is your intention to establish specific arrangements to override this rule, this may be done with the drafting of a will in Portugal.

Note unmarried partners (unless cohabiting for at least two years and having formally notified the Portuguese authorities of the union) and stepchildren (unless legally adopted), are not considered immediate family – and thus will not receive a portion of your estate.

How Does Succession Apply to Foreign Nationals?

According to the EU succession regulation Brussels IV, the law of your habitual residence usually applies to your inheritance by default. However, as a foreign national, you can choose the law of your nationality to apply instead, potentially overriding Portuguese forced heirship rules.

This choice must be clearly stated in your will or a separate declaration made during your lifetime.

Who is Subject to Stamp Duty?

The general tax rate in Portugal is 10%, applicable to inheritance beneficiaries or gift recipients. However, there are certain exemptions for close family members, including:

• Spouse or civil partner: No tax is payable on inheritance from a spouse or civil partner.
• Children, grandchildren, and adopted children: No tax is payable on inheritance from parents, grandparents, or adopted parents.
• Parents and grandparents: No tax is payable on inheritance from children or grandchildren.

Assets Subject to Stamp Duty

Stamp Duty applies to the transfer of all assets located in Portugal, regardless of where the deceased resided, or the beneficiary of the inheritance resides. This includes:

• Real estate: Properties, including homes, apartments, and land.
• Movable assets: Personal belongings, vehicles, boats, artwork, and shares.
• Bank accounts: Savings accounts, checking accounts, and investment accounts.
• Business interests: Ownership stakes in companies or businesses operating in Portugal.
• Cryptocurrency
• Intellectual property

While inheriting an asset can be beneficial, it is important to remember that it may also come with outstanding debt that must be settled.

Calculating Stamp Duty

To calculate the Stamp Duty payable, the taxable value of the inheritance or gift is determined. The taxable value is the market value of the assets at the time of the death or gift, or in case of properties based in Portugal, the taxable value is the value of the asset registered for tax purposes. If the property has been inherited/gifted from a spouse or civil partner and has been co-owned during marriage or cohabitation, the taxable value is shared proportionately.

Once the taxable value is established, the 10% tax rate is applied. The final tax liability is calculated based on the net assets received by each beneficiary.

Potential Exemptions and Reliefs

Beyond the exemptions for close family members, there are additional exemptions and reliefs that may reduce or eliminate Stamp Duty liability.

These include:

• Bequests to charitable organisations: Donations to recognised charitable institutions are exempt from tax.
• Transfers to disabled beneficiaries: Inheritances received by dependent or severely disabled individuals may be eligible for tax relief.

Documents, Submissions and Deadlines

In Portugal, even if you receive an exempt gift or inheritance, you still need to make a submission with the tax authorities. The following documents with associated deadlines are applicable:

• Inheritance: The Model 1 form must be submitted by the end of the third month following death.
• Gift: The Model 1 form must be submitted within 30 days of the date the gift is accepted.

Payment and Due Date of Stamp Duty

Stamp duty is required to be paid, by the person receiving the inheritance or gift, within two months of the notification of the death and in the case of receipt of a gift, by the end of the following month. Note that the ownership of an asset cannot be transferred until the tax is paid –in addition, you cannot sell the asset to pay the tax.

Estate Distribution and Tax Guidance

You can have one “worldwide” will to cover your assets in all jurisdictions, but it is not advisable. If you have significant assets in multiple jurisdictions, you should consider separate wills to cater for each jurisdiction.

For those who have assets in Portugal, it is advised to have a will in Portugal.

Reach Out Now for More Information

Navigating inheritance tax matters in Portugal can be complex, particularly for non-residents or those with complex inheritance situations.

Seeking professional guidance can provide personalised assistance, an intelligent assessment of the inheritance scenario, and assist to minimise or optimise liabilities.

Reach out to Dixcart Portugal for more information advice.portugal@dixcart.com.

