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Special Tax Regime for Non-Habitual Residents Live in Portugal, Invest in Portugal!


Index 1. Questions about the Special Tax Regime 1.1. Which are the competitive advantages? 1.2. How can you acquire Non-Habitual Resident Status? 1.3. Once Non-Habitual Resident Status has been obtained, what is the taxation rate and incidence applicable to domestic source income? 1.4. Once Non-Habitual Resident Status has been obtained, in which cases is foreign income obtained by Non-Habitual Residents in Portugal exempt from taxation? 2. Questions about the purchase of a property in Portugal 2.1. Which are the steps of a purchase? 2.2. Which are the costs involved with a purchase? 2.3. How does the buyer secure the title of the property with all rights associated with it? 3. Questions about portugal, Lisbon and Engel & Vรถlkers 3.1. Why choose Portugal? 3.2. Why choose Lisbon? 3.3.Why choose Engel & Vรถlkers? Special Tax Regime for Non-Habitual Residents

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1. Questions about the Special Tax Regime 1.1 Which are the competitive advantages? n

n

 or a period of 10 years, taxation related to IRS (personal income tax) on labour income in F Portugal is at a fixed rate of 20%;  o double taxation for pensions or for employment and self-employment income obtained N abroad.

1.2. How can someone acquire Non-Habitual Resident Status? 1.2.1. Having not been a resident in Portugal for the last 5 years; 1.2.2. Register at the local tax office as a tax resident in Portugal (to do so you must have remained in Portugal for more than 183 consecutive or non-consecutive days or having remained for less time, having, at 31st December of that year, a home in such conditions that would lead to the assumption that it is intended to be kept and occupied as your habitual residence); 1.2.3. Request that the status of Non-Habitual Resident be attributed at the time of registering as a tax resident in Portugal, or by 31st March of the year following that in which you become a resident in Portugal. 2

Special Tax Regime for Non-Habitual Residents


1.3. Once Non-Habitual Resident Status has been obtained, what is the taxation rate and incidence applicable to domestic source income? In the case of employment or self-employment, the applicable taxation rate is 20% (with an additional 3.5% surcharge in 2014). Taxation applies to income derived from high added value activities of a scientific, artistic or technical nature: n Architects, engineers and similar; n Fine artists, actors and musicians; n Auditors; n Doctors and dentists, teachers and psychologists; n Liberal professions, technicians and similar; n Senior managers; n Investors, directors and managers, when part of companies covered by the contractual regime provided for in the Investment Tax Code. Registration as a Non-Habitual Resident confers the right to be taxed as such for a period of 10 years as from the year of registering as a tax resident in Portuguese territory. 1.4. Once Non-Habitual Resident Status has been obtained, in which cases is foreign income obtained by Non-Habitual Residents in Portugal exempt from taxation? In the case of pensioners and retired people when: n Income is taxed in the source State, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or n Income is not considered to have been obtained through a Portuguese source, according to the criteria provided for in the IRS Code (personal income tax). In the case of income derived from employment, when: n Income is taxed in the State of origin, in accordance with the convention to eliminate double taxation, signed by Portugal and that State; or n That income is taxed in another State with which Portugal has not signed any convention to eliminate double taxation, as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS Code (personal income tax); In the case of income from self-employment (through the provision of services of a high added value, of a scientific, artistic or technical nature, or through intellectual or industrial property, investment income, rental income, capital gains income or other increases in equity), when: n The income may be taxed in the source country, territory or region, in accordance with the convention to eliminate double taxation; or n When no convention to eliminate double taxation has been signed, the OECD model convention may be applied (taking into consideration the observations and reservations made by Portugal) and as long as the source country, territory or region does not have a privileged tax regime, and as long as the income is not considered to have been obtained in Portuguese territory, in accordance with the criteria in article 18 of the IRS (personal income tax). Special Tax Regime for Non-Habitual Residents

