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An overview of Taxes for Portuguese Residents

Portugal, which borders Spain, is the second-oldest country in Europe. Due to its rich cultural heritage and thriving economy, it is an excellent place for second citizenship and residency. It is part of the 28-member countries of the European Union and the Eurozone. An estimated 10 million tourists visit Portugal each year, making it a remarkable tourist destination. Approximately 10% of Portuguese GDP comes from tourism, while agriculture, renewable energy, manufacturing, and trade sustain Portugal’s economy.

Portugal launched a Residency-by-Investment program in 2012, known as the “Golden Visa,” to revive its economy after a significant dip during the financial crisis of 2008. Non-EU nationals who make a substantial investment in Portugal will be eligible for a golden visa, such as purchasing real estate, making a capital investment, or creating jobs. Obtaining the Golden Visa will enable you to achieve permanent residency and citizenship in an EU member state in as little as five years.

There are many different reasons why people choose to live in Portugal. Some people move to Portugal for a new lifestyle or to enjoy their retirement years. In some cases, people don’t even want to relocate to Portugal and are instead interested in utilizing their Portugal residency as a way to travel freely through the Schengen Zone or gain easier access to the European Union (EU). However, any person wishing to obtain residency through Portugal’s Golden Visa Program must comply with the country’s tax laws. This article discusses a detailed breakdown of taxes for Portugal Golden Visa residents so that you can get an understanding of what to expect when you become a resident.

How does the Portuguese Golden Visa Program work?

A legal procedure based on Portuguese laws, the Portugal Golden and residence by investment program, was initiated in October 2012 to facilitate the process of obtaining fully valid residency permits in Portugal for foreign investors and their families. Applicants must satisfy a few simple requirements to qualify for the Portugal Golden Visa Program, including being at least 18 years old, in good health, possessing no criminal record, having confirmed investment sources, and successfully passing due diligence checks. Families and individuals are both eligible to apply.

Children under 18 (biologic or adoptive) who belong to the applicant’s family are eligible for the program. In cases of dependency on the applicant, parents and children older than 18 may be included in the application.

To qualify for Portugal residency by investment, applicants must first purchase property in Portugal or invest in a local business or create a job in the country before applying. In addition to gaining access to Portuguese healthcare and consumer rights, successful applicants will receive their residency permit and be able to live, work, travel, and study in Europe. Portugal’s minimum residency requirement mandates that residents visit the country for at least seven days every year for five years – the rest of the time can be spent anywhere else.

Taxes in Portugal – What Do You Need to Know?

Death and taxes are two things we can all count on in life. Regardless of where you live, you will always have to pay some tax. A more important question to ask is how much tax you will have to pay? Compared to other EU states, the UK and the USA, Portugal is the most tax-efficient country in Europe. If you become a Portuguese resident, you might have to pay:

  • Tax on income up to 48%
  • Additional ‘solidarity tax’ of 2.5% or 5% on higher incomes
  • 28% tax on interest income
  • A tax on capital gains when selling real estate
  • 1% wealth tax on property worth over €600,000 annually
  • Non-habitual Resident Tax System

Portugal was the first country to introduce a non-habitual tax regime (NHR) in 2009 to attract investors and professionals. Anyone who has not lived in Portugal for five calendar years can qualify for NHR. Portugal residents who are eligible for the regime can save substantial amounts of tax over ten years. So, to become eligible for non-habitual resident taxation, you first need to acquire residency through the Portugal Golden Visa Program.

Advantages of the NHR

  • People receive special tax treatment over ten years.
  • There is a potential tax exemption for almost all foreign income sources.
  • There is a flat tax rate of 20% for certain Portuguese income sources (such as self-employment and income from specific professions), compared to the usual tax rate of up to 48%.
  • There is no requirement for a minimum stay.
  • You can become a white-listed taxpayer within the EU.
  • Direct family members are exempt from paying taxes on gifts and inheritances.
  • There is no wealth tax.
  • Portugal accepts free money transfers.

Associated Benefits

  • Investors are considered residents of the European Union as they are permanent residents of Portugal. The Schengen Area will give them freedom of movement without restrictions.
  • Portugal and Europe offer world-class healthcare and education to investors and their families.
  • It is required to reside in Portugal for at least seven days a year during this program.
  • Citizenship can be obtained after five years as a resident of Portugal. Investors who fulfil program requirements and hold their residency for five years can then apply for Portuguese citizenship.
  • Portugal’s passports rank among the world’s top five passports in terms of ease of travel.
  • Portugal residents can travel visa-free to over 185 countries and territories, including the USA, Singapore, and Hong Kong, upon obtaining citizenship.

When applying for Residency by Investment or Citizenship by Investment programs, consult with a trustworthy agency like Passport Legacy. Many firms on the internet offer fraudulent services that promise citizenship or permanent residency within an implausible timeframe for an unrealistic price. The odds of it being true are high when the offer is too good to be true. The Passport Legacy firm specializes in citizenship and residency programs for their clients in the UAE. You can learn more about the Portugal Golden Visa Program or any other European residency through investment programs by visiting the Passport Legacy website or book a free online consultation. The Passport Legacy team will be happy to assist you with your application.

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