Introduction

The talk around the taxation of non-domiciled individuals in the UK has been a hot topic for a few years in the press and more recently in the political arena. In March, the previous government announced a new proposal, effectively scrapping the exiting remittance basis regime and replacing it with a residence-based system. Following a lot of debate, a general election, and a new government, the new rules have now been finalised.

As with most UK tax laws, they are not simple, and this article is not intended to set out every element of the new rules in detail, but rather help answer some common questions that are on the non-dom community’s lips. For more information on the new regime, and other announcements in the Budget of 30 October 2024, please visit our Autumn 2024 Budget Summary here.

Below is a hypothetical example of an individual whose situation closely mirrors that of many non-doms currently living in the UK.

Mrs Non-Dom

Mrs Non-Dom (known as ND by her friends and family) has lived in the UK for 12 years, having been born overseas to non-UK parents, making her a non-UK domiciled (non-dom) under the current rules. She has enjoyed living in the UK enjoying the great food and even better weather. She is a member of the promoter family of an overseas listed entity and owns 10% of the shares worth the equivalent of $100 million. Each year she receives a dividend of $1 million and has bank accounts with $5 million in them, paying $250,000 interest per year. 

Before moving to the UK, she took some great advice and created a healthy pot of clean capital to live off. She has claimed the remittance basis in her UK tax returns and has lived off her clean capital.

A few years after arriving in the UK, she settled a non-UK Trust with some of her non-UK assets and is a discretionary beneficiary of the Trust along with her spouse and children. She also owns 100% of the shares in a non-UK company which has some passive investments.

Current position

As a remittance basis user, she has only been paying tax on her UK source income and gains as well as the UK’s remittance basis charge.  ND has correctly segregated her clean capital from new income and gains, and these have not been remitted into the UK.

Her Trust is an excluded property Trust meaning the assets held within the Trust are protected from inheritance tax at the time she becomes deemed domiciled after living in the UK for 15 years.

The income and gains generated in her investment company are not taxable for her in the UK as she claims the remittance basis.

Position post 5 April 2025

As she has already been tax resident in the UK for more than 4 years, she will not be eligible for any benefits under the new FIG regime. As a result, her overseas dividend and interest will be taxable in the UK from 6 April 2025.

As a settlor interested Trust, the tax position of the Trust will now follow her UK tax position.  While she remains a UK tax resident, the income and gains in the Trust will be taxable.  The underlying assets will also now fall into her UK estate for inheritance tax purposes as she has been resident in the UK for more than 10 years.

The income and gains generated by the investment company will also now be taxed directly. The value of the company itself will also fall into her UK inheritance tax estate, as will all of her overseas assets as she has been UK tax resident for more than 10 years.

What steps can she take?

Income and gains

She will be able to benefit from the proposed Transitional Provisions which will firstly allow her to designate pre-6 April 2025 income and gains and pay 12% UK tax on them (with no foreign tax credit) up to 5 April 2027, and then 15% for the following tax year. It will also mean any assets sold at a gain post 6 April 2025 can be rebased to April 2017.

This may mean she will want to bring some income forward (where possible) to before the new tax rules take effect so they can then be used in the UK at a lower tax rate under these transitional provisions.

She should also consider the position of any assets she is considering selling. Each position will be subjective, and the financial and commercial aspects of the decision should not be ignored, but some may be better sold before 6 April 2025 (and then designated under the transition provisions at the 12%/15% rates) or some may be better sold under the new rules and, whilst then taxable at the prevailing capital gains tax rates (now 24% for most assets), may benefit from the rebasing. Each scenario should be assessed separately as each asset may fall into a different category.

Whilst new income and gains will be taxable on a worldwide basis from 6 April 2025, she should consider any foreign taxes she also suffers (and as a remittance basis user has perhaps not considered previously) to ensure she is able to claim any foreign tax credits.  Please note that credit for foreign taxes paid is not possible under the Transitional Provisions.

