What tax legislation should high net worth individuals relocating to your jurisdiction be aware of?

Taken from: A New Place to Call Home Residency options and implications for high net worth individuals
Virtual Round Table Series Private Client Working Group 2017

Portugal offers investors, pensioners and qualified professionals the ‘Non Habitual Tax Resident’ (NHTR) status which grants full exemption on most classes of foreign sourced income like pensions, dividends, interests and royalties. Couple that with an extensive network of bilateral treaties to avoid double taxation and all of these classes of income will benefit from limits on taxation in the country of origin, of between 5 and 15 per cent.

This status is guaranteed for ten years and is applicable on any monies you remit to Portugal. NHTR requires you to be considered tax resident in Portugal, spending 183 days a year in the country or alternatively having a centre of interest in Portugal (assets, job, kid’s schooling). Portugal sourced labour income, on a contract or self-employed, is taxed at a capped 20 per cent. If you are not a citizen of an EU country, you should apply for a Golden Visa which entitles you to free movement within the EU Schengen Zone and opens a direct path to full citizenship after five years. Golden Visas holders can become NHTR, but if they don’t want to reside in Portugal they just have to spend seven days in the country during the first year and 14 days in every two years after that. Portugal has a wide array of treaties to avoid double taxation, based on the OECD model. Let us say, for example, you are a Belgian with a lot of equity in a listed company.

In Belgium the tax on dividends is 30 per cent, but if that person came to live in Portugal and obtained the status of Non Habitual Tax Resident, he or she would not pay any tax on foreign-sourced dividends. The tax treaty would then limit the amount of tax Belgium could charge on those dividends to 15 per cent, meaning the tax bill would be halved. When I meet high net worth (HNW) individuals,

I know that if their wealth is based broadly on dividends or royalties – or even on wages or self-employment – this could be a very interesting proposition for them. The cherry on top of the cake in Portugal is no inheritance tax, although bequests to non-relatives are capped at 10 per cent stamp duty.