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2. Questions about the purchase of a property in Portugal 2.1. Which are the steps of a purchase? 2.1.1. Selection of an independent qualified lawyer; 2.1.2. Evaluation of the property; 2.1.3. Obtaining a fiscal number through a professional fiscal representation company; 2.1.4. Down payment of a part of the agreed price in order to take the property off the market. This amount is normally non-refundable and made on the basis that a ‘Promissory Contract’ will be drawn up within the next 30 days; 2.1.5. The lawyer will then collect all the house documents to check that everything is in order. If applying for a Portuguese mortgage it is advisable to obtain an offer from the bank before the Promissory Contract is made; 2.1.6. Promissory Contract: drawn up by the buyer’s lawyer and signed by the seller and the buyer. If using a bank to finance the purchase, it is recommended that the contract be made for 90 days until the deed of purchase. 4

Special Tax Regime for Non-Habitual Residents


2.1.7. Payment of the Property Transfer Tax (IMT): normally paid by the lawyer on behalf of the buyer a few days before the final deed. Value varies according to the property price, its use (e.g. a permanent or second home) and location; 2.1.8. Final Deed: made in the presence of a competent entity to legalize the deed (see the “Simplex” note below), the seller, the buyer (both can be represented by a lawyer, with a power of attorney) and a bank representative (in case of financing with a mortgage); 2.1.9. Registration of the deed at the National Land Registry Records (Conservatória do Registo Predial). Simplex Program – Since January 2009, the Portuguese government is implementing a reform called “Simplex” designed to cut the bureaucracy, modernize the public services and lower the administrative burden on companies and citizens. Various reforms are already implemented, such as the Law n.° 116-2008 by which Notaries (Notários), Lawyers (Advogados), Bailiffs (Solicitadores), Chambers of Commerce and Industry (Câmaras de Comércio e Indústria) and Registry Offices (Serviços de Registo) have now the competence to deal with, witness, check and control the legality of the acts and contracts of any real estate or mortgage transaction. Land registry, payment of taxes or additional formalities were also simplified thanks to an online service called Casa Pronta. 2.2. Which are the costs involved with a purchase? 2.2.1. Property Transfer Tax (IMT) In case of purchase of a new property a Value Added Tax (IVA) of 20% is due instead of the Property Transfer Tax (IMT). Real Estate for permanent residents – 2015 Value of Residential Property

% Tax

Amount Deductible

Up to € 92,407

0%

0

From € 92,407 to € 126,403

2%

€ 1,848.14

From € 126,403 to € 172,348

5%

€ 5,640.23

From € 172,348 to € 287,213

7%

€ 9,087.19

From € 287,213 to € 574,323

8%

€ 11,959.32

> € 574,323

6%

0

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Real Estate for non-permanent residents - 2015 Value of Residential Property

% Tax

Amount Deductible

Up to € 92,407

0%

0

From € 92,407 to € 126,403

2%

€ 924.07

From € 126,403 to € 172,348

5%

€ 4,716.16

From € 172,348 to € 287,213

7%

€ 8,163.12

From € 287,213 to € 550,836

8%

€ 11,035.25

> € 550,836

6%

0

Example: The property price is € 200,000 for a non-permanent residence, therefore the IMT will be: n

€ 200,000 x 7% = € 14,000

n

€ 14,000 - € 8,163.12 (amount deductible) = € 5,836.88

Exceptions: n Rural plots: Rural plots are subject to IMT at a flat rate of 5%. n n

Urban plots: Urban plots are subject to IMT at a flat rate of 6.5%. Offshore companies registered in an approved jurisdiction, e.g. Ireland, are subject to IMT at the same rates as above. If belonging to a ‘black listed jurisdictions’, e.g. the Isle of Jersey, IMT is levied at the flat rate of 10%.

2.2.2. Stamp taxes n Property stamp tax = 0.8% of purchase price; n

Mortgage stamp tax = 0.6% of loan amount.

2.2.3. Other fees n  Selling Agent’s Fee: Usually it is between 3% and 6% of the selling price, depending on the cost of the property and the type of contract, and are paid by the vendor. n

 urveyor’s Fees: If a building or plot of land needs to be inspected, the fee will depend on the S type of survey, any special requirements and the value of the property.

