Category: Taxation

Portugal, like many nations, maintains a “blacklist” of jurisdictions deemed to have more favourable tax regimes, often referred to as “tax havens”. This list is a crucial element of Portugal’s strategy to combat international tax evasion and avoidance, and it carries significant tax consequences for individuals and entities dealing with these jurisdictions.

What is Portugal’s Blacklist?

Portugal’s blacklist is an official list of countries, territories, and regions that the Portuguese tax authorities consider having clearly more favourable privileged tax regimes. This list is unilaterally determined by Portugal, though it can be updated by the government based on various criteria. It is notably extensive, encompassing over 80 jurisdictions, and includes both well-known tax havens and others.

It is important to note that this list can change, so it is important to consult the most up-to-date official decree from the Portuguese Ministry of Finance for the definitive list.

Conclusion

For individuals and businesses with connections to Portugal, understanding and navigating the country’s blacklisted tax jurisdictions is paramount. The tax consequences can be severe, leading to significantly higher tax burdens and increased administrative complexities. It is highly advisable to seek professional assistance to assess potential exposures, ensure compliance. Reach out to Dixcart Portugal for more information (advice.portugal@dixcart.com).

This is not professional tax advice.

Introduction

In this scenario, an international private client, let’s call him John, a UK resident in his early 70s and a widower, found himself confronted with a substantial Inheritance Tax (IHT) bill. With a UK property worth £1,500,000 and investments totalling £750,000, John pondered strategies to mitigate the impact on his wealth without seeking professional advice.

The Risky Plan

In an attempt to navigate inheritance tax, John contemplated selling his house to his son, a resident of Guernsey, a jurisdiction with no inheritance tax. The plan involved his son, who recently liquidated a multimillion-pound business, purchasing the property, and John gifting the proceeds back while continuing to reside in the house. The goal was for John to live for another seven years, aiming to avoid hefty inheritance tax charges.

Professional Analysis

However, our team of experts swiftly identified the flaws in this plan. The proposed scheme of “selling” the house to the son, followed by gifting the proceeds, would not align with HM Revenue and Customs. The Gift with Reservation of Benefit (GWR) rules, coupled with the potential application of Pre-Owned Assets Tax (POAT), made the plan ineffective. The value of the property would still be considered part of John’s estate for inheritance tax purposes. Moreover, the son’s residence in Guernsey did not exempt the UK-sited property from UK-based IHT, potentially leading to complexities in the future.

Professional Advice

What if John had sought professional advice from Dixcart UK before embarking on this risky endeavour? Let’s explore.

• Scenario Planning

Dixcart UK, could have guided John through a comprehensive scenario analysis. Understanding John’s international financial situation, Dixcart professionals could have illustrated potential outcomes, considering international wealth preservation goals and the nuances of various jurisdictions.

• Strategic International Gifting

Instead of pursuing a convoluted plan, Dixcart could have advised John on straightforward and globally compliant methods of mitigating inheritance tax. This might involve strategic gifting within allowable limits set by relevant jurisdictions or exploring Potentially Exempt Transfers (PETs) for financial assets. A carefully structured gifting plan, considering the time period, could have mitigated the IHT impact effectively.

• Utilising International Tax Allowances

Dixcart UK could have helped John leverage international tax allowances, considering his global assets. Exploring options like gifting a portion of his investments within these allowances could have been a more tax-efficient and transparent strategy. The utilisation of nil-rate bands, residence nil-rate bands, and other available allowances could have been optimised for international wealth preservation.

• Long-Term Generational Wealth Planning

Moreover, Dixcart UK could have assisted John in developing a long-term inheritance tax mitigation plan with an international perspective. Understanding John’s financial goals and family situation on an international scale, the professionals could have provided guidance on structuring his estate, ensuring the seamless transfer of assets to the next generation.

Conclusion

John’s case serves as a compelling illustration of the importance of professional advice in navigating complex global financial decisions. Seeking guidance from Dixcart, could have potentially saved John from the complications and financial pitfalls he faced. This case study underscores the significance of consulting professionals in international private client services, ensuring individuals make informed decisions and preserve their wealth across borders.

By exploring the hypothetical scenario where John had come to Dixcart UK first, we emphasise the proactive role professionals can play in securing a sound financial future and mitigating risks associated with international wealth preservation and generational wealth planning. This case study aims to reinforce the value of expert consultation and strategic planning in safeguarding individuals from unforeseen financial consequences.

Get in Touch

If you have any questions regarding the tax implications, drafting of UK Wills, Lasting Powers of Attorney and international inheritance planning, please get in touch at: advice.uk@dixcart.com.

