Portugal: A very competitive tax regime

Portugal has one of the most competitive tax regimes for individuals – the Non-Habitual Tax Residents Regime (“NHR”), offering several tax benefits for a 10-year period to individuals relocating to Portugal that were not tax residents in the preceding five years. No minimum period of stay is required for individuals to become Portuguese tax residents, making it particularly interesting for globe trotters. Under the NHR, foreign-sourced dividends, interest, pension, rental income and real estate capital gains are tax exempt in Portugal, irrespective of their tax treatment in the source country. As regards foreign sourced employment and services income, a full tax exemption may also apply. The NHR also provides for a reduced tax rate of 20% to employment and services income derived from high value-added activities performed in Portugal (including software developers, academics, researchers, tax advisors, senior company personnel and, in certain cases, board members).

Flexible rules on visa/residence permits

Whilst EU citizenship allows individuals to relocate to Portugal without complying with any major formalities, citizens from third-party countries require a visa/residence permit. To that end, the Portuguese Law includes the so-called Golden Visa (“GRP”), which is a residence permit that allows citizens from third-party countries to move freely within the Schengen area. To be granted a GRP, the applicant may opt for the following investments:

• a real estate acquisition of at least EUR 500,000.00 (or EUR 350,000.00, if the property was built more than 30 years ago or is located in a refurbishment area and is subject to refurbishment works); or
• a capital transfer of EUR 1,000,000.00; or
• the creation of at least 10 job positions in Portugal.

This residence permit allows the applicant to live and work in Portugal and may be extended to direct family members. The GRP requires the Investor only to spend an average of 7 days in Portugal per year. After 5 years of holding the GRP, it is possible to apply for a permanent residence permit and, subsequently, to apply for Portuguese citizenship.

Further to successfully hosting the web summit for the past two years (the 2018 event shall also take place in Lisbon) and with the purposes of consolidating its status as a high-tech jurisdiction, Portugal has recently launched a “start-up visa” that applies to entrepreneurs who relocate to Portugal and incorporate a start-up, with the potential of achieving a turnover of EUR 325,000.00 within five years.

Dynamic real estate market

The Portuguese real estate market plays an important role in the country’s positive economic environment. For that reason, relevant tax incentives for urban refurbishment were enacted, providing for a 6%-reduced VAT rate in construction contracts, exemptions of property taxes and a reduced personal income tax rate on rental income.

Safe harbour

All of the aforementioned regulations, combined with the fact that Portugal does not have capital/wealth taxes nor inheritance taxes, makes Portugal a very appealing jurisdiction for investors.