The UK has an extensive Double Tax Treaty network, and she should consider whether she can avail any benefits under these.

Inheritance tax

Alongside the UK’s extensive Double Tax Treaty network, it has 10 Estate Tax Treaties, and she should consider whether she can avail any benefits under these, for Inheritance tax purposes.

The more traditional inheritance tax planning opportunities of lifetime gifts and gifts out of excess income should not be ignored.

Under the new rules, now she has been UK tax resident for more than 10 years, if she were to leave after 6 April 2025, she would be subject to UK inheritance tax for a further 3 years.  This would be the case if she left after 13 years too but after that, this “tail” will follow her for an extra year, per year of residence. So, for example, if she leaves after 16 years, the tail will be 6 years and will continue increasing by a year up to a maximum of 10 years.

Leaving the UK

The new rules will result in Mrs Non-Dom being exposed to higher UK taxes than she has been previously. She may therefore decide to relocate to a more tax-friendly jurisdiction. As with any relocation, the tax consequences in both jurisdictions must be considered. 

The UK Statutory Residence Test will dictate how many days she can continue to remain in the UK. She should take advice and develop a plan for her days in the UK for the coming years, to be sure she does become non-UK tax resident.  There is more detail information in our note here.

She may discover that where she has chosen to move to is no more efficient from a tax perspective.  Dixcart is able to offer the immigration and tax support in a number of tax efficient jurisdictions and would be happy to assist. More information can be found here.

Conclusion

The new FIG regime is a significant shift in the tax laws and more importantly in many UK tax resident individual’s lives. Dixcart UK, and the wider Dixcart Group, can assist with providing advice on the new rules and developing a plan for the future, sadly perhaps not in the UK.

As is always the case, tax advice cannot be taken soon enough, so please do reach out to your usual Dixcart contact, or through our contact page to start these discussions: advice.uk@dixcart.com.

Portugal’s allure is undeniable, offering a pleasant climate, affordable living, high safety standards, a rich cultural heritage, and a warm community, making it a perfect place for a fresh start.

However, to ensure a seamless transition, it is important individuals consider the tax implications before moving to Portugal. Tax compliance not only provides peace of mind but is a necessity.

Portugal’s residency-based tax system means residents are taxed on their global income. This requires filing tax returns in both the US and Portugal. Below we have summarised several key considerations for US citizens requiring tax assistance in order to meet their tax obligations in Portugal.

Who is Required to Pay Taxes in Portugal?

Tax residents in Portugal will be required to pay tax on any income earned in Portugal.

Portuguese tax residents are required to file a tax return, regardless of source of amount. This includes:

• Employment income,
• Self-employed income,
• Dividend, interest or capital gains earned,
• Rental income,
• Pension income.

The Portugal tax rate will be driven by the source and/or value.

Who is a Tax Resident in Portugal?

If you spend more than 183 days in Portugal in a year, or if you have a home in Portugal that you intend to live in, you are considered a tax resident in Portugal.

Tax Deadlines and Tax Year-End

The Portugal tax year runs from 1 January to 31 December. Tax returns must be filed by 30 June of the following year, and if tax is owed, it must be paid by 31 August.

Agreements between the US and Portugal

A Double Taxation Agreement does exist which allows prevention of double taxation on specific income sources in Portugal and the USA. Further, a Totalization Agreement also exists – which prevents expats from paying duplicate social security contributions in both countries. A tax adviser will be able to confirm the treatment tailored to a client’s specific circumstances.

Other Tax Considerations for US Citizens

Each client has a unique tax situation, and below is a list of taxes and social security considerations that may be applicable. It is important to consult with a tax adviser, and to ensure the general information included within the links below is not taken as advice.

