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July 21, 2021 - Articles
Many people mix up the Golden Visa emigration program and the NHR (Non-Habitual Resident) regime.
One could say that they are like apples and oranges: they are not alternatives. At most, they can be complementary.
Golden Visa
The Golden Visa is a residency-by-investment program for non-EU citizens. It allows a non-EU citizen to travel to any Schengen country without the hassle of having to ask for a visa, as well as request a Portuguese residency permit and live in Portugal. It does not guarantee or secure Portuguese nationality. Anyone who has lived in Portugal for at least six years can apply, regardless of having applied for a Golden Visa or not. That is it! The Golden Visa has no direct implications in tax and has, itself, no tax implications. Currently UK nationals can simply move to Portugal before December 31, 2020 and register at a town hall, without the need of obtaining a visa. But what about after this date? Let us just say that your guess is as good as ours.
As Covid-19 took the 2020 spotlight, lit- tle is known about the ongoing negotiations between the UK and the EU, but as December 31 is fast approaching, a clear definition is expected. Worst case scenario, starting January 1, 2021, UK nationals become non-EU nationals and must apply for a visa to move to Portugal, whereby any visa program will be applicable, including the Golden Visa. So, what will be different? Time. Moving from the UK to Portugal takes maximum one month to sort the legal aspects. When a visa is required, the individual must request a visa in the country of origin and then, after arriv- ing in Portugal, apply for a residency permit. The process takes from six months to a year — and no, the Golden Visa process is not a fast track for emigration. It sometimes can take longer than normal visas.
The Golden Visa is a Schengen visa that is aimed at third-country nationals who do not wish to reside or stay for long periods of time in Portugal. The law states that the minimum period a Golden Visa holder is required to stay in Portugal during the first year is two weeks.
From the second year onwards, only one week is required.
“No, the Golden Visa process is not a fast track for emigration. It sometimes can take longer than normal visas.”
NHR
This is a special tax regime applicable to individuals who have become Portuguese tax residents but have not been tax residents in Portugal in the five preceding tax years. This is not an automatic process and must be applied for online up to March 31 of the following tax year (whoever has moved to Portugal in 2020 must apply before March 31, 2021). Once registered, the NHR regime is applicable during 10 tax years, including the year of arrival. A NHR is first and foremost a Portuguese tax resident, taxed on worldwide income at normal domestic rates. Yes, you read correctly, it is not true that ALL foreign income is not taxed in Portugal.
The default position is taxation, and the exception is non-taxation.
Investment Income and Gains
Investment income and gains from black-listed locations which have no tax treaty with Portugal are not exempt. When such income or gains are from securities, the tax is actually 35%.
Securities, Capital Gains and Distributions
Securities, capital gains and distributions from investment funds are also taxed in Portugal at a 28% rate (with a couple of exceptions where the relevant tax treaty grants taxation rights to the country of source). Therefore, you need to be careful to structure your holdings properly, before moving to Portugal. Portugal has also implemented CFC legislation, which can have a significant impact on Trusts, foundations, or certain holding structures. The regime favors foreign dividends and interest, capital gains on real estate and foreign rental income, which are all exempt. Foreign pensions are now taxed at a flat tax rate of 10%, but people who became tax residents in Portugal before the 2020 Budget entered into force (April 1, 2020) can still opt for an exemption on such pensions.
Employment and Self-employment Income
A special 20% tax rate is applicable to certain activities listed as high added value by the Government. On employment income, the tax authorities have frequently taken the view that the 20% only applies to Portuguese income, however, this is not stated in the tax law. Foreign employment income is only exempt in Portugal if the income is taxed outside of Portugal – according to the relevant tax treaty. If it is not, it may end up being taxed at our normal rates (they go up to 53%!).
Remember, there is no special social security regime applicable to employment or self-employment, so a cautious analysis made by a professional tax consultant is recommended before moving. We know, things aren’t as simple and clear as they should be. That is why it is important to have someone certified and experienced by your side, to guide you through these procedures, in order to avoid getting caught up in all the technicalities. In summary, two regimes: one for emigration (Golden Visa) and one for tax (NHR), they are as similar as apples and oranges.
Two regimes: one for emigration (golden visa) one for tax (NHR), they are as similar as apples and oranges!