A full structural survey and valuation should be charged less than half a percent of the property value.

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Special Tax Regime for Non-Habitual Residents


2.2.4. Legal fees n Lawyers Fees: usually 1% to 1.5% of the purchase price for an average property. n

Valuation: around € 500;

n

Bank charges (in case of mortgage): around € 250;

n

Provisional Registration: around € 650;

n

Final Deed Registration: around € 750.

2.2.5. Summing up Assuming a second-hand mainland property financed by a mortgage, the additional costs according the sales value of the property will be: n

100 to 150 thousand euros: 5%;

n

150 to 200 thousand euros: 5.5% – 6%;

n

200 to 250 thousand euros: 6.5% – 7%;

n

250 to 350 thousand euros: 7.5%– 8%;

n

350 to 500 thousand euros: 8% – 9%;

n

Over 500 thousand euros: 9% – 10%.

2.3. How does the buyer secure the title of the property with all rights associated with it? The conveyance ensures that the title of the property is correct, that the seller is the rightful owner having the right to sell it. 2.3.1. Checklist Get the classification of the property at the National Land Registry Records (Conservatória do Registo Predial): n

Plot of Land (Lote), it has already been designated and registered for building purposes;

n

Rural Land, check the planning rules and get the planning/building permission;

n

Existing house or part of a building (Fração).

Check the legal title to the property: it should be registered, at both the National Land Registry Records (Conservatória do Registo Predial) and Tax Department, in the name of the seller and not carry any onuses or liabilities. Ensure that all building, planning and habitation licences were delivered. All houses built after 1951 must have a municipal habitation licence (Licença de Habitação) and a technical habitation certificate (Ficha Técnica de Habitacão) if built after the 30th March 2004. Check the Municipal Master Plan (Plano Diretor Municipal – PDM) for the existence of any public planned construction which would affect the value of the property and the reasons why you decided to purchase it. Special Tax Regime for Non-Habitual Residents

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In some cases, like rural land, the neighbors might have priority over the purchasers, so better check that they desisted of their right. 2.3.2. Required documents In order to prepare for the promissory contract (Contrato de Promessa de Compra e Venda) some documents showing ownership should be asked to the vendor: n

n

n

n

 and Registration Certificate (Certidão de Teor do Registo Predial), valid for 6 months and L issued by the National Land Registry Records (Conservatória do Registo Predial); Tax Registration of a Property (Caderneta Predial) issued by the Tax Department – It needs to bear a stamp from the Tax Department and is valid during 1 year after emission; Tax Information Certificate (Certidão Matricial), valid for 6 months and issued by the Tax Department when the seller does not have the Caderneta Predial;  icence granted by the municipality stating what the building can be used for (Licença de L Utilização), issued by the Town Hall only for Property built after 1951. The existence of a valid habitation permit is a precondition for a valid conveyance of property to take place in Portugal and the existence of such permit presumes that a valid building license was issued previously.

Land and buildings have separate tax documents, therefore one should check if there is a document for the land and another for the building. 2.3.3. Promissory Contract The Promissory Contract sets out the terms of the transaction such as the identity of the owner, a detailed description of the property and land boundaries, registration and tax numbers, purchase price, deposit and date of completion. Usually, the contract is signed within 30 days from the date of reservation. At this stage the purchaser would normally be expected to pay a deposit, which is negotiable (between 10% and 30% is common practice). In Portugal, the parties become contractually bound with the signature of this Promissory Contract of Purchase and Sale (Contrato de Promessa de Compra e Venda), which sets out the terms of the transaction: property details, price, method of payment, completion date, warranties, penalties, etc. Until such contract is signed, the vendor is not committed and can change his mind. It is useful to remember that conditional clauses can be added in the promissory contract in order to protect you from events being out of your control and to prevent you to lose your deposit. For example: obtaining a mortgage or obtaining a planning permission and a building licence. n

8

 eposit: If the buyer decides to withdraw from the sale, he will lose the value of the deposit. D If it is the case of the vendor, he will reimburse the buyer from the value of his deposit and pay a compensation which is usually equal to the amount of the deposit.

