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Embee
I believe the answer to your first question is YES
Once you set up in Portugal ~ make sure you get your NIF updated with the Portuguese address
Than before 3/31 of the year you registered make sure to also sign up with the tax authorities online under the NHR tax regime to apply and hopefully activate if you qualify for the strongly reduced tax in Portugal for 10 years. It鈥檚 only 20 %.
We all pay double taxes in our country of origin but the set up will help you hold on to more of your retirement income. I also strongly advise consulting a tax accountant for deeper questions. I recently did and my advise to you is based on his counsel. One advantage of consultation might be learning how to best restructure accounts in the UK for best positioning of your income in Portugal. Good luck!

I made the move from beginning on 2019 from UK to being Portuguese Resident under NHR.
You need to confirm with Portuguese authorities that you are resident and liable to pay Portuguese tax.
That is relatively simple with a couple of visits to your area's tax office and council office.
The tax office was very helpful in advising me - Albufeira.
Once registered you can apply for NHR status - again, not too difficult although this is an online application via tax authority website.
You can rent, not buy, I didn't even need a rental contract to show, I simply have my address.
For UK, I still retain my own home, bank accounts etc.
It sounds as you have read up so hopefully already know about all the 'connections' you need to take into consideration with HMRC.
I am allowed 90 days maximum in UK and must stay 184 days in Portugal within each country tax year.
That's calendar year for Portugal and April 05th for UK.
You can backdate residency and NHR application and don't need to be physically in country on 01 January.
It is my belief that UK may be far more interested in checking whether you remained in UK more than the allotted 90 days than Portugal will be interested in proving you had not been resident for at least 184 days but those are your rules.
You need to inform HMRC when you are taking up Portuguese residency and they will demand proof.
That's relatively easy....you download or apply for a DT-Individual form from HMRC, complete it and have it signed by Lisbon (not local tax office) and then have it sent to UK for validation.
That part takes time....one of my forms went missing so it was more than 8 months until UK agreed and stopped tax being taken from my pension payments.
I also missed a tax year by a few days and that meant filling in and having my Self Assessment processed and my transit come through.
I hope this helps....I don't speak a word of Portuguese but I managed to do all by myself.
There was a great online book by Blevin Franks for under 10Euro from their website which was accurate and very helpful in all areas.
Beware that you need to apply for Health cover , driving license (legal!) and keep to time limits if bringing over car or items that are expensive here.
Let me know if I can be of any more assistance, chat or email.,
Regards,
Alan.

I THINK the new NHR is flat 10% on income from UK although income from property rental is taxed in UK but can be offset by UK tax allowance if 拢12500 or so that still is in place.
When I moved in Jan 2019 the changes to NHR hadn't been enacted so I was lucky to make it here on 0%.
That said, I can second your other points wholeheartedly.

I THINK the new NHR is flat 10% on income from UK although income from property rental is taxed in UK but can be offset by UK tax allowance if 拢12500 or so that still is in place.
When I moved in Jan 2019 the changes to NHR hadn't been enacted so I was lucky to make it here on 0%.
That said, I can second your other points wholeheartedly.
Oh, and if UK pensions are from Public Sector (non fund) then they cannot attract NHR tax benefits as only private or company pensions can.

Ps.听 I am an ex IFA in UK so understand a bit about pensions, investments, UK tax law, ISA and PEP, Income, CGT etc.
Don't worry...I gave it up a while ago and I have no references to make...however it was very helpful background to plan and manage my transfer.
I am happy to say that I pay almost zero income tax in UK although I own a few small properties there.
You will need an Accountant to do your annual tax return in Portugal.
The return has to be completed online and in Portuguese language!
That was relatively simple and uncomplicated and you don't need to be thinking about that until Spring.
I think my bill was about 250E and didn't even have to travel to meet - all completed online.

Hello rbellia

Thank you for your feedback.

I will certainly consider setting up for NHR to take account of any tax concessions that could apply.听 When you say "we all pay double taxes" do you mean you are taxed on income in your country of origin?

I will definitely consult a tax specialist to get a better understanding of how best to set things up.

Regards

Embee

Hello Alan

Thank you for taking the time to do such a detailed response with a variety of suggestions.

Probably something I should have added is that although my intention is to buy, initially I will also be spending a lot of time in the UK (probably more than 183 days) which is what prompted my questions as there is some ambiguity when completing the forms what my status will be by the end of the UK and PT tax years when tax returns are due.

Also, I think that I will initially be a dual-resident in both UK and PT and as I get older spend more time in PT which is why the tax status raises most questions.

You raise a lot of interesting points that also raise a few more questions.听 On your points:

When you say you can "rent but not buy" why is that?听 How does this impact your tax status?

If you do not spend 184 days in Portugal (as I might do) what impact does this have on the situation?

I thought that I would be a resident in PT.听 Why would I need to apply for health cover? Or did you mean register?
听
Good job getting to PT before the NHR tax changes came into force.听 How are you enjoying life out there?听 I would be grateful if you shared your accountant's details with me as I'll definitely need one.听 I appreciate your kind offer for assistance and would like to have a quick chat.听 Can you kindly provide contact details?

Regards

Embee

Embee.

Afterthought.

Should you take out Residency and NHR then, it may be the case that your 10 year NHR opportunity clock starts.

My understanding was, although you can defer NHR (ie. take a break and live elsewhere rather than Portugal as a resident), those missing years cannot be replaced...you simply lose them out of the 10 year tax advantage of NHR.