Estate planning is necessary, as Benjamin Franklin would agree with his quote ‘Nothing is certain except death and taxes’.

Portugal, unlike some countries, does not have inheritance tax, but makes use of a stamp duty tax named ‘Stamp Duty’ that applies to the transfer of assets upon death or lifetime gifts.

What Succession Implications Exist in Portugal?

Portugal’s succession law applies forced heirship – implying that a fixed portion of your estate, namely world-wide assets, will automatically pass to direct family. As a result, your spouse, children (biological and adopted), and direct ascendants (parents and grandparents) receive a portion of your estate unless expressly stated otherwise.

If it is your intention to establish specific arrangements to override this rule, this may be done with the drafting of a will in Portugal.

Note unmarried partners (unless cohabiting for at least two years and having formally notified the Portuguese authorities of the union) and stepchildren (unless legally adopted), are not considered immediate family – and thus will not receive a portion of your estate.

How Does Succession Apply to Foreign Nationals?

According to the EU succession regulation Brussels IV, the law of your habitual residence usually applies to your inheritance by default. However, as a foreign national, you can choose the law of your nationality to apply instead, potentially overriding Portuguese forced heirship rules.

This choice must be clearly stated in your will or a separate declaration made during your lifetime.

Who is Subject to Stamp Duty?

The general tax rate in Portugal is 10%, applicable to inheritance beneficiaries or gift recipients. However, there are certain exemptions for close family members, including:

• Spouse or civil partner: No tax is payable on inheritance from a spouse or civil partner.
• Children, grandchildren, and adopted children: No tax is payable on inheritance from parents, grandparents, or adopted parents.
• Parents and grandparents: No tax is payable on inheritance from children or grandchildren.

Assets Subject to Stamp Duty

Stamp Duty applies to the transfer of all assets located in Portugal, regardless of where the deceased resided, or the beneficiary of the inheritance resides. This includes:

• Real estate: Properties, including homes, apartments, and land.
• Movable assets: Personal belongings, vehicles, boats, artwork, and shares.
• Bank accounts: Savings accounts, checking accounts, and investment accounts.
• Business interests: Ownership stakes in companies or businesses operating in Portugal.
• Cryptocurrency
• Intellectual property

While inheriting an asset can be beneficial, it is important to remember that it may also come with outstanding debt that must be settled.

Calculating Stamp Duty

To calculate the Stamp Duty payable, the taxable value of the inheritance or gift is determined. The taxable value is the market value of the assets at the time of the death or gift, or in case of properties based in Portugal, the taxable value is the value of the asset registered for tax purposes. If the property has been inherited/gifted from a spouse or civil partner and has been co-owned during marriage or cohabitation, the taxable value is shared proportionately.

Once the taxable value is established, the 10% tax rate is applied. The final tax liability is calculated based on the net assets received by each beneficiary.

Potential Exemptions and Reliefs

Beyond the exemptions for close family members, there are additional exemptions and reliefs that may reduce or eliminate Stamp Duty liability.

These include:

• Bequests to charitable organisations: Donations to recognised charitable institutions are exempt from tax.
• Transfers to disabled beneficiaries: Inheritances received by dependent or severely disabled individuals may be eligible for tax relief.

Documents, Submissions and Deadlines

In Portugal, even if you receive an exempt gift or inheritance, you still need to make a submission with the tax authorities. The following documents with associated deadlines are applicable:

• Inheritance: The Model 1 form must be submitted by the end of the third month following death.
• Gift: The Model 1 form must be submitted within 30 days of the date the gift is accepted.

Payment and Due Date of Stamp Duty

Stamp duty is required to be paid, by the person receiving the inheritance or gift, within two months of the notification of the death and in the case of receipt of a gift, by the end of the following month. Note that the ownership of an asset cannot be transferred until the tax is paid –in addition, you cannot sell the asset to pay the tax.

Estate Distribution and Tax Guidance

You can have one “worldwide” will to cover your assets in all jurisdictions, but it is not advisable. If you have significant assets in multiple jurisdictions, you should consider separate wills to cater for each jurisdiction.

For those who have assets in Portugal, it is advised to have a will in Portugal.

Reach Out Now for More Information

Navigating inheritance tax matters in Portugal can be complex, particularly for non-residents or those with complex inheritance situations.

Seeking professional guidance can provide personalised assistance, an intelligent assessment of the inheritance scenario, and assist to minimise or optimise liabilities.

Reach out to Dixcart Portugal for more information advice.portugal@dixcart.com.

