Tax Planning
‘Your roadmap to a smooth relocation’
Plan your financial relocation
When you move to Madeira you will also be moving your tax residence to Portugal, this is automatic under Portuguese law and happens once you have passed 183 days in any Portuguese tax year in Portugal, at this point you are deemed tax resident and will be taxed on your global income. Relocating to Madeira and joining the Portuguese tax system requires good planning and being intelligent with your assets and your financial income. Panning your current tax and financial moves to Madeira is essential from an early stage to avoid financial surprises and to give you the solid base required to live in Madeira without undue financial concerns.
Cross border tax planning
It is particularly important to plan your exit from your current tax jurisdiction and tell your current country of tax residence you plan to be leaving. Often when people are leaving their home country they will be liquidating their assets, this can include investment property that could being used to fund a purchase in Madeira, there may be significant taxation to be paid on the sale of these assets, however under the Portuguese Non-Habitual Tax regime or NHR, the applicant can possibly or completely avoid such taxes. We have local tax experts available to advise you on these important issues well ahead of any potential asset liquidations into cash.
Pension relocation and asset planning
We strongly advise all our potential clients who have private pensions or similar financial products to have their assets checked over by a Portuguese pensions expert at an early stage. For instance, if you have a pension that pays in Swiss Francs or British Pounds then a relocation of the pension funds to a country within the European Union would be a smart idea, this would subject the pension to EU laws while also converting the funds to the Euro currency. Private pensions can also be reconfigured to have a fast drawdown over a shorter number of years, this can be particularly tax efficient in Portugal. We have expert partners available to assist you with such planning.
Inheritance tax and estate planning
The inheritance laws in Portugal and Madeira are attractive for an estate planning strategy for your family. Currently there is no inheritance tax in Madeira for a legal partner, children or parents inheriting property. Non-family members will be liable to an inheritance tax of just 10%. Should any beneficiary of your inheritance not be a Portuguese tax resident they may be liable for inheritance tax in the country of their tax domicile or residence on inheritance assets based in Madeira. Upon relocating to Madeira we advise having a will created shortly after taking residency by our recommended partners, this will protect your family and respect your later wishes.
Non-Habitual Residence
“The NHR is the best kept personal tax secret in Europe”
Private Pensions and Dividends
The None-Habitual Tax Regime or NHR regime was introduced by Portugal in 2009 and is a step towards Madeira being a tax-free jurisdiction for individuals in receipt of qualifying non-resident income. The income that qualifies from NHR inclusion includes pensions, royalties, interest on savings, share dividends and company dividends. The outstanding NHR tax regime was introduced with the aim of attracting wealthy individuals, those with private pensions and company directors who receive dividend payments.
Reduced personal income tax
The NHR should be considered as one of the best personal income tax options in Europe. The programme works on the principle of reduced personal income tax, in this regard it is the best option for low tax income allowing your pension, dividends and interest payments to increase your disposable income in Madeira substantially. Company owners who become tax residents can receive their company dividends entirely tax free inside the regime. The NHR alone is a good reason to make Madeira your future home, allowing you to be more tax efficient in your retirement and investments.
Investigate
As with all tax and personal financial situations, we advise an early investigation to see if the income can qualify for tax exemption. Please contact Bespoke Villas for an exploratory conversation. Please also request our Bespoke Villas brochure, it is a great read and will help you understand more about the services our company offers our clients. Tax planning should be started before you start selling your assets and at least 24 months before your planned move to Portugal.
Business owners who wish to reside in Madeira
Without exception the single most attractive advantage of the NHR regime is for those who own a foreign business in their home country. Business owners can restructure their business formation and assets and receive their company payment dividends in Madeira, the dividend will be exempt of all personal taxes. A company owner with a regular overseas salary will also be subject to a full tax exemption, there will be Portuguese social security to pay on these salary payments. This is particularly attractive and easy for UK and some EU based business owners. Contact Robert Webb for more details.
10 Years Duration
The NHR enables those who become tax resident in Portugal to receive qualifying income, potentially tax free in Portugal and Madeira, provided that the income in the source country is liable to taxation in accordance with the applicable tax treaty. To benefit from this preferential regime is to become a Portuguese tax resident, in accordance with Portuguese tax law, plus not having before been a tax resident in Portugal in the previous five fiscal years. The NHR tax status lasts for the first 10 years of residence. A resident is defined as 183 days in Madeira per annum.
Academic Individuals
NHR also extends to include local professional income in salary form for certain valued work activities, those who qualify benefit from a flat tax rate of just 20%. The professional working objective of the regime has been to attract academically qualified individuals and their families to work and reside in Portugal and Madeira enhancing and educating the local workplace. Qualification comes from various areas including artistic, scientific, technical, teaching and the IT sector.
Please contact us today for more information about this excellent scheme and its advantages for you.
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