September 2015

Portugal Golden Visa & NHR Tax Regime

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Residence permit Golden Visa

Portuguese tax issues NHR tax regime

Portuguese tax issues Other taxation issues

INDEX Introduction Why Portugal?

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Introduction Why Portugal?

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Introduction Why Portugal?

Like other European countries (the United Kingdom and Switzerland), Portugal is an attractive option

for domicile, offering the following advantages:

• Culture and language.

• Security and a high standard of living without the costs of other European countries.

• A good healthcare system.

• Stable currency and residual inflation.

• Free access to the majority of European States in the Schengen area – Golden Visa.

• Portugal is a party to an extensive network of double taxation agreements.

• A very competitive tax system through the non-habitual residents (NHR) regime.

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Introduction Why Portugal?

Domicile in Portugal is based on two essential pillars, which interested individuals can use together or

separately:

The residence permit (Golden Visa) – see slides 7 to 14

The Golden Visa programme is a fast track scheme for non-EU citizens to obtain a fully valid

residence permit in Portugal that allows them to live and/or work in the country.

Obtaining NHR status – see slides 15 to 20

This is a special tax scheme, valid for 10 consecutive years, which allows individuals who become tax

residents in Portugal to benefit from a very attractive tax framework.

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Introduction Why Portugal?

The temporary residence permit (Golden Visa) does not require the individual to live in

Portugal (there is only an obligation to comply with the minimum annual stays established in the law.

These are 7 days in the first year and 14 days in each following 2-year period).

An individual may apply for a temporary residence permit to benefit from free access to Portugal and

to the other countries of the Schengen area1, without ever having to reside in the country. 1 Austria, Belgium, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lichtenstein,

Lithuania, Luxembourg, Malta, the Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.

The residence permit does not, in itself, have any tax implications. However, any investment in

Portugal means it is necessary to obtain a Portuguese tax number and, as a consequence, tax

representation.

In contrast, if an individual intends to live and work in Portugal and is not European citizen, he or

she must first obtain a temporary residence permit (Golden Visa), then register as a tax resident in

Portugal and, after this, apply for NHR status.

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Residence Permit Golden Visa

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Advantages of the Golden Visa

• Extremely low minimum stay requirements - first year, 7 days and following 2-year periods, 14

days.

• Extends fully to family members (with no further investment requirements).

• Freedom to travel to all European countries that are members of the Schengen area.

• Possibility of permanent residency after 5 years.

• Possibility of being granted Portuguese nationality after living in Portugal for 6 consecutive years.

• No limitation on subsequent investments or employment opportunities.

• Access to all Portuguese public services, including health and education.

Residence Permit Golden Visa

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Requirements for access to the Golden Visa

To have access to the scheme, anyone interested must make an investment in Portugal and maintain

it for 5 years. The qualifying investments are:

(i) Transfer of capital in an amount => EUR 1,000,000.

(ii) Creation of at least 10 jobs.

(iii) Acquisition of real estate assets in Portugal with a value of => EUR 500,000:

- The investment may be made in one or more properties as long as the total value reaches

EUR 500,000. The properties can be rented out or operated for commercial, agricultural or

tourism purposes;

- Any property acquired may be subject to a charge (for example, a mortgage), but only over

the part of the value above EUR 500,000;

Residence Permit Golden Visa

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- Any property may be acquired under joint ownership as long as each co-owner invests at

least EUR 500,000, personally or through a Portuguese single shareholder limited

company in which the interested party is the shareholder.

(iv) Acquisition of property in Portugal that is more than 30 years old or located in an urban

rehabilitation area, carrying out additional rehabilitation works, with a value of => EUR 350,000.

(v) Transfer of => EUR 500,000 to acquire units in investment or venture capital funds providing

capital to small and medium-sized companies.

(vi) Investment of => EUR 350,000 in certain in research activities.

(vii) Investment of => EUR 250,000 in certain investment activities in artistic production, or

renovation or maintenance of Portuguese cultural heritage.

With the exception of cases (i) and (v), the minimum amount required may be reduced by 20%

whenever the investment is made in areas of Portugal with a low population density.

Residence Permit Golden Visa

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Who can benefit from the Golden Visa scheme?

• Non-EU citizens.

Do both non-EU spouses need to apply for their own Golden Visa?

• No. The investor’s family members can also obtain a residence permit from Portugal by applying

for “family reunification” (spouses, children aged under 18 and adult dependent relatives still in

education).

• These family members will also be eligible for permanent residency and Portuguese citizenship.

When one spouse is an EU citizen, does the non-EU spouse need a Golden Visa?

No. The non-EU spouse can obtain a special residence permit under the “family reunification” rules.

Residence Permit Golden Visa

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What are the minimum stay requirements in Portugal under the Golden Visa scheme?

• Golden Visa applicants must regularise their situation within 90 days of entering Portuguese

territory.

• To maintain the Golden Visa, holders must stay in Portugal for the following minimum periods:

Year 1: 7 days, whether consecutive or not;

Year 2 onwards: 14 days, whether consecutive or not, to be observed in each subsequent 2-

year period (for example, the Golden Visa holder may stay for 14 days in one

year and not travel to Portugal in the following year);

Year 5: Possibility to apply for permanent residence in Portugal.

Residence Permit Golden Visa

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Ways to obtain Portuguese nationality

• At the end of 6 years of uninterrupted residence in Portugal, it is possible for Golden Visa holders

to apply for Portuguese citizenship.

• However, there are other ways of obtaining Portuguese citizenship by naturalisation that do not

depend on six years’ prior residence in Portugal. These are:

- Relatives in the ascending line - nationality is available to individuals born abroad with at

least one second-degree direct relative in the ascending line who has Portuguese nationality.

