The approach to an expatriate’s financial planning in Portugal will be determined by whether the individual becomes resident in Portugal or whether they can qualify as a non-resident for tax purposes. While, as a whole, the Portuguese tax regime for non-residents is less onerous than the regime for residents, with only Portuguese sourced income and gains being subject to tax, an expatriate should take care over the number of days spent in Portugal during any tax year.
Expatriates resident in an EU Member State investing in a cross-border bond investment will generally find it beneficial to obtain a tax compliant policy issued by a life insurance company operating under EU Freedom of Services or Freedom of Establishment rules rather than a non-tax compliant policy or a ‘foreign’ policy issued by a life insurance company located in a third country, e.g. Jersey, Guernsey, Isle of Man.
There are significant tax benefits by using a tax compliant EU policy. Information can be provided.
Expatriates resident in an EU Member State taking out a cross-border bond while outside this country, for example in the UK before becoming an expatriate or on a subsequent visit to the UK, are not restricted to the bonds of EU-based life companies. Such bonds, for example from an Isle of Man or Guernsey life company, can be held while resident in EU Member States and enjoy tax control and mitigation benefits. On partial or full surrender, the proceeds will be paid gross and it is the responsibility of the policyholder to declare the policy gain or income to the tax authority in their country of residence.
The tax rate on investment income received from entities resident in jurisdictions subject to a privileged tax regime in their country of residence and included on Portugal’s blacklist, such as the Isle of Man and the Channel Islands, which also do not have a permanent establishment in Portugal, was increased in 2012 from 30% to 35%.
If you are an expatriate currently living in Portugal, you should review your finances with a suitably qualified financial adviser who is either authorised directly by the Portuguese regulator or is based in another EU market and recognised by the Portuguese regulator following prior notification by the adviser under the Insurance Mediation Directive. If you are planning a move to Portugal, you should review your finances with a suitably qualified and experienced financial adviser and/or tax adviser who is familiar with Portuguese tax matters before making the move.