What was the personal situation or challenge?
David and Laura, had retired from senior positions in the National Health Service in the UK, after successful careers and wise investments they chose to move to the beautiful town of Lagos in Portugal. Living there comfortably for five years under the D7 visa and the Non-Habitual Residency (NHR) tax regime. They were enjoying the 0% tax on their overseas pension and other assets held outside of Portugal, thanks to the NHR program.
However, like many who are approved under the NHR tax regime in Portugal, they had failed to plan for the long term. Unaware that after the 10-year period, they would face higher taxes on their incomes and pensions held outside of Portugal, they were at risk of significant financial consequences. They were not prepared for the end of the exemption period, which could drastically change their tax status.
How did Portugal Pathways help?
We stepped in to offer David and Laura specialised guidance in long-term tax planning. Understanding their situation and their goals, our experts began by reviewing their current tax situation and assessing how financials might change once the NHR tax benefits ends, identifying those future tax liabilities and how they could structure their income and financial assets in a way that avoided these future progressive tax rates after 10 years.
We presented a financial plan for a more tax efficient situation post NHR, and were able to tailor it to their needs, such as investment bonds or trusts through our proprietary financial planning model and systems. What we put in place has allowed them to pay as little as 3.8% tax per year for another 10 years on their overseas pension and other passive income from their rental properties in the UK.
By engaging with them early enough, five years into the NHR regime, we ensured that they had enough time to transition smoothly without unexpected tax liabilities. With our intervention, David and Laura are now positioned to enjoy significant financial benefits and get on with their retirement in Lagos.
Their experience highlights the importance of early and comprehensive financial planning, especially for those under the NHR tax regime.