Special Tax Regime for Non-Habitual Residents


n

n

Required Documents: -Tax Number of the buyer and the seller from the Tax Department; - Identity Cards/Passports of the buyer and the seller.  inal Check: Just before signing the final deed, it is important that you do a final check F to ensure that the property is still in the same state than when you negotiated it with the seller. You should verify as well that all appliances included in the property price are still there.

2.3.4. Deed of Conveyance (Escritura) If you have applied for a bank loan, you will need to register the mortgage at the National Land Registry Records (Conservatória do Registo Predial) along with the provisory registration of the acquisition. Then, and upon payment of the transfer tax (IMT), you will be ready to sign the Deed of Conveyance (Escritura). It will be signed before a competent entity to legalise the deed (see the ‘Simplex’ previous note) and will be the actual property transfer. The competent entity will verify the identity of the parties and the validity of the deal, both legally and from a tax point of view. This is the document that gives the purchaser the proper title to the property. Bear in mind that registering your new home is the most important act of buying a property in Portugal because ownership will be enforceable against third parties only after being registered at the National Land Registry Records (Conservatória do Registo Predial). 2.3.5. Timing (in average) n  1 to 5 days to get the Land Registry (Certidão de Teor) and the Tax Certificate (Certidão Matricial); n

n

n

n

1 week to 1 month to receive the Local Authority Habitation Licence (Licença de  Habitação) if the seller does not have it with him or if it is not referred in a previous Deed of Conveyance; 1 day to 2 weeks to negotiate the terms of the Promissory Contract, execute the Promissory Contract and pay the deposit to the seller directly; 1 week to 3 months to sign the Deed of conveyance and pay outstanding balance to the seller directly; 3 days to 2 weeks complete registration of property in the buyer’s name.

Note: The legal information here included does not intend to substitute the consulting of the applicable legislation. If needed, Engel & Völkers Lisboa can recommend qualified law firms for legal advice.

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3. Questions about Portugal, Lisbon and Engel & VÜlkers 3.1. Why choose Portugal? Being one of the oldest nations in Europe, Portugal is blessed with unique competitive advantages such as its strategic location and its global language. But most of all, Portugal is a resilient country that has developed and modernized over time while still creating the best conditions for companies that wish to take advantage of these assets. Portugal touches millions of people every day with new and innovative products like molds, sophisticated software, biometric solutions, health products, communication systems but also traditional products such as wine, olive oil, cork and shoes. Member of the European Union since 1986, Portugal is a developed and sophisticated country with modern infrastructures. A country that has experienced extensive and dynamic changes to make its economy more competitive. It’s now much easier to do business in Portugal and the European Union has recognized it as one of the countries that most reduced bureaucracy. It’s possible to set up a company in less 10

Special Tax Regime for Non-Habitual Residents


than one hour and, according to the 2010 Global Benchmark Report, Portugal is the 7th country in the OECD with the lowest level of costs and taxes. It is also a welcoming country, full of sun, with breathtaking landscapes and a unique cuisine. However, our most valuable asset is our people, that mobilize the country for the future, with their talent, resources, and qualifications. Official statistics about Portugal: Area:

92,212.0 sq km (2010)

Population (thousands):

10,514 (2014)

Working population (thousands):

5,182 (2014)

Population density (inhabit./sq km):

115.4 (2010)

Official designation:

Republic of Portugal

Capital:

Lisbon (2.8 million inhabit. – metropolitan area)

Main religion:

Roman Catholic

Language:

Portuguese

Currency:

EUR (in units of 100 cents) EUR = 1.392 USD (average rate in 2011)

GDP at market prices:

165,107 million EUR (2012)

GDP per capita:

19,400 EUR (2011)

