Financial Planning Tips for Life in Portugal

Portugal

Portugal has a lot a to offer American expats and retirees, including favorable tax regimes, great weather, a low cost of living, and relatively easy immigration paths.

In order to best take advantage of all that Portugal has to offer, including the NHR tax regime, expats and retirees should build a financial plan around their move.

Here are a few tips to help Americans thinking about moving to Portugal:

NHR (Non Habitual Resident) Tax Regime

  • The NHR regime has significant benefits for retirees and some workers, including a 10% tax rate on all pension income. This includes US Social Security and 401k and IRA distributions.
  • As an American, your tax liabilities do not end with paying Portuguese taxes under NHR. If your US tax liability exceeds your Portuguese tax liability, you may owe US taxes, as well.
  • NHR only lasts for 10 years. After 10 years, you revert to Portuguese income tax rates which quickly scale up to 48%.
  • If working, it is best to contact a tax advisor ahead of your move to determine your tax liabilities in Portugal and the best tax strategy and structuring

Investments, Structuring, and Accounts

  • It’s a frequently asked question – there is no benefit to moving your US qualified accounts (401k, IRA) into a European or Portuguese structure. There is no US compliant equivalent, and ‘moving’ these accounts is just a distribution taxed at income tax rates (and possibly penalized).
  • Portugal does not recognize Roth IRAs, and the tax benefits of a Roth are not relevant in the Portuguese system.
  • While investing via Portuguese company structures may be tax efficient in Portugal, it could create unforeseen tax problems in the US.
  • Investing in local Portuguese mutual funds or ETFs will not be US tax compliant. These are considered Passive Foreign Investment Companies (PFICs) in the US and are not tax efficient.

The interaction between the US tax regime and the Portuguese tax code is complex and often requires specialist planning.

With the right financial plan, you can live financially secure in Portugal even after the initial 10-year NHR period. Although Americans do not get the full tax advantage of NHR, there are plenty of financial planning opportunities for US connected persons with the right advice and structures.

Portugal

Chase Buchanan is an international wealth management company with comprehensive accreditations and authority to provide professional financial management services across Europe. With offices in the USA, Canada, Canary Islands, Cyprus, Belgium, Malta, Portugal, Spain, and our UK Administration Centre, our highly qualified advisers are committed to ensuring all clients, existing and new, have the knowledge and tools they need to make sound choices for the future.

We do not provide tax, accounting or legal advice. You should always consult with a with a qualified professional in those specific areas before implementing any portion of the plan. There is no guarantee that any goals will be achieved or plans of action will be successful.

Advisory services in the United States are offered and provided through Beacon Global Advisor Network, LLC, a registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training and does not imply endorsement by the Securities and Exchange Commission (SEC) or any state. Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with Licence No: 287/15.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.