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NHR and Cryptocurrencies

The evolution of the currency has been raised to a completely digital level, and it may currently have no physical representation, being only in a bank account in the form of a computer record, consisting of a monetary value registered, for example on your smartphone.

Crypto-currency is nothing more than digital codes which are assigned certain values controlled by a data system, where records of transactions are kept permanently, protecting crypto-currency from being falsified or stolen.

In general terms, and according to the European Central Bank’s definition, crypto-currency is a type of digital money, not yet regulated, nor linked to any central bank.

Bitcoin is the crypto-currency that has been most valued in recent years, currently it is worth more than gold. In fact, crypto-currencies like Bitcoin have been gaining importance in the international financial sector, both as an investment and for the protection of financial assets. Where some may see uncertainty, the risk-takers see it as an opportunity.

Although the Portuguese Tax and Customs Authority (AT) has already pronounced itself on the matter, through binding information, it does not materialize that crypto-currencies should be taxed as financial assets.

However, the AT considers that taxpayers who have registered as free-lancers to transact crypto-currencies should be subject to taxation on business or professional income (category B type of income). The AT also opens the hypothesis that the income obtained through the crypto-currencies can be considered an asset increase, and be considered a capital gain.

Regardless of whether or not any of the options are considered, for taxpayers carrying out any activity related to crypto-currencies, in another country, such income, provided it is generated outside Portugal, is exempt from taxation under the non-habitual resident regime for a period of ten years after the status is granted.

In another, more recent, binding information issued by the tax authorities on the issue of crypto-currencies, dealing not with personal income tax but with VAT, following the European Union Court of Justice’s jurisprudence which consideres “bitcoin, like traditional currencies which have a discharging value, has no other purpose than to serve as a means of payment”. This means that “since they are means of payment whose function is in itself exhausted, their mere transfer does not constitute a chargeable event for VAT”.

Although the issue of taxation of crypto-currencies continues to be a controversial one, and the lack of regulation in Portugal regarding operations and transactions of crypto-currencies has both sides of the advantage and of the uncertainty, the truth is that Portugal ends up becoming attractive for people who want to invest in crypto-currencies, if one considers the possibility of relocating to Portugal and taking advantage of the regime of the Non-habitual Resident.

Being a completely remote activity, it makes more and more sense to look at this type of investment and to congregate it to the regime of the Non-habitual Resident, where the eventual gains with the crypto-currencies, whether they are dividends, income from a professional activity, or capital gains from an asset increase, would be exempt from taxation for ten years under that regime.

Besides the benefit of living in one of the most beautiful and safe countries in the world, with a fantastic climate, and with excellent living conditions, many of those who created their structures abroad to invest in crypto-currencies, could ensure the non-taxation of their earnings for a period of ten years.

auctores Pedro Marrana & Vitor Abreu

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Tax Avoidance Directive

Portugal has effectively transposed the European Corporate Tax Avoidance Directive which introduces rules to prevent tax avoidance by companies and thus to address the issue of aggressive tax planning in the EU’s single market. Madeira, being an outermost region of the EU is subject said directive.

The directive applies to all taxpayers that are subject to company tax in one or more EU country, including permanent establishments in one or more EU countries of entities resident for tax purposes in a non-EU country.

The directive lays down anti-tax-avoidance rules in 4 specific fields to combat BEPS, while amending Directive (EU) 2017/952 (which only covered hybrid mismatches within the EU):

  • Interest limitation rules: where multinational companies artificially erode their tax base by paying inflated interest payments to affiliated companies in low-tax jurisdictions. The directive aims to dissuade companies from this practice by limiting the amount of interest that a taxpayer has the right to deduct in a tax period. The maximum amount of deductible interest is set at a maximum of 30% of the taxpayer’s earnings before interest, tax, depreciation (a measure of how much of an asset’s value has been used up at a given point in time) and amortisation (spreading payments over multiple periods).
  • Exit taxation rules: where taxpayers try to reduce their tax liability by transferring its tax residence and/or its assets to a low-tax jurisdiction, solely for the purposes for aggressive tax planning. Exit taxation rules aims to prevent the erosion of the tax base in the EU country of origin when high-value assets are transferred with ownership unchanged, outside the tax jurisdiction of that country. The directive gives taxpayers the option of deferring the payment of the amount of tax over 5 years and settling through staggered payments, but only if the transfer takes place within the EU.
  • General anti-abuse rule: this rule aims to cover gaps that may exist in a country’s specific anti-abuse rules against tax avoidance, and allows tax authorities the power to deny taxpayers the benefit of abusive tax arrangements. The general anti-abuse clause of the directive applies to arrangements that are not genuine to the extent that they are not put into place for valid commercial reasons that reflect economic reality.
  • Controlled foreign company (CFC) rules: in order to reduce their overall tax liability, corporate groups are able to shift profits to controlled subsidiaries in low-tax jurisdictions. CFC rules re-attribute the income of a low-taxed controlled foreign subsidiary to its more highly taxed parent company. As a result of this, the parent company is charged to tax on this income in its country of residence.

