DFK Tax Advisory – Portugal, a country of contradictions and balances
04/12/2018 – Tito Barros Caldeira , Tax Adviser
Portugal, a country of contradictions and balances
A country full of energy that welcomes both citizens and companies, both leisure and business and that grows with you as you grow with experiences and sensations lived in Portugal.
As the time goes by and different time zones gets closer and closer, Portugal enhances its quality in what it is an art – to host. And if in the past we used to do it in an amateur way, government policies and ultra-competitive market rules are forcing economic agents to present high levels of excellence. Is a fact that Portuguese are collecting profits of this growth and trend, but this text is to alert you that you are jeopardizing to skip a great chance of benefit from what Portugal may give to you.
Real estate rehabilitation and lodging market
Being Portugal an undoubtful touristic destiny, every bed offer that is created qualifies as a good and profitable investment. And not only in the traditional way of an hotel, hostel or pension but also to be exploited in “bed & breakfast” mode or to be leased for long periods of time.
In this context, a good investment may be followed through the acquisition of classic buildings, projecting and performing their rehabilitation, benefiting from tax exemptions and reduced rates as derivation of from political and governmental guidance that were implemented to incentive the renewal of the country in many aspects of our quotidian.
One shall be advised that after the rehabilitation it may exist the risk of the owner wants to seize the house to himself instead of offering it to the lodging market. But we believe this is a good risk!
Retirement in Portugal
This is not a secret!!
Many reasons could be appointed to justify the attractiveness of Portugal to people spending their retirement, but I must remark two: the weather and the tax regime.
If the weather is a pure bless of the nature and geography, tax regimes (commonly applicable to retired people) were created after the economic crisis as measure to capture investment and consumption to the Portuguese territory and Economy. As it effectively generated remarkable positive results there are strong reasons to maintain it and, we will see, to extend it.
Please bear in mind that not only people in age of retirement may benefit from the referred tax regime – non-habitual resident tax regime (“NHR”) – the main requirement is not to be considered as tax resident in Portugal in the five years prior to the tax registration in Portugal. I am sure this is an easy requirement to comply with by most of the readers of this text.
This is the first step to benefit from several exemptions on personal income tax, namely on income subject to tax in the state of source under the rules of an existing Double Tax Treaty or if not considered as Portuguese source income under domestic rules.
If the income does not qualify for the briefly presented exemptions, a 20% flat rate may be applicable to the taxpayers developing an activity considered as highly qualified activities.
In the last few years, among other audit, consulting, accounting and tax services rendered, DFK and associated firms have assisted many clients, defining the most recommendable structure of investment to be implemented, preparing the registration and NHR’ application and on subsequent steps in Portugal.
Our long experience in the market and local network allow us to appoint the best partners to our clients in any area of the quotidian (real estate agents, lawyers, schools, etc.).
Should you need anything from our side, it will be a pleasure to assist you, namely recommending a Portuguese genuine spot or experience not to skip!