Overview Of Swiss Social Security

Swiss Social security is financed through contributions based on an employee’s gross salary, shared equally between employer and employee. Only the employee’s share is deducted from their gross salary; the employer pays its share on top and remits both portions to the authorities.

The Swiss social security is structured into three pillars, each with distinct characteristics to support individuals in maintaining their standard of living after retirement.

Social Security Contributions

The First pillar amounts to 5.12% and the Second pillar is in average 9% of the employee’s gross salary. Both pillars are mandatory.

The Third pillar is optional and typically paid by the employee only. Average contributions are around 7%, although employers may also contribute if agreed contractually.

Employment Structures: With Or Without A Swiss Entity

Whether the employer has a Swiss presence directly impacts how social security obligations are managed:

Employer with a Swiss entity  

Where a Swiss entity exists, the Swiss-resident employee is employed through it, and the local entity assumes full responsibility for social security compliance, including registration and contributions.

Establishing a Swiss branch may be a suitable solution. A branch carries out the same activities as the head office but operates with commercial independence. It remains legally part of the parent company and can fulfil local social security obligations.

Employer without a Swiss entity  

If the employer has no presence is Switzerland, the Swiss-resident employee operates under a self-employment status. This has significant consequences, including:

• The employee is fully responsible for all social security contributions.
• Additional administrative burdens apply, including registration with various Swiss authorities.
• The employment contract with the foreign company is generally not recognised by the Swiss unemployment insurance system.
• Certain benefits (e.g., occupational pensions or daily sickness benefits) may be limited or unavailable, unless covered voluntarily or through private arrangements.

Additional Employer Obligations

• Accident insurance: Mandatory for all employees, covering occupational and non-occupational incidents.

• Daily sickness benefits insurance: Not compulsory by law but common in practice. It typically covers 80% of salary for a defined period in case of extended illness.

• Family allowances: Mandatory, with eligibility based on canton and family situation. Employers handle registration and payments via cantonal funds.

• Administrative and compliance costs:
  Including payroll setup, registrations, and ongoing tax and social security filings.

Taxation Of Swiss Resident Employees

Swiss-resident employees are subject to local taxation on their worldwide income. The treatment depends on the individuals’ residence permit and nationality:

• Swiss resident employees holding a B permit and those who are cross-border commuters are subject to withholding tax which is deducted directly from their salary.
• Swiss nationals and holders of C permits file a standard tax return and pay directly their tax.  

Tax rates and obligations may vary by canton. It is essential for both employer and employee to ensure compliance with local tax rules, particularly where international arrangements are involved.

*Note: These rates may vary depending on the canton, sector, salary level, and insurance provider.

Additional Information

If you would like additional information regarding Swiss Social Security, please contact Christine Breitler at the Dixcart Office in Switzerland: advice.switzerland@dixcart.com.

For years, Portugal has held the allure of limited taxation on crypto, attracting digital asset enthusiasts with its sunshine and seemingly lax regulations. However, that era has largely transitioned into a period of measured taxation, with new rules implemented in 2023.

Taxable Territory

Portuguese tax residents pay tax on world-wide income, which includes world-wide crypto related income. Crypto taxation for individuals typically falls within one of the following three categories:

• For holdings exceeding 365 days, gains are tax-free. Holdings for a shorter duration incur a flat 28% capital gains tax. If you are eligible to register as an NHR 2.0 taxpayer in Portugal (see here for details), capital gains provided from the sale of crypto may be exempt from taxation in Portugal.
• Income derived from passive crypto investments, such as capital or regular income from staking, airdrops or lending, is taxed at a flat rate of 28%. This includes investment income received in fiat currencies, from passive crypto investments, not based on crypto transfers.
• With regards to professional crypto trading profits (including those earned from self-employment income or as a professional crypto trader) several factors need to be taken into consideration, such as the number of platforms used, number of trades, the holding periods, the profit ratio to other sources of income, etc. Profits are then taxed at the standard progressive rates, of between 13.5% and 48%. In addition, the simplified regime, relevant to self-employed individuals and business with income up to €200,000, may be applicable, and result in a number of deductions.

Other Tax Considerations

• Note that transactions exclusively in cryptocurrencies are tax-free in Portugal.
• Additionally, individuals who are non-tax resident in Portugal are only taxed on Portuguese sourced crypto income at a flat rate of 25%.
• Crypto assets may be held under a company’s name, with tax rates ranging from 11.9% in Madeira to 20% in mainland Portugal.

Navigating the Nuances

• Ensure clarity: determine your tax residency status and holding period before assuming that you are eligible for a tax-free status read here for more information.
• Record-keeping: Maintain detailed records of transactions and cost bases for accurate tax calculations.