Rules on hybrid mismatches: where corporate taxpayers take advantage of disparities between national tax systems in order to reduce their overall tax liability, for instance through double deduction (i.e. deduction on both sides of the border) or a deduction of the income on one side of the border without its inclusion on the other side. To neutralise the effects of hybrid mismatch arrangements, the directive lays down rules whereby 1 of the 2 jurisdictions in a mismatch should deny the deduction of a payment leading to such an outcome.

For more information on how the Directive might affect your MIBC company or investments in Portugal, or fore detailed information on the transposition mechanism, please do not hesitate to contact us.

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Getting to Madeira amidst COVID-19

The Government of the Autonomous Region of Madeira (RAM) has defined, in relation to the Standardization Plan for Air Accessibility, to be in force as of July 1, with regard to travelers to the airports of Madeira and Porto Santo:

  1. Filling out and submitting the epidemiological survey
    Survey in portuguese: http://apps.iasaude.pt/s-alerta/questionarios/viagem/questionario.cfm?l=PT
    Survey in other foreign languages: http://apps.iasaude.pt/s-alerta/questionarios/viagem/

All passengers must complete the Regional Health Authority’s (IASAÚDE) form.

The form should be filled in previously to the trip, between 48 and 12 hours before departure.

The survey is available at the Regional Health Authority’s website and, will also be accessible through airlines’ websites that so consent.

Alternatively, the completion of the survey, on paper, may occur on arrival at airports in the Autonomous Region of Madeira.

  1. Thermal Screening

All passengers landed at airports in Autonomous Region of Madeira are subject to thermal screening, even if they carry a negative test for COVID-19 disease, carried out within 72 hours prior to landing, in laboratories certified by national or international authorities.

  1. COVID-19 disease test

Each traveller who disembarks at the airports of the Autonomous Region of Madeira is obliged to alternatively fulfill, and under the supervision and guidance of the competent health authorities, that which is established in one of the following paragraphs:

  1. a) Provide proof of having performed a PCR test to screen for SARS-CoV-2 with a negative result, provided that it is carried out within a maximum period of 72 hours prior to disembarkation;
  2. b) Conduct, through the collection of biological samples upon arrival, a PCR screening test for SARS-CoV-2, to be carried out by the health authority, and remain in isolation, in the respective home or in the intended accommodation establishment, until obtaining a negative result from the test.
  3. c) Carry out voluntary isolation, for a period of 14 days, at your home or at the accommodation establishment where accommodated, and if the accommodation period is less than 14 days, the confinement will have the duration of the accommodation period.
  4. d) Return to the destination of origin or any other destination outside the territory of the Autonomous Region of Madeira, fulfilling, until the time of the flight, isolation at home or in the accommodation establishment where accommodated.

3.1. The PCR screening tests for SARS-CoV-2 considered for the purposes of paragraphs a) and b) are those certified by national authorities and recommended by international health authorities, the European Centre for Disease Prevention and Control (ECDC) and the World Health Organization (WHO);

3.2. The financial costs incurred at the Hotel where the traveller is accommodated, in the cases referred to in paragraphs b) and c) of number 3 are the responsibility of the traveller alone.
Criteria for submission to the SARS CoV2 test in childhood and pre-adolescence:

  • Children from 12 years old, subject to prior decision by the Health Authorities;
  • Children with suspect criteria for COVID 19 disease;
  • Children whose family members or companions are suspected cases;
  • Other situations validated by the Health Authorities.
  1. Monitoring

All passengers will be monitored through an APP (mobile application) “Madeira Safe to Discover” of the Regional Health Authority, of voluntary, but recommended use, or by telephone contact.

  1. Positive test result for COVID-19 disease

Mandatory confinement, if necessary compulsively, for a period of 14 days, in a health establishment, in the respective home or in an accommodation establishment, by decision of the competent health authorities:

a) For patients with COVID-19 and those infected with SARS-CoV-2;

b) For citizens for whom the health authority or other health professionals have determined active surveillance.