Portugal

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3.2. Why choose Lisbon? Lisbon is the Capital of Portugal and it is now considered one of the most interesting places in Europe to live and do business in. In 2012 and 2013, the Financial Times Magazine placed Lisbon on the top-list of “European Cities & Regions of the Future”. Here’s why: LOCATION Lisbon is the closest European capital to the United States and to South America, particularly to booming Brazil. Lisbon also maintains privileged ties to its former African colonies, especially Angola. It’s also less than one hour away from Madrid, with several flights every day, and about two and a half hours from Paris and London (it’s the only capital in mainland Europe sharing the same time zone with the British capital). Being on the edge of Europe also means that the harbors of Lisbon, Sines and Setúbal are gateways to the old continent and to a market of 250 million Portuguese speakers around the world. WEATHER With close to 300 days of sunshine throughout the year, no snow and temperatures that never reach the freezing point, Lisbon is a truly blessed city. It’s great living in a place where you can have beach days in October or March, where you can sit comfortably outside in a café terrace in February and where you don’t have to worry about the dangers of snow on the ground. SAFETY Lisbon officially has the lowest homicide rate of any European capital and the lowest number of residents who have been victims of any crime in the previous five years, making it Europe’s safest capital. QUALITY OF LIFE Safety and agreeable weather are just two factors that contribute to a high quality of life in Lisbon. Freedom, human rights, a stable democracy, recreation facilities and leisure time also make the Portuguese capital one of the best places to live in Europe. Residents can be at the beach just minutes from downtown or enjoy nature in several green spaces such as Monsanto, the largest urban forest in Europe. Golf, surfing (Europe’s first surfing reserve is 30 minutes away) and other outdoor activities are also more accessible here than in other European capitals. INNOVATION AND TECHNOLOGY Lisbon was the first city in Europe to set up a network of electric car recharging stations, was recognized in 2011 as having Europe’s best fiber optic network and Portugal has pioneered services in banking (particularly ATM), telecommunications, and renewable energy (close to 60% of the electricity in the country comes from renewable sources). These are just a few examples that reveal the experience and the opportunities in innovation and technology in Lisbon. 12

Special Tax Regime for Non-Habitual Residents


HUMAN RESOURCES Unlike in the rest of southern Europe, in Lisbon there’s a sizable multilingual population, with 42% speaking two languages (especially English) and 23% speaking at least three. Improvements in education levels also mean that there’s never been a better-prepared young generation in the country entering the job market. TOURISM GROWTH While it’s recently been given several high-profile awards (Europe’s Best Tourist Destination, Cruise Destination and City Break in 2009’s World Travel Awards) and while it’s one of the world’s top 10 cities for corporate events, it’s still overlooked as one of Europe’s must-see capitals. REAL ESTATE OPPORTUNITIES There has been a massive effort to renovate the historic part of the city and new investors renovated homes and buildings, discovering the charm and the privilege of living in the center of Lisbon. Despite the renovation boom, prices haven’t gone up and are still very competitive. The formerly rigid tenancy rules have also finally been loosened up, opening up a new market for long-term rentals. OTHER INFORMATION ABOUT LISBON – REAL ESTATE Real estate market in Lisbon – Map of areas:

LISBON l

-No rt

Su

E ix o

rriche C. C a

e-

Av. P.

5 Av. M a

Cr

uz

3

re c h

al G . Co

Parque das Nações

s ta

Sul Eixo- No rte -

Monsanto

6 Belém Av. Índia

Inf an te D. He nriq ue

2 3

4

2 M.Pombal

1

. Av

4 Julho Av. 2 Ponte 25 Abril (Bridge)

Special Tax Regime for Non-Habitual Residents

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Real estate market in Lisbon: sales (price sqm) Area

