Portugal Makes it Easier for Expats to Take Tax Breaks

I can just imagine one of those signs that points at you no matter where you are in the room, although they would have to use today’s technology as this sign would need to point right at your wallet. Portugal wants your money, or rather it wants the money of wealthy expats. In a bid to entice more of them to put their money into Portugal, it has relaxed its expat tax rules.

Three years ago, a special tax rate for non-residents of 20 per cent on income generated in the country was introduced by the government. Foreigners’ income was also exempt from Portuguese taxation, though expats could still be liable for tax in their home country.

Making no bones of its intentions even then, Portugal limited the new “perks” to high net worth individuals (HNWIs) or “high value-added” and to have been Portuguese residents for less than 5 years.

They also had to prove that they had lived and paid tax in their home country before moving to Portugal and during their time living in Portugal, with documents from their own tax authority. But now, this hoop-jumpery is no longer neccesary in order to qualify for the tax breaks, expats simply need to sign a declaration saying that they were previously resident in another country. This now opens the possibility of moving to Portugal for those who may have moved around the world, or who may not be on the best of terms with their own tax authority.

Portugal Property: Down but Not Out

Portugal, Portugal, Portugal he says, sucking in air. Or maybe it should be: dearly beloved, we are gathered here today to celebrate the life of Portugal.

Portugal is in a right old mess, it is having the bust, even though it never had the boom.

  • 2003 – 2004, house prices rose by an average of 6.2% y-o-y (3.3% in real terms)
  • 2005 – 2007, prices rose by an average of 1.25% (-1.3% in real terms)
  • 2008 , prices fell by an average of 4.7% (-7.1% in real terms)
  • 2009, prices fell by an average of 2.7% (-1.9% in real terms)

If its boom was lacklustre, its bust is certainly making up for it. According to the Instituto Nacional de Estatistica (INE) prices fell 19% in 2011, a statistic beaten in its attrocity only by the 20% drop in the number of contracts for the purchase and sale agreements of real estates, also from the INE. Construction is in the toilet and the general state of the economy is poor (rapid intake of breath).

But it is not all bad… The latest data from the INE shows that the rate of decline is slowing, bank appraisals for May showed prices down 8.9% year on year, and in June the rate of annual decline fell to 7.9%.

But more importantly, this is Portugal for god sake, and no matter what happens to the economy Portugal will still have its charms for holiday makers. The unshakable love for the Algarve that is shared by so many holidaymakers will scarcely even be touched by the economic malaise. And actually, the only data I can find that breaks prices down into regions is from the INE in 2010, and shows that prices were actually growing year on year in Q2 2010.

For all those people who love the Algarve, there has never been a better time to buy property there. A quick breeze through FindaProperty.com shows litterally dozens of properties in the £50-£80k mark, which would have been in the £120-£200k mark during the boom. What’s more, because Portugal’s banking system is still in relatively good shape, one can still secure finance to buy properties in Portugal, usually up to about 80% LTV.

And finally, we have the ace in the hole. According to the latest reports, the Portuguese rental market is in much better shape than the sales side.

So, if you are a lover of Portugal don’t dally and risk missing the opportunity of a lifetime. Prices look to have fallen about as far as they are going to, so get your skates on and buy now.