Portugal and taxation: Busting the myths
By , 8 Oct 15
A Portuguese tax resident can be taxed at a rate of 56.5%, but director at Blevins Franks Jason Porter unveils some of the exemptions and reliefs offered to UK expats who decide to make Portugal their home.
An important part in courting Europe’s wealthy to Portuguese shores was the introduction of a very favourable succession and inheritance tax regime for new arrivals.
Stamp duty
What would be considered a true inheritance and gift tax was abolished in Portugal at the end of 2013. It was replaced with ‘stamp duty’, which only applies to Portuguese situs assets. This would exclude from charge for example, a Portuguese limited company established as Sociedades Anomimas (SA), or a non-Portuguese company holding Portuguese assets. Non-Portuguese, but compliant single premium life policies would also be exempt.
Even if it is a Portuguese situs asset, gifts and inheritances received by spouses and direct-line ascendants and descendants are exempt from stamp duty. If stamp duty is payable, it is only payable at 10%.
For a Portuguese national, the actual succession law to apply would be Portuguese, so this would include the forced heirship rules which tend to apply across Europe. But, if you are a non-Portuguese national, then you can elect, via your Will to apply the succession law of your nationality.
Cheaper
Therefore, a UK national has complete testamentary freedom in how they choose to pass their assets, via a UK Will, which would be valid in Portugal. However it is likely to be cheaper to have a Portuguese Will for the Portuguese situs assets, and a UK Will for everything else.
This position will allow the individual to arrange his/her affairs from the position of just one set of succession laws, to maximise the tax savings, and the speed of disposition.
