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Investing and Living in Portugal

Portugal is asserting itself as a major start-up destination in Europe, and with that hundreds of techies are willing to relocate to Europe’s oldest country. But it is not just the Web Summit’s new capital, Lisbon, who’s attracting new residents, the Algarve and Madeira are also getting their share. The southern Portuguese most richest regions have an agreement with Saint Peter (all-year-round good weather) and therefore are attracting not freshly retired residents from Central and Northern Europe every year, but also digital nomads looking for good weather and inspiration.

A Land of Tax Opportunities
Smart Tax Incentives for New Residents

The Portuguese Government is not relying on the country’s “good looks” to attract investment, in fact, it has resorted to an interesting tax policy aimed at luring and securing foreign investment in the long term. The tax policy? Portugal’s Non-Habitual Resident (NHR) Regime.

The NHR Regime is a special tax residency status, applicable to all those who fall under the following conditions, regardless of nationality or age:

  • Be a tax resident under Portuguese domestic legislation; and
  • Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal.

Provided you check the previous requirements, you can benefit from a total tax exemption on foreign source employment, professional, dividends, interest, capital gains and rental incomes. As for pensions, these are taxed at a flat rate of 10%. All you need to do is to make sure that those incomes are either taxed at source, in accordance with the applicable tax treaty or that are not deemed as derived from Portugal nor from a tax haven (in the case of dividends, interests, capital gains and rents).

In case you work in Portugal and earn either employment or professional income from a Portuguese source, then those incomes will only be liable to a 20% flat tax rate, provided the job performed is deemed as a high-added value profession by law.

Reduced Tax Costs for International Businesses

Apart from the NHR Regime applicable to anyone relocating to Portuguese territory and complying with the regime’s conditions, digital nomads, freelancers, international consultants and international services providers can reduce their tax-related operational costs through the International Business Center of Madeira. This preferential and highly efficient tax regime grants significant advantages to companies structured in Madeira Island, of which I highlight the following:

  • 5% corporate tax (against mainland’s 21% or Madeira’s 20%), in all international operations.
  • Total exemption from withholding tax on dividend remittances from the Madeira companies, for non-resident shareholders.
  • Exemption on capital gains payments, for non-resident shareholders.
  • Access the participation exemption regime.
Why Madeira, of all other places in Portugal?

Weather: Geographically located off the coast of Africa, Madeira is certainly European.  The currency is the euro, the culture is European and politically speaking Madeira is 100% Portuguese.  And yet the climate is sub-tropical with temperatures rarely dropping below 20 degrees centigrade even in the winter, and a high level of rainfall in the mountainous interior ensures the island is very green for the majority of the year.

Reduced operational costs: Madeira offers low operational costs when in comparison with other European countries. In fact, the cost of human resources and the price of several goods and services are very competitive when directly compared with other European locations, allowing companies to face considerably lower costs when establishing operations in Madeira.

Connectivity: Business wise, Madeira has a highly qualified workforce and most of the people speak and understand the English. Add that to the fact the its Cristiano Ronaldo Airport connects you to most of European capitals (Paris, Amsterdam, Vienna, Zurich, London, Berlin…) and it is easy to understand why the tech start up scene is developing.

In terms of international communications connectivity, Madeira is connected to a Submarine Cable Station connecting Europe to Africa and the Americas, hosted in the “Madeira Datacenter”, operating several international optical submarine cables, allowing interconnectivity with national and international SDH networks and providing, as such, significant advantages in terms of quality, cost, bandwidth and scalability.

Safety: Madeira is Portugal’s safest region, with a criminality rate of just 26 criminal cases per thousand inhabitants.

auctor Miguel Pinto-Correia

MCS has more than 20 years of experience in assisting private and corporate clients making their move to Portugal. Find out how we can help and do not hesitate to contact us.

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