How existing NHR tax regime holders can avoid significant tax consequences

The Portuguese government announced in their state budget for 2024, that the NHR tax regime closes to new entrants on the 31st of December 2023, and only those that have applied before this date and have taken serious steps to prove intent and meet the grandfathering items laid out by the government can be eligible to receive NHR tax status in 2024.

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If these requirements are not in place, it is borderline impossible for the professional supply chains in Portugal to be able to grandfather your NHR tax status application, early in 2024.

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How does this affect current NHR tax holders

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While not directly affected by these changes, current NHR tax status holders face a different problem which is failing to plan for the long term after the 10-year qualified period ends, after which they will be subject to progressive tax rates of up to 48%.

Our experts work with current approved NHR status holders early in their NHR tax life to ensure that they avoid significant tax consequences way before the 10 year exemption ends.

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If you structure your income in the right way you can pay as little as 3.8% tax per year for 20 years on your overseas pension and other assets held outside of Portugal, such as dividends, royalties and alike.

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For those already with NHR tax status, it is vital that you get early advice on financial and tax planning, so that you continue to optimise your position beyond the NHR finishing. If you want to find out more on how this impacts you, please contact us today.

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Here are some reasons why it is crucial to start early on your financial and tax planning throughout the 10 year NHR tax regime period:

1.  Reviewing your current tax situation: It is essential to review your current tax situation and assess how it might change once the NHR exemption period is over.  This will help you identify any potential tax liabilities and plan accordingly.

2.  Explore your financial options and opportunities early: Once the NHR exemption period ends, your tax liability in Portugal may increase, and you may need to explore new investment opportunities that are more tax efficient.  This could involve structuring your finances using tax efficient investment bonds or trusts through our proprietary financial planning systems designed by our experts.

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3.  Restructuring your assets: Depending on your current asset structure, you may need to restructure your assets to optimise your tax position once the NHR exemption period ends.  This could involve transferring some of your assets to a holding company or a trust, which could help reduce your tax liability.

4.  Reviewing your residency status: It is important to review your residency status once the NHR exemption period ends, as this may impact your tax liability in Portugal.  You may need to consider becoming a permanent resident or exploring other residency options that are tax efficient.

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In summary, starting tax planning early will help you identify potential tax liabilities, explore new investment opportunities, restructure your assets, and review your residency status to optimise your tax position once the NHR tax exemption period ends. This will help you avoid unexpected tax liabilities and remain tax-efficient in Portugal.

It is important to always have a meeting and check with one of our advisors that you are not inadvertently paying too much in tax and to financial advisors.

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Disclaimer: The guidance above should not be fully relied upon and does not constitute formal instructed professional advice. In relation to tax advice in Portugal, please engage and instruct a regulated professional for all tax advice and structured financial planning. Please contact Portugal Pathways if you would like an introduction to one of our professional advisors.

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