shock for retirees in Portugal

When we moved here some 12 years ago the 10 year tax free was in operation. Also if you built your home, you were exempt from paying council tax for 5 years a win, win situation. We also had asolar panel installed on our roof for hot water at a cost to us of 995 euros about £500 with the exchange rate as it was. The solar panel gave hot water for 7 months out of 12 without recourse to electric or gas.

The locals were particularly hard hit during the terrible recession especially the elderly. People saw their pensions cut yes you read right, cut. Pensioners were expected to live on 250 euros per month. The government increased taxes for earnings and at the time the basic wage was 575 per month. A SRN nurse earnt 1000 before tax.

Portugal as someone else mentioned is becoming increasingly popular for Italians, French, German and Dutch mainly youngsters with children who wish to live off the land a la “the good life”, we have many around here. When they don’t have enough money, they beg. A Portuguese person would never beg in this country, I don’t know about abroad.

I don’t know about the education system. The NHS system is second to none and better than the UK it’s higher up the world rankings. The government are now enticing their people back home with a lump sum payment and people are coming. Met a lung specialist ex St Thomas, London here the other day, came home because it’s a better work/lifestyle balance as was working all the hours they could possibly get out of her. I think youngsters today go a lot on work/life balance.

... and Swiss, Germans ..

Portugal is a very popular place for Italian pensioners to move to, because of the no-tax/ten years rule. Have not heard anything on the news her in Italy about changes in the Portuguese system.

It's true about the houses for sale at one euro in depressed areas here. However, there is the obligation to starting renovations within one year of acquisition.

Funnily enough, and I did not know this before I posted- got an e-mail from a relative sending news from UK, and saying they were considering moving to Portugal, but have now decided not to.

Yes you are right NfkDumpling some of our neighbours in France thought that British people living in France did not pay taxes there. Once we explained that we pay tax globally as Dinahmo said they were more accepting,

I like the idea that Portugal is using taxation as an immigration policy Growstuff. Perhaps our Government should do the same to attract doctors and nurses to the UK.

I fear though it would cause considerable resentment by the ‘natives’. Do the Portuguese know their UK neighbours don’t pay tax? I would assume so and would assume they too would have been resenting this.

I did read your post thoroughly Dinahmo and I apologise for misleading about government pensions. Personally, I'd rather believe a company specialising in cross-border tax advice than a random person on GN.

I don't care what the situation in France, Greece, Switzerland or anywhere else is or was. That was the position in Portugal, until it changed at the beginning of this year. I don't know why people are trying to deny it.

When we had our holiday home in Greece we had to prove that we were UK tax payers as otherwise we would have had to pay tax there on our UK earnings. We also paid approx 1,000 euros in property tax there every year. Sold up and got out.

The point here is that in order not to pay tax on your pension in Portugal you have to be resident for 182 days or less.This means that you will be resident somewhere else. Unless you are wealthy and are able to have houses in more than two countries, as a British national you will therefore be deemed to be resident in the UK.

The Blevins Franks paper is disingenuous as for example when it talks about dividends. These are paid out of income that has already been subject to Corporation tax. At the small companies rate that is 19%. Higher for larger companies. In the good old days, dividend income would be grossed up and a tax credit would be calculated. Depending upon the make up and level of ones income, if tax had been overpaid then there would be a refund of the tax credit. That can no longer happen even if total income, including dividends is exceeded by the personal allowance.

If you had read my previous post thoroughly you would have seen that I wrote that UK tax is paid on government pensions and is not refundable in the UK.

… and other sources of income.

Dinahmo When I googled, a number of articles and info sheets came up. The situation was till the same until a few days ago. I chose one, but didn't notice the date.

You seem to be missing their status as non-habitual residents.

Here's a more recent article:

www.blevinsfranks.com/news/article/non-habitual-resident-regime-NHR-Portugal-tax-advantages

Please note that it only applies to those with non-government pensions.

growstuff interesting - but your paper was written by PwC in 2014 and the one I read was written by PwC in 2019. It starts with the statement "Residents in Portugal are taxed on their worldwide income at progressive rates varying from 14.5% to 48%"

I don' t understand your comment "retirees have not been required to pay tax on pensions in any country".

If you are a UK national you pay UK tax on your government pension if you were a government employee - civil service, teachers etc. That applies to non residents as well as UK residents. In France that income is added to the tax return in order to calculate your French liability. You can apply for other pensions, unconnected with the British state, to be paid tax free but you are required to already be or are about to be registered with the French authorities.

It may surprise you to know that the French authorities cn access British bank records. Some friends had ISAs in the UK which should have been switched to non ISAs. They didn't declare the income on their French returns and were invited to a meeting at the local tax office. The official explained that he had obtained the information from the UK and quickly demonstrated how.

Dinahmo But they haven't paid tax if they were non-habitual residents, rather than resident.

