On January 31st, 2020, Brexit took place, and the United Kingdom left the European Union, becoming a third country. The formal agreement was signed after 10 months of discussion and one week before the end of the transition period.
The document brought together the possible agreement of both parties, called the Trade and Cooperation Agreement, has more than 1,200 pages and focuses mainly on the issues related to the exchange of goods, security, fisheries, aviation, free trade, horizontal governance agreements and competition rules and will be provisionally applied until February 28th, 2021.
Portugal always recorded a strong presence of the British community in its territory, either on a seasonal basis, for tourism (about 4.767,764 citizens / year), or on a permanent basis by having UK nationals establishing their residency here. According to the official data from the Foreigners and Borders Services (SEF) of 2019, the United Kingdom is the third most representative foreign nationality in Portugal, with around 34.358 British citizens registered in Portugal. With the Brexit announcement, the number of new applications for Portuguese residency rose from 1.500 in 2019 to 2.500 per month in 2020.
Arguments such as proximity (less than 3 hours flight to any of the 5 Portuguese international airports), sharing the same time zone (GMT), a significantly lower cost of life, the variety of international schools, the day-to-day security (having the Global Peace Index stating that Portugal is one the safest country in Europe and the third safest country in the world) or even the fact Portugal it is the seventh country in the world with the best English proficiency (according to the EF English Proficiency Index report) are the ones that may justify the choice of Portugal as the destination country for many Britons.
With the departure of the United Kingdom from the European Union, UK nationals no longer benefit from the European right of free movement. In particular, the aforementioned agreement establishes a distinction between short and long term stays, resulting in British nationals only benefiting from free entry into Portugal (or Schengen area) without the need for a visa, when coming for tourism, for 90 days every 180 period.
Regarding the long-term stays, given that the United Kingdom is now considered as a third country, it will be necessary to obtain a visa at the Portuguese Consulate in the United Kingdom to enter and stay in Portuguese territory for longer periods than 90 days. Among the different immigration options, which include the visa for working purposes – to study or for entrepreneurship – we have the passive income visa (D7 Visa) standing for, being of particularly interest for pensioners, as well as the visa for highly qualified professional activities – the D3 Visa – and the Golden Visa/ARI, which is the most flexible option as it does not require prior procedures at the Portuguese Consulate in the United Kingdom (it is requested and granted in Portugal), does not require that the holder stays in Portuguese territory for more than 7 days/year (although it can also be used to reside, if the holder chooses so) and depending only on making an investment in the Portuguese territory.
Such investments can have a financial focus (bank deposit, acquisition of shares, public debt or units in an investment fund or venture capital fund), or it can be through real estate (acquisition of one or more properties), creation of jobs, creation of companies or strengthening their social capital, or even through support of artistic, technological, or scientific research activities. The minimum investment amounts are defined by law, depending on the investment option and starting at € 200,000.00. From July 2021, the minimum investment values will be subject to updates, particularly with regards to real estate investments, and will be also subject to some geographic restrictions.
Often confused with the immigration process, Portugal has the NHR regime – Non-Habitual Tax Residency regime, a special tax regime that aims to attract to the country professionals who exercise activities of high added value or intellectual property, and pensioners who are seeking to see reduced their tax burdens in Portugal, changing their main residency to Portugal.
This status can be enjoyed for 10 years and grants interesting tax benefits that vary depending on the type of income received by the new residents. For example, income obtained in Portuguese territory derived from dependent or independent work activities such as high added value ones (certain skilled workers in agriculture, animal production, clothing, electronics, or other industries, as well as managers, medical doctors, administrators, writers, artists, jewelers, specialists in information and communication technologies, and also architects, psychologists, teachers, etc.) will benefit from a fixed tax rate, at PIT level, of 20%.
Regarding taxpayers who obtain income from dependent or independent work from abroad, the tax exemption method applies, meaning that they do not pay taxes in Portugal provided that the income is, or can be, taxed in another country (the source country). In case of a pensioner, the income will be subject to a tax rate of only 10% in Portugal. In terms of passive income (such as interest or dividends), taxation may even be inexistant in Portugal! In all cases, the taxpayer who changes his tax residency to Portugal under this regime will always benefit from the advantageous conditions resulting from the tax agreements that Portugal has entered into with several States to avoid double, and will be able to see their capital/wealth not being taxed (as, in general rule, the Tax Law only foresees taxation over income) nor being subject to inheritance taxation.
Special treatment will be given to cryptocurrency. In fact, at a worldwide level, Portugal is one of the (very) few countries that do not tax digital currencies because it is the understanding of the Portuguese Tax Authority that cryptocurrencies cannot, technically, be considered “currencies”, although, in fact, they can be exchanged for physical currencies. The lack of clear and specific regulation regarding the taxation of this type of income and the lack of rules in the tax law remain, without any changes announced in the State Budget for 2021.
A different situation will occur in the professional or business activities of cryptocurrency trading: these transactions may be subject to taxation as income resulting from the exercise of a recurring activity and not depending on the origin / type of income. Even so, several companies have already applied for registration to be able to carry out activities with virtual assets in Portugal.
Portugal has shown itself to be a country particularly opened to innovation and to the transition to the Digital Age, which is one of the pillars of its mandate, as head of the Presidency of the European Union in 2021, and one of the reasons for being considered one of the European countries with best ranking in the Annual Digital Economy and Society Index.
As such, it is not a surprise, the notorious growth of the foreign population – a 22.9% increase in the last year according to official data –that has decided to settle in Portugal, benefiting from immediate access to Portuguese nationality, and consequent European citizenship for their children who are born in Portugal, and for themselves after 5 years.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.