  1. Repatriation

The Government of the Autonomous Region of Madeira collaborates with all Diplomatic Authorities and Operators involved.

All charges related to repatriation operations must be covered by passengers’ travel insurance.

Travellers between Madeira and Porto Santo are currently free from any control by Health authorities.

The Regional Government of Madeira, through the Regional Secretariat for Tourism and Culture, and Madeira Promotion Bureau are working side by side with all stakeholders to relaunch the Destination. Our teams are always available to share information.


  • We advise that contacts be made with the respective airlines, tour operators, or travel agents to adjust returns.
  • The Archipelago ports’and marinas are closed.

Madeira was the first region in Portugal to implement a “Contingency Plan for Emerging Infections: Coronavirus”, presented on 03 February 2020, a document that is subject to continuous updates.

Link (download): Plano de Contingência para Infeções Emergentes: COVID-19 da RAM  (Contingency Plan for Emerging Infections: Coronavirus – COVID 19  in Madeira Islands) – portuguese version

Please consult the poster with health recommendations regarding Coronavirus – COVID 19: https://covidmadeira.pt/

For more information, browse the IASAÚDE microsite for regular updates at : https://covidmadeira.pt/

For more information on which countries have not been blocked from flying to Portugal, please consult the IATA’s website.

Source: VisitMadeira

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The best of both worlds

In international taxation one can seldomly have the best of both worlds. However, Portugal is proving otherwise, thanks not only to the Madeira International Business Centre, but also to the Non-Habitual Resident (NHR) tax regime.

Created in September 23rd, 2009, the NHR regime is a set of personal income tax exemptions and reduced rates aimed at people wishing to transfer their residence to Portugal. Those qualifying for the NHR regime are entitled to the above-mentioned reduced rates for a period of 10 consecutive years.

Among the several tax benefits deriving from the NHR regime, is the tax exemption on foreign sourced income (interests, dividends, capital gains, income from real estate property (rents), royalties, intellectual property income and business income) provided that: these latter types of income can be taxed in the country of origin under a Double Taxation Agreement signed with with Portugal.

Given the above, potential investors with structures in Malta or Switzerland can relocate to Portugal and have peace of mind with respect to dividends/profits distributed by Maltese and Swiss companies (such as a SICAV type company – investment company with variable capital) to their shareholders benefiting from the NHR scheme.

In fact, the Portuguese Tax and Customs Authority not only applies full tax exemption on income received from the above entities (as generally foreseen in the Portuguese Personal Income Tax Code), but has also established recently binding information to its taxpayers that dividends paid to NHR shareholders of Maltese companies and SICAVs are exempt from personal income tax in Portugal.

In the light of the Double Taxation Treaty concluded with Malta in Portugal, the tax credit provided to shareholders is assimilated to dividends, taking into account the specificity of the Maltese tax system of imputing income to shareholders.

On the other hand, and although the Portuguese Personal Income Tax Code considers the income paid by a collective investment organization, namely a SICAV, to its participants, is as capital income, in light of the Double Taxation Treaty between Switzerland and Portugal, the same income is considered as dividends.

Further to the above, the same treaty establishes a situation of cumulative tax jurisdiction for this income, with Portugal being able to exercise taxation as the State of residence of the beneficiaries, and Switzerland, as the State of the source. Therefore, under the NHR regime, income deriving from SICAVs will be exempt from taxation in Portugal.

The NHR as a stand-alone option, or together with the corporate tax incentives under the Madeira International Business Center, makes available to international investors. a higher degree of international mobility and liquidity, the latter through a low corporate tax rate of 5% applicable to international services companies.

These features of the Portuguese Tax System make it possible for one to benefit from the best of both worlds.

auctor Miguel Pinto-Correia

MCS and its team have more than 20 years of experience in assisting private clients who want to transfer residence or invest in the Autonomous Region of Madeira.

Obtaining RNH status requires a careful assessment of the income structure of the potential beneficiary.

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Taxation of Foreign Pensions

It is increasingly common for expats to come and spend their retirement in Madeira Island, Portugal. They bring with them not only their savings of a lifetime of work, but also their foreign pensions.

Fulfilling the criteria of tax residence in Portugal (residing more than 183 days in Portuguese territory, or, when residing less time, having a house here that can be occupied at any time in the same period of time), those who reside, for tax purposes, in Portugal, are subject to the legal obligation to annually report their foreign bank accounts and their worldwide earnings to the Portuguese Tax and Customs Authority.