Price sqm

1. Chiado, Príncipe Real, Lapa, Santos

€ 4500 - € 6500

2. Avenidas Novas, Amoreiras

€ 3500 - € 5000

3. Laranjeiras, Telheiras, Lumiar

€ 3000 - € 4000

4. Almirante Reis, Historical zone

€ 2500 - € 4000

5. Parque das Nações

€ 3500 - € 5000

6. Restelo

€ 3000 - € 6500

Real estate market in Lisbon: rentals (price sqm) Area

T1 - T2

T3 - T4

House

1. Chiado, Príncipe Real, Lapa, Santos

€ 900 - € 1600

€ 1800 - € 4000

> € 3500

2. Avenidas Novas, Amoreiras

€ 600 - € 1200

€ 1500 - € 3000

-

3. Laranjeiras, Telheiras, Lumiar

€ 500 - € 1000

€ 1000 - € 2500

-

4. Almirante Reis, Historical zone

€ 300 - € 900

€ 1000 - € 2000

€ 1000 - € 2500

5. Parque das Nações

€ 700 - € 1500

€ 1500 - € 3500

> € 3000

6. Restelo

€ 800 - € 1300

€ 1500 - € 3500

€ 1500 - € 5000

OTHER INFORMATION ABOUT LISBON – INTERNATIONAL SCHOOLS Boa Ventura Montessori (www.boaventuramontessori.com) Carlucci American International School of Lisbon (www.caislisbon.org) Escola Alemã de Lisboa (www.dslissabon.com) International Christian School of Cascais (www.icsc.pt) International Preparatory School (www.ipsschool.org) Liceu Francês (www.lfcl-lisbonne.eu) St. Dominic’s International School (www.dominics-int.org) St. James’ Primary School (www.stjamesschool.pt) St. John’s School (www.stjohns-school.com) St. Julian’s School (www.stjulians.com) St. Peter’s School (www.st-peters-school.com) 14

Special Tax Regime for Non-Habitual Residents


OTHER INFORMATION ABOUT LISBON – HOSPITALS British Hospital Lisbon XXI (www.british-hospital.pt) Hospital Cuf Descobertas (www.cufdescobertas.pt) Hospital Cuf Infante Santo (www.cufinfantesanto.pt) Hospital da Luz (www.hospitaldaluz.pt) Hospital de Cascais (www.hospitaldecascais.pt) Hospital de Santa Maria (www.chlc.min-saude.pt) Hospital de São José (www.chlc.min-saude.pt) Hospital dos Lusíadas (www.lusiadas.pt) Hospital Prof. Doutor Fernando Fonseca (Amadora Sintra) (www.hff.min-saude.pt) 3.3. Why choose Engel & Völkers? Since its beginning in 1977 as a specialty boutique providing exclusive, high-end real estate services in Hamburg, Germany, Engel & Völkers has become one of the world’s leading companies specializing in the sale and lease of premium residential and commercial property and yachts. Engel & Völkers currently operates a global network of over 4,900 real estate advisers in 550 residential brokerages and 53 commercial offices spanning 38 countries across six continents, offering both private and institutional clients a professionally tailored range of luxury services. It established its Portugal first shop in 2006. Committed to exceptional service, Engel & Völkers Lisbon supports its clients with a premium quality service, based on our experience, knowledge and transparency. It is also set apart from other companies because of its attention to detail at every level, bringing the highest standards of real estate service to Portugal.

Live in Portugal, Invest in Portugal!

Special Tax Regime for Non-Habitual Residents

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Technical Data

LANE Mediação Imobiliária, Lda. - AMI 8486 Licensed Partner of Engel & Völkers Residential GmbH Pre-press Choice – Comunicação Global, Lda. Printed in March 2015


Cascais Rua Afonso Sanches 25 b 2750-282 Cascais n Portugal Phone: (+351) 210 170 425 www.engelvoelkers.com/pt/cascais/

Lisboa Alameda dos Oceanos, Lote 1.07.1E 1990-203 Lisboa n Portugal Phone: (+351) 210 960 640 www.engelvoelkers.com/pt-pt/lisboa

Restelo Rua Duarte Pacheco Pereira, 30A 1400-140 Lisboa n Portugal Phone: (+351) 213 010 407 www.engelvoelkers.com/pt-pt/lisboa

Profile for Engel Völkers Lisboa

Special Tax Regime for Non-Habitual Residents  

Live in Portugal. Invest in Portugal

Special Tax Regime for Non-Habitual Residents  

Live in Portugal. Invest in Portugal

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