Beyond Taxes

Gifts and Inheritance:

Stamp duty applies in certain circumstances involving cryptocurrency such as; donations, gifting, or inheritance at a rate of 10%. For more information, please refer to: the Practical Tax Guide to Inheritance and Gifts received in Portugal. In the instance of commissions, a stamp duty charge of 4% is applicable.

Purchasing Property with Crypto:

Property may be purchased exclusively using crypto with the first instance occurring in Braga, north of Portugal, in May 2022. This was made possible with the introduction of changes in Notary Regulations, to permit such transactions. Specific compliance measures are required for such transactions.

Evolving Landscape:

Regulations are constantly evolving, to stay updated on changes we recommend you select a firm of professionals such as Dixcart: advice.portugal@dixcart.com, to keep you fully updated.

Global Considerations:

Investing in foreign crypto projects may entail international tax implications. Stay informed about such considerations to remain compliant.

Remember

By understanding the basics of crypto taxation in Portugal, you can approach your investments with confidence. Remember, seeking professional guidance is invaluable for navigating the intricacies and ensuring compliance. So, explore the crypto world with a clear head and make informed decisions to enjoy the Portuguese sunshine and your digital assets!

Reach out to advice.portugal@dixcart.com for more information.

This information is not tax advice and is not intended to replace personalized advice from a qualified tax professional. Each individual’s circumstances are unique and their tax obligations may differ from what is presented here. Always consult a qualified professional before making any decisions based on this information.

Portugal has emerged as a popular destination for property investment, offering a blend of lifestyle and financial benefits. But, beneath the surface of this sunny paradise lies a complex tax system that can impact your returns. This guide unravels the mysteries of Portuguese property taxes, from annual levies to capital gains, ensuring you are well-prepared to navigate the landscape.

Dixcart have summarised below some of the tax implications applicable in Portugal (note that this is a general information note and should not be taken as tax advice).

Why is it Important to Engage with Dixcart?

It is not just the Portuguese tax considerations on properties, largely outlined above, but also the impact from where you may be tax resident and/or domiciled, that need to be considered. Although property is typically taxed at source, double taxation treaties and double tax relief need to be considered.

A typical example is the fact that UK residents will also pay tax in the UK, and this will be calculated based on UK property tax rules, which may be different to those in Portugal. They are likely to be able to offset the Portuguese tax actually paid against the UK liability to avoid double taxation, but if the UK tax is higher, further tax will be due in the UK. Dixcart will be able to assist in this regard and to help make sure you are aware of your obligations and filing requirements.

How Else May Dixcart Assist?

Dixcart Portugal have a team of experienced professionals who can assist with various aspects regarding your property – including tax and accounting support, introduction to an independent lawyer for the sale or purchase of a property, or maintenance of a company that will hold the property. Please contact us for more information: advice.portugal@dixcart.com.

Starting from 6 April 2025, the UK will implement significant changes to the taxation of non-UK domiciled individuals. The current remittance basis of taxation, which is based on domicile status, will be removed and replaced with a new tax regime based solely on tax residence under the UK’s Statutory Residence Test.

This article explores the benefits of the new Foreign Income and Gains (FIG) regime for recent arrivals in the UK, whether originally from the UK or not.

The 4-Year Foreign Income and Gains (FIG) Regime:

From 6 April 2025, the new regime will provide 100% exemption from UK taxation on foreign income and gains for new arrivals to the UK in their first four years of tax residence, provided they have not been UK tax resident in any of the ten consecutive years prior to their arrival.

Individuals who were UK residents as of 6 April 2025 will be able to benefit from the four-year FIG regime for the remainder of their initial four years of residence, provided they had ten consecutive tax years of non-UK residence before arriving and are still within their first four years of UK tax residence in 2025/26.   They will also have an opportunity to benefit from some transitional provisions available for previously earned income and gains, as well as accrued historical gains.

Importantly, an individual who was a UK tax resident for only part of the four year period will not be able to extend their exemption period by carrying forward any “unused” years to future tax years.

Individuals who qualify for and claim the FIG regime will not pay tax on foreign income and gains arising in the first four tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges.

This offers a significant advantage over the existing remittance basis regime, which while generally exempting tax on foreign income and gains, does charge such income and gains to UK tax if remitted to the UK.  There is also no fee for accessing the scheme as was the case for the remittance basis and for certain other countries which have similar remittance basis schemes.

As before, individuals will have to register with HMRC to make a claim for the FIG regime and will need to apply by completing a UK tax return.  The return will not only include details of the claim but also the amount of foreign income and gains for which exemption is being claimed. Crucially, if any foreign income and gains are not disclosed on a UK tax return, they will be taxable in full on an arising basis.