It is therefore important to understand the taxation framework of foreign pensions that tax residents in Portugal are subject to.

According to the OECD Model Convention, to which most countries and territories adhere, in order to avoid double taxation “pensions and similar remuneration paid to a resident of a contracting State [in this case Portugal] as a result of previous employment can only be taxed in that State [Portugal]”. In other words, foreign pensions earned by tax residents in Portugal can only be, in most cases, taxed in Portugal.

Notwithstanding the previous paragraph, “pensions and other similar remuneration paid by a contracting State or by its political subdivision or local authority, either directly or through funds, constituted by them, to a natural person, as a result of services rendered by that person to the State, or its subdivision or municipality, can only be taxed in that State.” That is to say, foreign pensions paid to former civil servants can only be taxed by the State where the former civil servant has performed his duties.

Note, however, that the overwhelming majority of expats who come to live to Portugal will be receiving pensions derived from previous commercial or industrial activities, this means that under the law, their pensions in Portugal will be subject to progressive rates of up to 48%.

The only way to avoid such high taxation on pensions by obtaining the status of Non-Habitual Resident (NHR), which must be requested by the taxpayer on arrival in Portugal (provided that the conditions are met). Beneficiaries of the NHR regime thus have their foreign pensions subject to a fixed rate of 10% on earned pensions from foreign sources.

In addition to the benefits described above, beneficiaries of the NHR scheme may also benefit from exemptions and reduced personal income tax rates on other types of income for a period of 10 consecutive years.

auctor Miguel Pinto-Correia

MCS and its team have more than 20 years of experience in assisting private clients who want to transfer residence or invest in the Autonomous Region of Madeira.

Obtaining RNH status requires a careful assessment of the income structure of the potential beneficiary.

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Reconversion of Local Accommodation

In recent years Portugal has been considered a safe haven for several expats and foreign investors, who in turn have contributed on a large scale to the improvement of the Portuguese economy, by investing in the real estate sector, sometimes simultaneously associated with the tourism sector, namely in local accommodation (short terms tourist rentals, known in Portugal as alojamento local), or because many wish to relocate  their life and busines activity, permanently, to the country.

Several programs were launched to attract these investors and expats, including programs with attractive tax benefits such as the Non-Habitual Resident (NHR) regime, or the   “Golden Visa“, a residence by investment program of which most of the investments were  made  through the acquisition of real estate property.

In recent years, these programs have led to an exponential increase of real estate acquisition, especially in large urban and tourist areas, which has also contributed emphatically to the growth of the tourism sector, since a  large percentage of real estate acquisition has been  allocated to local accommodation.

Despite the crisis arising from the pandemic outbreak of Covid-19, the “Golden Visa” maintains a good level of adherence and demand by investors. In May of this year, there was a new increase in the value of real estate investment, a total of 137 million euros, the highest monthly investment value since March 2017.

Despite the message of confidence passed on by investors during the crisis, the global pandemic has exacerbated some socio-economic effects that were already worrying the Portuguese government, especially housing in large urban areas.

The strong demand for profitable properties, under the “Golden Visa” program, coupled with the growth of tourism activity in Portugal, and consequently the growing investment in local accommodation, has aggravated the price of housing rentals, especially in the large urban centers where the majority of real estate investment is made, and where the highest percentages of local accommodation.

On June 6, 2020, Resolution of the Council of Ministers No 41/2020 was published, approving the Economic and Social Stabilization Program, which contains measures for the conversion of local accommodation.

There is great uncertainty as to the direction of the tourism sector, how and when it will rise and how the sustainability of housing prices and rentals will be in these times of pandemic. Tourism has held back its breath, and those who have invested in local accommodation may need an oxygen balloon in the short-term.

In view of the urgency of responding to the middle-income population in obtaining affordable housing leases and the fact that the tourism sector, in particular local accommodation, is experiencing major difficulties due to restrictions on international travel, the measure of reconversion of local accommodation could be a response in order to combat both problems.

The measure itself is implemented through the Portuguese government’s support to municipal rental and sub-rental programs for more affordable rents. In these programs public entities pay 50% of the difference between the rental income paid and the rental income received, which will certainly give increased security to the landlord, because 50% of the income is guaranteed by public entities.

To the above benefit there is also an important advantage concerning personal income tax and corporate income tax exemption, on rental income resulting from the lease or sub-lease, as stipulated by Article 20 of Decree-Law No. 68/2019.

