ALL FOREIGNERS AND RETURNING PORTUGUESE HIGH-VALUE ADDED PROFESSIONALS ARE MOST WELLCOME
Who can be eligible as a Non-habitual Portuguese Resident: Does nationality Matters?
Any individual may become an eligible non-habitual Portuguese resident provided he or she has never acquired Portuguese residence for tax purposes in any given year among any of the 5 (five) years prior to the one of the application for such an advantageous tax status, regardless of his or her nationality Portuguese, of any other EU country and/or of any other country even non-EU Hence, this tax regime may be as important for other nationals as it may be for Portuguese high calibre professionals living for more than five years in other countries planning their return to Portugal.
High-Value Added Activities: a Definition
Artists, architects, engineers, consultants, research & development experts in the IT and physical sciences fields, doctors, auditors, tax consultants, college or university professors, certain investors, directors and managers of companies to which tax incentives were granted by the Portuguese tax authorities under the Investment Tax Code for production projects, certain other liberal professions and corporate officers are eligible as individuals engaged in “high-value added activities”.
10 Years of Exemption from Portuguese Taxation on Professional Income from Abroad or Taxation at a Flat Rate of 20% on Labour or Self-Employment Income from Portugal
Consequently, such persons, when meeting other criteria, may obtain the tax status of “non-habitual Portuguese residents” and, thus, become exempted from personal income tax (“IRS”) on all labour or employment income arising from employment paid or originated or sourced outside Portugal and liable to IRS at a flat 20% rate on any net labour or employment income originated or sourced in Portuguese territory.
10 Year of Tax Exemptions Covering from Professional Income to Retirement Pensions, Investment or Financial Income and Capital Gains, Technical Assistance and Know-How Fees, Royalties and Capital Gains
Non-habitual Portuguese resident individuals may also be exempt from Portuguese personal income tax (“IRS”) on any self-employment income or income derived from a liberal professional exercised outside Portugal or liable to such a Portuguese income tax on any such net income derived from the above “high-value added activities” carried out within Portuguese territory at the above 20% flat rate.
Moreover, non-Portuguese habitual resident individuals carrying out high-value added activities are also fully exempted from taxation in Portugal in respect of any retirement pensions, income from any intellectual or industrial property rights, know-how, technical assistance and similar income, investment income, such as interest, dividend and income derived from any other financial applications and or products, real estate rental income and capital gains arising from the disposal of such financial and or other movable assets and or from the sale or real estate assets. This always provided that such income or capital gains arise from high-value added activities, assets and/or other transactions developed, taking place and/or located outside Portugal and provided the same may be subject to taxation in any other country. In some circumstances, the applicable law requires such other country be one of the 60 or more with which Portugal has entered into a double taxation treaty. But it the absence of such a double tax convention in many cases there are alternative ways to secure the above exemptions from Portuguese taxation on the mentioned types of income and or capital gains.
Valadas Coriel & Associados (VCA): Solutions to Render the Taxation Regime of Non-Habitual Portuguese Residents Even More Attractive
As of the 1st of January 2014 several amendments to the Portuguese personal income tax (“IRS) code have came into force pursuant to the State Budget Law for 2014 and on 17 January 2014 and extensive reform to the Portuguese corporate income tax (“IRC) code has also started to produce its full legal effects. On such basis and together with the above taxation regime applicable to the non-habitual Portuguese residents and with several other disperse laws creating other benefits, such as the laws and regulations allowing for the expedite grant of a special Visa and Portuguese Residence Permit for Foreign Investors known as the “ARI Golden Visa”, Valadas Coriel & Associados (VCA) has developed a full package of innovative solutions for foreigner investors into Portugal.
It is, for example, possible for a candidate to a non-habitual Portuguese resident to incorporate a professional partnership with all the advantages of a limited liability company whereas being taxed under a so-called “tax transparency” regime as a civil professional partnership. Meaning that the net profits of such a incorporated professional partnership being taxed solely on the hands of the partner whom, if eligible as a non-habitual Portuguese resident, would be taxed at only 20% for the Portuguese-sourced professional income generated in Portuguese territory.
Moreover, with the recent reform of the IRC code, such a non-habitual Portuguese resident partner of such a incorporated partnership could have such a partnership qualifying as a small and medium enterprise (“SME”) having the above net profit taxed only in the hands of the partner calculated not on the basis of actual or effective net accounting profit but on the basis of a deemed net profit estimated under the specific provisions of the IRC code applicable to a “simplified taxation regime” applicable to SMEs. Albeit with the disadvantage of being unable to deduct for tax purposes effectively borne or actually incurred expenditures and or costs, the application of this regime could allow the partner to be taxed on his or her professional income at an effective rate of only 15% on his or her gross professional income derived from Portuguese sources. This regime would offer the advantage of significant savings of time and costs in the creation and maintenance of a relatively heavy administrative, managerial, accounting and financial reporting organisation for such an incorporated professional partnership. This solution could be used for professional partnerships with an annual turnover up to € 200,000.00 (two hundred thousand Euros).
VCA is also experienced in obtaining ARI/Golden Visas for foreign investors. Despite the costs involved, a Portuguese ARI/Golden Visa is easier to obtain than similar ones available in other countries and has the additional advantage of opening, after the end of the fifth year, the possibility of acquisition of Portuguese nationality being the same also much easier to obtain than in many other European Union countries. Portugal is also far more generous than many in terms of the right to family reunion or regrouping even of children whom have reached the emancipation age and of elder parents. In order to apply for a Portuguese Golden Visa, a real estate investment of any sort in the minimum amount of € 500,000.00 (five hundred thousand) is required. Alternatively, any investment in the purchase or creation of any business employing at least 15 persons in Portugal or a portfolio investment or any kind of at least € 1 million (even if a simple bank deposit maintained for 5 years as an average bank account balance measure at the 31st of December of each given calendar year) is also acceptable.
The above are mere examples of combination of different legal and tax regimes VCA is experienced using to shape solutions for its international clients. However, VCA, as a typical boutique law firm, believes and practices law under the concept that each case is a case and each Client deserves and requires a tailor-made approach to his or her specific and personal needs.
Therefore, should you wish further information or a study specifically tailored for your personal and unique situation, please contact:
João Valadas Coriel Paulino Brilhante Santos
Managing Partner Partner, Head of Taxation and International Projects
Valadas Coriel & Associados Valadas Coriel & Associados