Dinahmo Some information about the tax regime for non-habitual residents in Portugal:

www.pwc.pt/pt/fiscalidade/imagens/pwc_europe_best_kept_secret.pdf

Until now, retirees have not been required to pay tax on pensions in any country.

Aaaaarrrrggggghhhh! People do pay tax wherever they live, but income tax is only one form of taxation.

There are a number of countries in the world, where there is no personal income tax at all. They range from Bermuda to Somalia. Unfortunately, to live in Bermuda you have to be stinking rich and to live in Somalia it's advisable to hire a permanent armed guard.

I'm not advocating having no direct personal tax - what I am saying is that it's only one form of taxation and all governments use tax to control how money circulates in an economy.

It's noticeable that most social democratic countries have high income tax. That's because the governments want more control about how money is spent. There's also a tradition of seeing it as fairer.

All UK Conservative chancellors have been keen to reduce income tax, the argument being that wealth will then trickle down into the economy. Unfortunately, that doesn't work very well and means that people don't spend their money in a way which the government wants. Often they don't even invest in the UK economy.

Another argument against direct income taxation is that it's wealth rather than income which is causing inequality. In the UK, wealth is relatively undertaxed, which means that there's a disincentive for people to work rather than acquiring wealth through investment (especially overseas). It's also been a main driver in the increase in property prices.

I don't know about Portugal but generally if you are resident in one country you are required to pay tax on your world wide income in that country. So I live in France and include my state pension and my employment pensions on my French tax return. French IT is calculated on all my income and I am given credit for any tax deducted at source in the UK and this reduces the amount of French tax that I have to pay.

Regarding second homes the sale of these have to be declared to the fiscal authorities in the country where the home is and also where you are resident. Thus, the disposal of a second home in France is subject to capital gains tax and the tax is retained by the notaire from the sale proceeds.

The sale of the holiday home is also taxable in the UK but credit is given for the tax paid in France. If the tax liability in France is higher than that in the UK you don't get a refund (because it's French tax) If it's lower in the UK then you have to pay the difference. The rules are different for calculating the gain in both countries.

I have just checked on a Portuguese website and everybody who is resident in Portugal has to pay tax on their world wide income. I suspect that those who don't pay tax either have income which is below the equivalent of the personal allowance or are not declaring their income.

I agree MawB and would be a good reason for me to not go there.
Have never visited Bognor Regis, so feel intrigued by it now.
My own feeling is that all should pay tax, either in the country they live or the country the pension etc is paid out.

Personally growstuff, I would find “top quality golf courses” in the Algarve or anywhere a complete turn off. (yawn) Might attract the likes of Prince Andrew or Donald Trump!

Well, we'll have to agree to disagree because even countries such as the UK only raise a minority of their income from direct taxation.

I don't agree with you growstuff. Just spending money in a country and paying indirect taxes via VAT doesn't butter many parsnips. That doesn't raise sufficient revenue to cover building and maintaining roads, railways, hospitals, schools, colleges, emergency services or any of the basic infrastructure of a country. Each citizen is expected to contribute to those services via direct taxation and anyone who has a problem with that is, in my opinion, a freeloader.

But as Maw says, not sure of the relevance of the thread in the first place; it's so obviously the right thing for Portugal to do.

PS. MawB I think Bognor Regis would have to build a few more top class golf courses and improve its weather before it became more attractive than the Algarve .

Yes, just like Philip Green. (Hasn't he already been mentioned?)

I would imagine the problem with people like Philip Green is that much of his money isn't invested in the country where he lives, although some will be. He probably has an office in Monaco, which charges him fees for managing his finances.

Maybe the Portuguese government has done its sums and has worked out that other rich retirees are doing the same, ie not actually spending the money in Portugal, but using it as a base to invest globally.

Chewbacca They're not freeloaders because they spend their money in Portugal, which boosts the economy. The Portuguese government has, in the past, quite deliberately wanted to attract high net-worth retirees, who haven't paid tax on their pensions (wherever they're paid) and other sources of income. The Portuguese economy has benefited from having them.

Maybe the decrease in unemployment means that Portugal is on the road to recovery and doesn't need to attract wealthy foreigners to quite the same extent. Nevertheless, it still wants skilled people and, apparently, is a magnet for professional Brazilians. Obviously, they share a language, but Brazil isn't in the EU, so this is a way to tempt them.

but there are some countries people choose to go to because they don't. Malta too. And Portugal recently.

So tax evasion then?
Just like Philip Green

It would appear that certain "activities" will still benefit from the Non-Habitual Resident tax regime:

www.lexology.com/library/detail.aspx?g=d343f685-dc44-4d9d-ae5a-fef9eb3a66ea

Sorry, can't copy the text, so you'll have to click on the link.

Interesting, because Portugal appears to be using its tax system rather than a points-based immigration system to attract the people it still wants to come to the country.

I could be wrong, but I don't think this is so much about getting more money from certain groups, but limiting the number of people from certain groups who are attracted to living in Portugal.

PS. Unemployment in Portugal (although still quite high at over 6%) has halved over the last few years.