• Personal Tax in Portugal
• Self-Employed Tax in Portugal
• Social Security Contributions in Portugal
• Inheritance and Gifts Tax in Portugal
• NHR – Tax Break for Individuals in Portugal
• Property Tax in Portugal
• Portugal’s Crypto Tax
• Various Tax Breaks for Individuals in Portugal
• Understanding Double Tax Agreements

Other: Non-Resident Income Tax in Portugal

Although this article is focussed on Portuguese tax residents, US individuals who are non-resident in Portugal for tax purposes, and who earn Portuguese sourced income, are taxed at a flat rate of 0%, 25%, or 28%. More information can be found here regarding capital gains and rental income for non-residents.

Reach Out for More Information

Dixcart Portugal provide support to international expats from around the world to ensure compliance with accounting and tax, providing clients with peace of mind.

We also provide assistance for clients relocating, and individuals considering the appropriate Portuguese visa option for them – see further reading available here. Please feel free to get in touch: advice.portugal@dixcart.com.

Recent developments on the non-domiciled regimes in the UK led many individuals who were benefiting from these schemes to reconsider their UK tax residency.

Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget on 30 October 2024, announcing several changes: from 6 April 2025, the existing non-Dom regime will end and the concept of domicile as a relevant connecting factor in the current tax system will be replaced by a system based on tax residence.

The change, which reduces the period under which a resident, non-domiciled individual will benefit from the remittance basis only for 4 years, provided that s/he has been non-tax resident for the last 10 years, will impact a significant number of UK Non-Doms, who are now looking for an alternative.

Relocating to a new country is a life-changing decision that cannot be taken lightly, and individuals and families need to take into consideration many aspects of their lives, before deciding (please read this Dixcart article for more information). Malta represents a strong option for several reasons.

Key Strengths of Malta

Malta is a politically stable country, with a well-developed legal framework that protects foreign investments and ensures security to those seeking long-term tax residency.

The remittance basis of taxation is available in Malta. In fact, residents are taxed only on income remitted to Malta, while foreign-sourced income that is not remitted to the country remains tax-free. This regime applies to individuals who are residents of Malta but are not domiciled there. Foreign-sourced capital gains (profits from selling assets like real estate, stocks, or other investments abroad) are not taxed, even if remitted, making it attractive to investors and those with significant capital gains abroad.

Furthermore, Malta has an extensive network of Double Taxation Treaties (DTAs) with over 70 countries, including major trading partners in the European Union, Asia, the Middle East, and Africa.

Malta also has no inheritance or wealth taxes, which is a major attraction for high-net-worth individuals looking to protect and transfer their assets and maintain their fortune through future generations.

In addition to advantageous fiscal conditions, Malta has many features that are highly appreciated by individuals and families who are considering relocating: English is one of the official languages, and its geographical location, with a good climate throughout the year and a Mediterranean lifestyle, make the country particularly attractive.

To complete this appealing scenario, the island boasts an excellent healthcare system, a wide choice of international schools and a constantly growing foreign community, which reinforce the positioning of Malta as a sought-after destination in the global mobility sector.

Residency Options Available in Malta for Non-EU Individuals

Malta offers several programmes for individuals considering moving to Malta: under the Global Residence Program (GRP), beneficiaries are subject to a 15% tax rate on remitted foreign income, with a minimum annual tax of only €15,000. The programme was designed to attract non-EU individuals seeking favourable tax residency. The Malta Permanent Residence Programme (MPRP) allows applicants to obtain residency through investments in property and government contributions. The programme allows successful applicants to travel VISA-free within the Schengen area. The Malta Citizenship by Naturalisation for Exceptional Services by Direct Investment can lead to Citizenship and grants free movement within the Schengen Zone (26 European countries).

Should you wish to discover the details of all residency programmes available in Malta, please click here.

How can Dixcart assist?

The Dixcart office in Malta has professionals that can assist in providing advice as to which programme would be most appropriate for each individual or family.

We can also assist with visits to Malta, applying for the relevant Maltese residence programme, assist with property searches for rentals and purchases, and provide a comprehensive range of individual and professional commercial services once relocation has taken place.

For further information, please contact Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com. Alternatively, please speak to your usual Dixcart contact.