In other words, it is possible for the grandchildren of Portuguese people to acquire Portuguese

nationality;

- Sephardi Jews - the descendants of Portuguese Sephardi Jews can obtain nationality by

naturalisation.

See the conditions at: http://www.plmj.com/xms/files/newsletters/2015/Marco/Nacionalidade-

Portuguesa-para-Descendentes-de-Judeus-Sefarditas-direito-nacionalidade.pdf

Residence Permit Golden Visa

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STEPS AND ESTIMATED TIMING

Residence Permit Golden Visa

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Portuguese tax issues NHR tax regime

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What does the NHR scheme consist of?

The NHR applies for 10 years to individuals who may benefit from a special tax regime under which

their income will either be exempt or will be taxed at reduced rates.

What are the requirements to benefit from the NHR scheme?

- Not having been a tax resident in Portugal in the last 5 years.

- Becoming a tax resident in Portugal, which implies:

- Staying in Portugal, every year, for more than 183 days, whether consecutive or not, in any 12-

month period beginning or ending in the year in question;

- Staying for less time but having their habitual tax residence in Portugal on any day of the 12-

month period beginning or ending in the year in question.

- Presenting the NHR application by 31 March of the year following the one in which they became

tax resident in Portugal.

Portuguese tax issues NHR tax regime

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Is the NHR compatible with maintaining tax residence in the State of origin?

No.

Taking the decision to come and live in Portugal means the individual in question must take up tax

residence in the country and, therefore, be considered as “non-resident” for tax purposes in their State

of origin (it is not possible to have more than one tax residence).

This decision does not imply a radical cutting of ties to the State of origin. The individual in question

can continue to travel home as long as (i) their stay does not exceed certain maximum periods, and

(ii) the individual ceases to maintain personal and/or professional ties with that State of origin that

might raise the question of them being tax resident there.

In other words, the individual must restructure his or her personal, professional and financial life so

that their centre of vital interests is located in Portugal. Subject to a case-by-case analysis, this does

not prevent them in theory from continuing to hold assets in the State of origin (for example, real

property or bank accounts).

Portuguese tax issues NHR tax regime

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Does the NHR require the individual to reside in Portugal for at least 183 days in each year?

As a rule, any change of tax domicile means that, in each calendar year or during a period of 12

months, the individual must spend fewer than 183 days (whether consecutive or not) in the State of

origin.

However, even if the individual spends fewer than 183 days in the State of origin, he or she may be

considered a tax resident because of the strength of the personal or professional ties they maintain

with this State.

When the State of origin makes that claim, the phenomenon of double tax residence arises. In this

event, the rules established in any applicable double taxation agreements will apply to determine the

State where the individual is resident for tax purposes.

This means that the question of spending 183 days, whether consecutive or not, of every year, in

Portugal must be seen, above all, from the perspective of the State of origin and of the ability of the

individual in question to use their stay in Portugal to fight off any claim the State of origin may make to

continue to treat him or her as a tax resident.

Portuguese tax issues NHR tax regime

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Domestic Abroad

Pensions

Taxed at progressive

tax rates up to 48% +

surcharges and

Social Security

Source Income

Exempt

Conditions

Employment 20% (+3.5%) +

Social Security

Domestic: if derived from value added activities

Abroad: if effectively taxed (e.g. WHT at source)

Abroad: if taxed in the source country as per applicable tax treaty

or, alternatively, if they are not considered as obtained in Portugal

Domestic: if derived from value added activities

Abroad: if it may be potentially taxed in the source country as

per an existing tax treaty signed by Portugal, or, in the absence of

a tax treaty, it may be potentially taxed under the OECD model

tax convention provided the income is neither sourced in Portugal

nor in a tax haven.

Abroad: if it may be potentially taxed in the source country as

per an existing tax treaty signed by Portugal, or, in the absence of

a tax treaty, it may be potentially taxed under the OECD model

tax convention provided the income is neither sourced in Portugal

nor in a tax haven.

Exempt

The list of “high added value activities” includes, e.g. architects, engineers, artists, actors, musicians, auditors, medical doctors, computer technology and data,

processing activities, pilots, Portuguese branch legal representatives and directors provided it can be proved they are able to legally bind the company

Portuguese tax issues NHR tax regime

Royalties

Interest

Dividends

Capital gains

Self-employment

Taxed at a 28%

(except royalties)

(only applicable to

independent personal

services as per list of

professions approved

by the PIT code)

20% (+3.5%) +

Social Security

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What should an interested individual do to establish domicile in Portugal?

- Carry out a prior study of the tax framework that will apply to them in the future in Portugal;

- Take any measures necessary to restructure their assets before changing their tax residence to

Portugal;

- Obtain a Portuguese tax number as a “non-resident” and, if applicable, obtain a residence permit

under the Golden Visa scheme;

- Cancel their tax residence in the State of origin and register as a tax resident in Portugal;

- Apply to be granted NHR status (this takes an average of 8 months to obtain but, once awarded, it

takes retroactive effect as from the date of the beginning of the tax residence in Portugal).

Portuguese tax issues NHR tax regime

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Portuguese tax issues Other taxation issues

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Wealth tax (tax on assets/fortunes)

Not applicable in Portugal.

Asset disclosure obligation

In terms of income tax, Portugal does not impose any obligation to report assets. However, individuals

tax resident in Portugal must indicate any bank accounts they hold in their own name outside Portugal

in their annual tax return (this obligation only covers the IBAN and not the balances of the accounts).

Tax on inheritance and gifts

Transfers for no consideration are subject to Stamp Duty taxation in Portugal at the rate of 10%.

However, any transfers from parents to children and between spouses are exempt from this tax.

Portuguese tax issues Other taxation issues