This option concerning the conversion of local accommodation into long term rentals may be even more appealing, considering the amendment to Article 3(9) of the Personal Income Tax Code, carried out by the 2020 State Budget. Such change foresees that the local accommodation does not generate a capital gain when the property is transferred back to the owner’s estate, if said property is immediately assigned to generated long term rental income.

With this measure, a potential solution remains open for investors who have earmarked their real estate investments for local accommodation, and who now want to secure a source of income,  which although not as attractive as that obtained in many cases through local accommodation, is in the current scenario of economic crisis, a more sustainable and stable source of income.

auctor Pedro Marrana

MCS and its team has more than 20 years of experience in assisting corporate and private clients wishing to relocate to Madeira. For more information on our services please do no not hesitate to contact us.

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Portugal and Madeira are “Safe Travels”


Portugal was awarded the “Safe Travels” seal by the World Travel & Tourism Council (WTTC), which aims to certify destinations that comply with hygiene and safety rules and aims to give confidence to those who travel after restrictions to avoid the spread of covid-19. “This seal aims to recognize destinations that comply with health and hygiene protocols aligned with the Safe Travel Protocols issued by the WTTC, helping, above all, to instil confidence in consumers, so that they feel they can travel safely as soon as restrictions raised, “explains the Ministry of State, Economy and Digital Transition, in a statement. The Secretary of State for Tourism, Rita Marques, considers that the award of the seal comes to reward the effort made in the country. “Portugal was a pioneer in the launch of the Clean & Safe seal. This WTTC seal comes to reward the effort that was made by all. The best destination in the world is also understood as the safest in the world”, said the minister. The WTTC also published guidelines for other sectors, such as restaurants, street shopping, aviation, airports, congress centers, meetings and events. The seal can be obtained through the World Travel & Tourism Council website.

in Expresso

Madeira Island

According to the Regional Government, Madeira is the first tourism region to have a destination certification process underway by an internationally recognized multinational.

“Madeira was the first region in Portugal to have a manual of good referencing practices for the sector, participated by the sector, and it is the first tourism region that we know, until now, with an ongoing certification process”, said Eduardo Jesus, Secretary for Tourism, in an interview with the Portuguese news agency, Lusa.

The Secretary for Tourism pointed out that the epidemiological situation of this autonomous region in the context of the COVID-19 pandemic, with 90 cases, 60% of which were recovered, and the absence of deaths caused by the new coronavirus, make Madeira “a very unique and quite differentiated ”, placing this destination“ on a completely different level from the markets with which it regularly works”.

“We want to have the first certifications in July”, he pointed out, explaining that this process “is distinct” from the seal (Covid Safe Tourism) which has “a more immediate logic”, a “short reach”, just filling out a survey, while “Certification requires the implementation of practices”, depending on the verification of the proper implementation “.

Eduardo Jesus emphasized that certification “is a different commitment and one does not invalidate the other”.

“Here the key is that what you do, you do it well. And to do well is not being able to create a false expectation for the traveller ”, based on three prevention criteria, which“ must always be verified in any circumstance: social distance, use of personal protective equipment and health security ”.

“If we apply these three directories at any point during the trip, we have the process safeguarded. That is, before getting on the plane, on the plane, when leaving the plane, when making the first ground transportation, when going to the accommodation, when circulating inside and outside the accommodation, at all these moments there are three major lines to check orientation ”, he stressed.

The Madeiran government official also maintained that everything that is done must “attend to these three universes: whoever visits, who works and who resides”.

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Bringing your car to Madeira

EU Nationals

An EU national moving to Madeira, must register his/her car if one is the holder of the registration certificate, the owner of the vehicle, or a user of a vehicle one does not own (e.g. a family member). One can use your vehicle here while it is still registered in your previous home country. An EU national has 20 working days to register your car in Madeira, following the car import into Portuguese territory. One can register his/her car at any customs office by showing the Vehicle Tax (Imposto Sobre Veículos – ISV) and by submitting the vehicle customs declaration (DAV) with the Portuguese Tax and Customs Authority.

Please note that if one changes his/her country of residence to Portugal, one has 12 months from the date you transfer residence to Portugal to request an exemption from the payment of vehicle tax.

If one buys a car abroad, transit registration plates issued in another EU country will be recognized in Portuguese territory for the purposes of driving one’s car back to his/her place of residence (temporary importation).

One can only use his/her car in Madeira for the maximum period of 90 days, after the entrance in Portuguese territory, under the condition that it is driven only by the owner of the vehicle.

