RE: Evi8 Aug 2021 13:31
Mick-B Portugal
Portugal has some of the most attractive tax rules for foreign pensioners. Pension income is only taxed at a flat rate of 10pc as long as it was sourced from abroad. Income drawn from a pension pot is taxable where the person lives, so in Portugal rather than in the UK. The only exception is Government employee pensions, which will only be taxable in the UK.
This means Britons moving to Portugal would pay significantly lower taxes. For example, someone in the UK taking a £30,000 income in retirement would pay 20pc tax but only 10pc if they moved to Portugal. The savings are much higher for higher rate taxpayers, who cut their bills by three quarters.
Anyone who hasn’t been taxed in Portugal in the last five years will fall under these “non-habitual residence” tax rules for 10 years.
Jason Porter, of Blevin Franks, said: “Portugal has a very attractive tax system for retirees. Despite the reputation that it has for high taxation, this is not always true.”
Unlike other European countries, Portugal has no wealth tax. However, there is a property tax on urban properties owned worth more than €600,000 per person, or €1.2m per couple.
There is no inheritance or estate tax in Portugal, which means any gift or inheritance received by a spouse, child or parent is tax exempt.
However, inheritance tax rules in Portugal could inadvertently result in money going to the wrong family members.
Under Portuguese law children, whether from a current or previous relationship, are classified as “reserved heirs”, which means they are entitled to a certain portion of the deceased’s estate. This rule supersede the current spouse.
But there is a way around this. European succession regulations allow people to elect in their will for the inheritance rules of the country of their nationality to apply. This means Britons can stick to UK inheritance tax rules by requesting it in their will.
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