What is it about Portugal, other than the great food and weather, that everyone is talking about? You may have heard that Portugal has become a hotspot for millennials wishing to embark on a business venture start-up, or it is where crypto traders are now relocating to, or the fact that companies like Google and Amazon are setting up offices in the acclaimed 'Florida' of Europe.
Tax Advantages for Individuals
The buzz and energy in Portugal has sparked interest in many and for various reasons – Portugal is currently attracting the affluent, as well as a wide range of other individuals, through their favourable tax regime.
Individuals may be exempt from foreign income, or taxed at a flat rate of 20% for income earned in Portugal, for a period of 10 consecutive years. Those wishing to be eligible for this regime; the non-habitual resident regime (NHR), need to register specifically for this regime to be entitled to the tax related benefits. It is definitely worth using a tax specialist, such as Dixcart Portugal to assist as the regime can be quite complex.
The main criteria are; an individual becomes Portuguese tax resident and has not been a Portuguese tax resident for any of the previous five years, and his/her income must be earned from a high value-added activity or is of a scientific, artistic or technical nature.
Benefits Offered by the International Business Centre of Madeira
The Portuguese island of Madeira has famously been acclaimed as one of the best islands in the world due to its natural beauty. It has won awards for several consecutive years up to 2021, namely; "Europe's Leading Island Destination" and "World's Leading Island Destination". It also boasts an attractive international shipping registry, regarded as among the highest in the world. Efficient tax structures are also available for shipping companies and crew members.
This autonomous Portuguese island presents numerous opportunities – the International Business Centre of Madeira (IBC) allows for the registration of companies where income from international or online activities is taxed at a flat rate of 5%, provided certain criteria are met such as having a full time employee employed in Madeira and making a specified initial investment into the company. Companies wishing to register outside this framework are taxed at rates ranging from 11.7% to 14.7% . Companies registered in the IBC also have access to all of the double taxation agreements entered into by Portugal and have full access to the EU single market.
Incorporating Companies in Portugal
Companies also consider Portugal as a location to create an efficient tax structure, by making use of the participation regime. This regime means that companies may be exempt from dividend tax, provided certain conditions are met.
The conditions include the shareholder; holding at least 10% of the shares (the shareholdings in question must have been held, uninterruptedly, during the year prior to the distribution), and not being tax resident in a country considered to be a tax haven by Portugal. In addition, there must be no distribution of income in the first year of operation
Although it is becoming harder, it is still possible for companies to find an affordable place to rent (or even purchase) as office space. Over the last decade, popular areas of Lisbon and Porto have however seen incremental price escalations as a result of the increased attention Portugal has received.
Why Are Individuals Moving to Portugal?
The recent popularity of Portugal is also witnessed in the tourist sector. Many individuals have moved onto relocate, after visiting. The streets of Lisbon and Porto are culturally rich with traditions that the country boasts proudly of. It is not hard to understand why tourists are in love with these cities! From the trams in Lisbon to the port wine in Porto.
D7 and D2 Visas
Through the introduction of various visas by the Portuguese government, it has become possible for almost anyone to come to Portugal, and apply for a residence permit
Individuals are typically applying for D7 or digital nomad related visas, essentially a visa for those earning passive and/or independent income, and able to support themselves. This income can be for example from: property rentals, financial investments, profits and dividends from a company, copyright, etc.
Others, who are more entrepreneurially wired and wishing to venture to Portugal, are applying for a D2 visa. Those who can benefit are self-employed individuals or individuals who intend to set up or buy a company in Portugal. This visa requires a business plan to be submitted to the Portuguese authorities, amongst other criteria.
The country has shifted gear in ensuring the right calibre of people are moving to this jurisdiction and it is clear that there are many opportunities in this country situated in the far West tip of Europe.
Golden Visa Program
Those wishing to keep Portugal as an option for relocation purposes, can register for the Golden Visa program. It is a quick way for foreign investors from non-EU countries to obtain a valid permanent residence permit in Portugal, and also allows them to travel freely in most European countries (Schengen Area).
Since inception of this program, over 17,000 family members have benefited from the Portuguese Golden Visa. The program has specific investment criteria – the most popular in recent times has been an investment in a fund to the value of €500,000. The program has been so successful that the Portuguese government has raised the limit, from the previous minimum of €350,000.
The stay requirements in Portugal are minimal, with an average of only 7 days stay per annum, over a 5 year period, unlike the other visas which require you to make a permanent move to Portugal
As you can see from the above, there is more than just the crispy custard tarts and more than 300 days of sun that Portugal has to 'shout' about.
The reasons many are relocating to Portugal are numerous – with each person having their own story and set of circumstances.
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.