Vehicles owned by a private individual, who has transferred his/her residence to Portugal, may be exempt from vehicle tax (ISV) if they meet the following criteria:

  • individuals over 18, resident in the country from where are transferring the residence for a minimum period of 6 months, consecutive or otherwise
  • that has paid the vehicle tax in the country of your former residence and did not benefit from any type of reimbursement scheme when left that country
  • owner the vehicle in the country of your former residence for at least 6 months prior to transferring to Portugal, starting from the date on which the vehicle registration document was issued, or from the date on which the leasing contract was signed, as relevant.

An EU national registering and using his/herr car in Madeira, must pay:

  • Resgistration Tax (ISV); and
  • Road Tax (IUC).

The following categories of vehicles are exempt from vehicle tax but must be registered in Madeira:

  • vehicles whose owner has transferred his/her residence from another EU country, or from a third country to Portuguese territory
  • vehicles brought by diplomats who are returning to Portugal

The following categories of vehicles are exempt from road tax:

  • motor vehicles and motorcycles owned by foreign states, diplomatic and consular missions, international organizations, and specialised European agencies and their officials
  • motor vehicles and motorcycles which are older than 20 years or are public museum pieces, and are occasionally used for no more than 500 kilometres a year
  • non-motorised vehicles, exclusively electric or powered by non-combustible renewable energies, special non-carrying goods vehicles, ambulances and vehicles dedicated to the transport of patients under applicable regulations, hearses and agricultural tractors
Step by step
  1. When importing a car into Portuguese territory one must obtain the following documents: registration certificate and the European Certificate of Conformity (COC);
  2. Upon arriving to Portuguese territory the vehicle needs to be submitted to vehicle inspection;
  3. Obtain approval from Madeira’s Regional Directorate for Economy and Land Vehicles concerning the legality of the vehicle’s documents;
  4. Submit all the vehicle’s documents to the Portuguese Tax and Customs Authority and pay the respective tax;
  5. Once tax is paid the car owner will then receive the new license plate numbers, which he/she will then have to obtain (from an authorized producer) and fix the new license plates to the car;
  6.  Deliver to Madeira’s Regional Directorate for Economy and Land Vehicles the documents produced by the Portuguese Tax and Customs Authority and obtain the Single Vehicle Document (DUA);
  7. Once the DUA is obtained one must register the vehicle with the National Car Registry;
  8. Once the vehicle is registered, pay the road tax.

translator Miguel Pinto-Correia | fons Ekonomista

Our team at MCS has more than 20 years of experience in assisting investors and expats alike relocating their business and life to Madeira, Portugal. Should you need assistance, in dealing with the bureaucracy, namely from a tax standpoint we are here to help you.

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NHR Portugal – The Ultimate Expat Tax Benefit

Without a doubt, the ultimate expat tax benefit is the Non-Habitual Tax Resident Tax Regime  (NHR) granted by Portugal (Madeira Island included) to those wishing to relocate (or return) to the country, regardless of their nationality.

If you have not been deemed tax resident in Portugal in the previous 5 years and you decided to acquire tax residency in Portugal, then you are able to apply for the NHR status under which you will benefit from:

  • A unique personal income tax treatment over a 10-year period, which included the possibility of enjoying a 10-year tax exemption on almost all foreign source income;
  • 20% flat rate, instead of the normal tax rates that can go up to 48%, for certain Portuguese source incomes (from high-added value activities, as determined by Ministerial Order, as well as income from self-employment).
  • Not needing to have a minimum staying period, although one must be careful with tax residency implications in other jurisdictions
  • Becoming part of a white-listed tax jurisdiction within the European Union
  • A tax exemption for gifts or inheritance to “direct line” family members (descendants and ascendants)
  • No wealth tax
  • Free remittance of funds to Portugal

In order to qualify for all the above mentioned tax benefits one must have the right to legally reside (i.e. from an immigration perspective) in Portugal. As such at the moment of the application one must either be Portuguese, a European Union citizen, and European Economic Area Citizen or a holder of a visa (for example: the Golden Visa or the Passive Income Visa) that entitles one to reside in the Portuguese territory.

Notwithstanding the above, EU/EEA citizens are required to obtain a EU/EEA Residency Certificate from the City/Town Hall with jurisdiction over their tax residency address in order to comply with EU/EEA citizens immigrations requirements. The documents needed to be presented in order to obtain such certificates vary from municipality to municipality, although under law such documents are the following:

  • A valid Identity Card / Passport;
  • A written Affidavit declaring that you have a Professional activity as a worker or as self-employed in Portugal; or An Affidavit, declaring that you have sufficient funds for you and for your family, and that you are covered by health insurance when the same applies to Portuguese citizens in your country of origin.

