Are you thinking of moving to Portugal? Portugal is not generally regarded to be one of top tax havens, but the tax system in Portugal is extremely accommodating. People who have recently relocated to the country are known as”non-habitual resident” (NHRs) and are entitled to an income tax of 20 percent. tax.
Most types of incomes from foreign sources are tax-free within the nation, which adds to the generous system more.
Financial Climate
Portugal became a member of in the European Union back in 1986 and, since then the process of diversification in the economy has been happening. Portugal’s economy is competitive internationally and, as per 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 illustrates. It is predicted to rise in the coming years.
Government is investing money in upgrading the infrastructure for tourism and boosting the appeal that the destination is gaining as a premier European tourism destination. There has also been advancements in the areas of technology and information which have further diversified the economy of the country. All of these are contributing to the development of real estate market and.
In the last few days, government officials has launched the new economic development strategy. The goal of the strategy is to boost the investment of foreign direct investors and improve the exports of Portugal. These efforts aim to improve Portugal’s stability in the economy, making 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 be eligible for the Personal Taxpayer Tax (PIT) system. When they are accepted NHRs the individuals can have this status for a time which is continuously for 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 their move to Portugal.
NHR regime is showing to be a great success, with more than 1000 people already being registered. The country is currently processing applications of 400 people who are mostly EU-member countries as well as Brazil.
A significant proportion of these people are self-employed. A lot of NHR applicants are able to draw a substantial retirement income, or different sources of earnings within their country of the residence.
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Applications Requirements: NHR Taxation
Anyone who is looking to obtain the NHR status must reside living in Portugal for minimum 183 days throughout the year. Additionally, they must own an property in Portugal and have plans to make it their permanent residence.
When individuals receive the NHR classification, they are able to take advantage of the flat rate of 20 percent tax. The tax policy is applicable to income from salary, and also to the earnings generated by an enterprise.
There is no tax on personal income for salaries received from an employer located in a country other than Portugal. The only requirement is that those salaries to be tax payer in the country in question. It’s easy to understand how many companies can gain by relocating their operations to Portugal. Portuguese employers also stand to gain by employing NHRs.
Any kind of income that results from high-value-added products or services with a scientific, artistic, or technical nature in another country is exempt of taxation by Portugal. Again, there is a restriction – this type of income has to be taxed under the Double tax treaty. It is essential that the country from which the income is derived to be allowed to tax it than taxation itself to occur. NHRs are also exempt from taxation upon 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. The NHRs can benefit from the absence of gift and inheritance taxes, which can be quite practical when it comes to deciding regarding the transfer of assets to next generation.
Numerous Other Fantastic Benefits of Moving to Portugal
The tax-related initiatives and the fantastic real estate purchasing possibilities are sure to make many people contemplate moving to another city and apply in for NHR status. A few other benefits are to be discussed and also.
The tax burden can be further reduced because of the nation’s favorable treatment of 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 corporation income tax. This tax is in effect until 2020 and applies to any kind of transaction, including those with non-residents.
As of now, Portugal has signed double tax treaties with 67 nations. Of the 67, 61 are currently in effect. Knowing more about the options and conducting a amount of research on the tax policy of the country is essential to this NHR application process, and getting the most of this chance.