Once an individual no longer qualifies for the FIG regime they will be fully taxable on their worldwide income or gains as they arise.

Inheritance Tax Changes:

The current domicile-based system of Inheritance Tax will be replaced with a new residence-based system.

An individual who has been resident in the UK for at least ten out of the last twenty tax years will become subject to UK Inheritance Tax (IHT) on their worldwide assets and will remain in the scope of UK IHT for between three and ten years after leaving the UK. However, the government has committed to applying the Estate Tax treaties that the UK already has in place.

Conclusion

The new Foreign Income and Gains rules represent a major shift in the UK’s approach to taxing non-UK domiciled individuals. By moving to a residence-based system, there will be winners and losers, but for the first four years at least, the UK will offer an extremely generous tax position which could offer new residents some interesting tax planning opportunities, particularly those with significant income or gains generating events, such as a business exit or large dividend being planned.

For more information on the UK’s New Foreign Income and Gains Rules or to speak to one of our experts, please use our enquiry form or email us at advice.uk@dixcart.com.

As the tax season progresses in Portugal, it is crucial for residents to be aware of upcoming deadlines to ensure compliance and avoid potential penalties. Our team at Dixcart Portugal are here to provide clarity and support in navigating these obligations. This article highlights some critical dates and actions you should consider.

New Non-Habitual Resident (NHR) Applications: Deadline Approaching

Applications must generally be submitted before 15 January of the following year after becoming tax resident in Portugal (Portugal’s tax years run in line with calendar years). This regime offers attractive tax benefits for new residents in Portugal, but the application process requires careful attention to detail. We strongly urge anyone considering applying for NHR status to contact us immediately to discuss their eligibility and ensure a timely submission so they do not miss this opportunity. More information can be found here.

Other Important Personal Tax Deadlines:

Beyond the NHR application deadline, several other personal tax obligations require attention. While the specific dates may vary slightly each year, it is wise to prepare well in advance. These typically include:

• IRS (Personal Income Tax) Declarations: A tax year in Portugal runs in line with the calendar year and the deadline for submitting your annual IRS (Imposto sobre o Rendimento das Pessoas Singulares) declaration in Portugal is 30 June of the following year. This declaration covers income earned in the previous year. Gathering all necessary documentation, such as income statements, receipts for deductible expenses, and bank statements, is essential for accurate and timely filing.
• Personal Tax Deductions: To benefit from deductions on expenses such as healthcare, rent, education, gym memberships, and vehicle maintenance, it is essential to validate all relevant invoices on the e-Fatura portal by 25 February. This validation process is vital for those seeking to reduce their taxable income in Portugal.
• IMI (Municipal Property Tax): While IMI payments are typically spread throughout the year, understanding your payment schedule and ensuring timely payments is crucial to avoid penalties. Here’s a simple breakdown of IMI payment deadlines:
  • €100 or less: Pay the full amount by 31 May of the following year.
  • €100 to €500: Pay in two instalments: one by 31 May, and the other by 30 November of the following year.
  • €500 or more: Pay in three instalments: one by 31 May, one by 31 August, and the final one by 30 November of the following year
• Social Security Contributions: If you are self-employed or receive income from specific sources, you may be required to make regular social security contributions. After the first year of exemptions, you must submit a report to the social security system quarterly and pay the contribution monthly. Read here for more information.

Understanding your obligations and payment deadlines is vital to ensure compliance and avoid penalties.

Plan Ahead for a Stress-Free Tax Season:

Tax efficiency is a year-round process, not just a last-minute scramble. We understand that navigating the complexities of the Portuguese tax system can be challenging, that is why we encourage you to reach out to our team of experienced tax professionals well in advance of any deadlines.

Why Contact Us Now?

• Sufficient Time for Preparation: Early engagement allows us to thoroughly review your financial situation, identify potential deductions and credits, and ensure all necessary documentation is in order.
• Personalised Service: We provide tailored service based on your specific circumstances, ensuring you optimise your tax position within the legal framework.
• Peace of Mind: Knowing that your tax obligations are being handled by experienced professionals provides peace of mind and allows you to focus on other priorities.
• Avoid Penalties: Missing deadlines or submitting inaccurate information can result in penalties. Proactive planning helps you avoid these costly mistakes.

Contact Information

Contact Dixcart Portugal today to schedule a consultation. We are here to assist you in navigating the Portuguese tax landscape and ensuring compliance. Let us help you make this tax season as smooth and efficient as possible.

For more information, please contact us at: advice.portugal@dixcart.com.