Once right of residency is established, from a tax stand point all the NHR applicant needs to do is to hold an abode, either purchased or rented, in Portugal ready at December 31st of that year with the intent to hold habitual residence.

Income Taxation under the NHR – Foreign Sourced Income
  • Taxation exemption on employment income is granted if the income is subject to taxation in the source country, in accordance with the applicable Double Taxation Agreement, or are considered not to be derived from a Portuguese source.
  • Pensions are subject to a flat tax rate of 10%. In case they are subject to tax in the source country, in accordance with the applicable Double Taxation Agreement, a tax credit applies.
  • Freelancer income / Independent Contractor derived from high value-added service activities, with a scientific, artistic or technical character, are also exempt if these can be taxed in the country of source, with which Portugal has Double Taxation Agreement or, in the absence of such agreement, when the income is not to be considered obtained in Portuguese territory.
  • Taxation exemption on other types of foreign sourced income (interests, dividends, capital gains, income from immovable property (rents), royalties, intellectual property income and business income) if: these can be taxed in the country of origin under a Double Taxation Agreement concluded between Portugal and the respective State or; if these types income may be taxed in the State of origin in accordance with the OECD model of tax convention (excluding tax havens) in cases where there is no Double Taxation Agreement.

List of jurisdictions deemed as tax havens (this includes some jurisdiction with whom Portugal has signed a Double Taxation Agreement): American Samoa, Liechtenstein, Andorra, Maldives, Anguilla, Marshall Islands, Antigua and Barbuda, Mauritius, Aruba, Monaco, Ascension Island, Monserrat, Bahamas, Nauru, Bahrain, former Netherlands Antilles, Barbados, Northern Mariana Islands, Belize, Niue Island, Bermuda, Norfolk Island, Bolivia, Other Pacific Islands, British Virgin Islands, Palau, Brunei, Panama, Cayman Islands, Pitcairn Island, Channel Islands, Puerto Rico, Christmas Islands, Qatar, Cocos (Keeling), Queshm Island , Iran, Cook Islands, Saint Helena, Costa Rica, Saint Kitts and Nevis, Djibouti, Saint Lucia, Dominica, St. Peter and Miquelon, Falkland Islands, Samoa, Fiji, San Marino, French Polynesia, Seychelles, Gambia, Solomon Islands, Gibraltar, Saint Vincent and the Grenadines Granada, Sultanate of Oman, Guam, Svalbard, Guyana, Eswatini, Honduras, Toquelau, SAR Hong Kong (China) Trinidad and Tobago, Jamaica, Tristan da Cunha, Jordan, Turks and Caicos Islands , Kingdom of Tonga, Tuvalu, Kiribati, United Arab Emirates, Kuwait, United States Virgin Islands, Labuan, Vanuatu, Lebanon, Yemen, Liberia.

Income Taxation under the NHR – Portuguese Sourced Income
  • Employment income and business or professional income derived from high added value activities are taxed at a flat rate of 20%.
  • Remaining employment and business or professional income (not considered of high added value) and other types of income, shall be aggregated and taxed according to the taxation general rules.
High-Added Value Activities
  • General Manager and Executive Manager of Companie
  • Directors of Administrative and Commercial Services
  • Production and Specialty Services Directors
  • Hotel, restaurant, trade and other service directors
  • Experts in the physical sciences, mathematics, engineering and related techniques
  • Doctors
  • Dentists and stomatologists
  • University and Higher Education Teacher
  • Information and Communication Technology (ICT) Experts
  • Authors, journalists and linguists
  • Creative and performing arts artists
  • Intermediate science and engineering technicians and professions
  • Information and Communication Technology Technicians
  • Market-oriented farmers and skilled agricultural and livestock workers
  • Skilled, market-oriented forest, fishing and hunting workers
  • Skilled workers in industry, construction and craftsmen, including in particular skilled workers in metallurgy, metalworking, food processing, woodworking, clothing, crafts, printing, precision instrument manufacturing, jewellers, craftsmen, electrical workers and in electronics.
  • Plant and machine operators and assembly workers, namely stationary and machine operators

Please note that the above list is updated through Ministerial Order issued by the Minister of Finance.

Engaging a Tax Consultant

Notwithstanding the above it is important to obtain specialized advice from a reputable tax consultant to help navigate not only through the Portuguese bureaucracy, but also to help fully comply with the regime’s requirements and tax reporting obligations arising with such status.

Did you know that Portugal, and therefore Madeira, blacklists and penalizes, through taxation, income deriving from more than 80 different jurisdictions including all British Overseas Territories and British Crown Dependencies? Did you know that the Portuguese fiscal year matches the calendar year? Did you know that not all types of pensions maybe exempt from taxation? Did you know that even though you are an NHR you are still obliged to file tax returns in Portugal?

The above-mentioned small details can become a headache if your income structure and relocation dates are not analysed and adjusted, if needed, on a timely manner in order to comply with the NHR scheme rules.

Applying for NHR status

The first step regarding NHR application is to obtain a Portuguese Taxpayer Identification Numbers (NIF) as non-resident in Portuguese territory. In order to do this, applicants need to provide proof of residency abroad through a government issued document. Non-EU-Citizens must also appoint a tax representative when applying for a NIF.

Only once you have obtained residency can you apply for a NIF as resident in Portuguese territory. Change of residency status with the Portuguese Tax and Customs Authority can only be done by presenting proof of said residency, i.e. by presenting a residency permit card issued by the Portuguese Borders and Aliens Service (SEF) or a EU/EEA-Citizen Residency Certificate issued by the City or Town Hall with jurisdiction over the applicant’s residential address. Furthermore, proof of real estate purchased or rental agreement (short-term tourist rentals are not accepted) may also be requested.

Upon change of residency status, from non-resident to resident, for tax purposes you will be able to apply for the NHR status until March 31st of the following year. Please note that if you have appointed a tax representative you now ought to dismiss such representative.

In order to apply for NHR status one must firstly apply for a password to access the Portuguese Tax and Customs Authority website, through which the application is to be submitted by your tax consultant. Any random audits carried to the said application are notified on the tax authority’s website and ought to be replied there too.

auctor Miguel Pinto-Correia

MCS and its team has more than 20 years of experience in assisting corporate and private clients wishing to relocate to Madeira. For more information on our services please do no not hesitate to contact us.

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Portugal’s E-Residency

In an effort to promote investment in the country and attracting digital nomads, freelancers, startups and digital entrepreneurs, the Portuguese Government approved Resolution of the Council of Ministers no. 30 / 2020, which sets ou the Action Plan for the Digital Transition (“PATD”) on April 21, 2020. This plan is in line with policies defined by the European Union for the period 2021-2027, aiming at innovation, digitalization, economic transformation of the Single Market.

Under said plan the Government has establish 12 sub-plans to be carried out in accordance with the foreseen digital transition strategies, two of them being of extreme importance for investors and expats alike: the E-Residency Program and the Free Tech Zones.

The E-Residency Program, similar to the one implemented by Estonia in 2014, aims at facilitating access by non-Portuguese to Portuguese services such as company formation, banking, payment processing, and taxation. The program will give the e-resident a smart card which they can use to sign documents and carry out business in the country.

Portugal’s E-Residency Program, foreseen to be launched in early November this year, will allow investors to submit all the needed documentation for application in exchange for residency kit, if said application is approved.

The other important measure foreseen in the PATD is the creation of Free Tech Zones, physical spaces/locations where high-end technologies (such as 5G or self-driving vehicles, for example) can be tested and displayed.

Free Tech Zones will be managed in such a way that specific legislation and regulations will be enacted in order guarantee that enough legal flexibility exists to promote research and development (R&D).

Both these programs are expected to actively promote the development of Portuguese tech companies and research centers through the acceleration of development and testing processes and the creation of Portuguese knowledge and intellectual property.

In this way, these programs will promote Portugal’s positioning in R&D, national resources and participation in international projects, as well as the attraction of innovative projects, foreign investment related to emerging technologies and qualified workers.

The existence and development of such programs can be integrated with Portugal’s attractive taxation system available not only for individuals but also to companies, i.e. the Non-Habitual Tax Resident (NHR) program and the Madeira International Business Center (MIBC).

E-Residents that, at a later stage, wish to relocate to Portugal can benefit from a set of personal income tax exemptions or flat rates, depending on their income source, while those looking into incorporate a company can opt for the MIBC framework, allowing their business to benefit from Europe’s lowest corporate income tax rate, i.e. 5%.

auctor Miguel Pinto-Correia

MCS and its multidisciplinary team, with over 20 years of experience, has been assisting investors and expats wishing to make a move to Portugal. Fore more information about our services do not hesitate to contact us.

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