If , however, you take out Portuguese Residency but do not start NHR around the same time, you may not be able to gain the long term opportunity later as, one of the prerequisites of being granted NHR is that you haven't been a Portuguese Resident in the previous five years or so.

These are pretty crucial items to be sure of in order that your plans are sound.

Hello Alan

Thank you for your further comments.

Very crucial points but all very crucial & important in the context of tax planning. It would be a shame to not use and lose the opportunity of the PT NHR so I will look very closely at this.

The issue of the interplay between residency & tax residency comes in to play again. An example is if I buy or rent a property in PT becoming a resident but still own and use a UK property in a way that still makes me tax resident in the UK rather than PT.听 In this instance I think it is better to defer applying for NHR until I know that I will definitely be tax resident in PT. My understanding is that you must not have been tax resident (rather than resident) in PT in the preceeding 5 years. This status, I think, can only be determined at the end of the tax year, after the relevant date for applying for NHR which adds another complexity.

Regards

Embee

Not sure about any of that.
Be safe rather than sorry.
I wouldn't get to hung up about having property in either location as that won't be the deciding factor IMHO.
Lots of Brits will own property and holiday homes in Portugal but wouldn't have registered for a tax number.
That may be the issue that is used to define whether you were resident, lived or have lived in Portugal in last 5 years, not sure if that is based upon the 184 day rule.
I know my friend, who had second thoughts, formally withdrew his tax number and residency application.
I am simply musing here on what is logical or not because my understanding is 2+ years ago and things change, but I would expect if you have an NIF number then it would tie you to the Portuguese obligations and possible/probable residency.
It's easy to acquire so that tells me it has deep state obligations in tow!

Hello

Totally agree on better to be safe than be sorry.听

The issue of property comes into play as it is used in both the UK Statutory Residence Test (for tax residency) and the formal definition of PT tax resident.听 听 Days actually present in either country seems to be the dominating factor in how I plan to spend my time.

Really appreciate all your comments.

Thank you.

If you advise the PT tax authority that you are resident, then the clock will start clicking.
In principle, the tie breakers in the double tax treaty determine where you are taxable (usually article 4 on most double tax treaties). However, from experience and local tax cases, if you advise the tax authority that you are resident, then that is it - even should you decide to contest it ie due to centre of vital interests, etc, no guarantee that the tax authority / judicial authority will agree - so best to follow the precise rules ie make a choice so that you are not trapped within two tax systems simultaneously - not worth the stress.

To benefit from the nhr rules - basically declare residence at the Pt tax authority - usually a local address which can be rented / owned. Some tax offices apparently accept a rental through airbnb type accommodation - though not all offices will accept听 this, but , should this be the case, try another office.

The application for the nhr status has to be done on or before 31 March of the year following residence.

The main benefits - foreign source rental income, capital gains on fixed property, dividends, interest, some royalties, provided not from a country in the Portuguese black list (there are exceptions to this), will not incur further taxes in Portugal - though the figures should be reported in the Portuguese tax return.

Foreign pensions subject to 10% tax (those who entered the entered into the system after听 1 April 2020) or else taxed at general tax rates at tax payers option.

Foreign salary income / business income supposedly tax free if taxed in the foreign country according to tax treaty rules -听 theoretical rather then practical - in practice, probably limited to double tax treaty situations with ex colonies

If salary / professional income is derived from one of the professions on the 'high value added' list, then the tax payer has the option of being taxed at 20% (on the gross) or alternatively per the tax tables / general tax rules. The income maybe from a Portuguese source eg employment in Portugal - does not have to be from a foreign company / etc

A further note - capital gains on financial instruments are not tax free no matter how long held as an investment

Hello Tonyj1

Thank you for your comments and pointers.

I see your point regarding saying you are tax resident then trying to undo that status with the PT tax office.

The situation regarding NHR status is also clearer to me know.听 In this case you are both resident and tax resident in Portugal
thereby reaping the benefits of the tax savings due to the NHR regime.

Now, I plan to spend most of the year in the UK.听 The situation that I would like to capture is to be PT resident and not PT tax-resident

initially. In this way I can hopefully lock-in the EU Withdrawal rights until I am ready to spend more time in Portugal when I would then look to

activate NHR status.听 Time spent in PT would not be working as I am self-sufficient.听 Is this a situation that you think can be done?

According to the OECD I understand that tax residency in Portugal is defined as follows:



Is this your understanding?听 If so, according to the OECD definition it does not appear as if you can self-classify yourself as non-tax resident

if you are actually resident in PT or have I misunderstood something?

If you know that you will be in PT for say 4 months as a resident and 8 months in the UK then are you resident and not tax resident?

Finally, if you open a bank account in Portugal are you automatically classified as tax resident or expected to have a financial representative if

you are non-resident?

Regards

Embee

If you 'tell' the tax authority that you are resident, they will consider you to be resident - there was a recent tax case on this very topic.

You say that you will be resident for 4 months in Portugal and 8 months in the UK - in this case you are not tax resident in Portugal, but if you declare to the tax authority that you are resident, and should there be any taxes payable because of you declaration, it will be then difficult, if not almost impossible (but not totally) to argue otherwise - in effect you would be arguing with yourself. Sometimes you have to make decisions and then take the 'medicine' that comes with it.

In other words, if your main home is in the UK, and you only spend 4 months here, then for tax purposes you are not resident - have a look at the tie breaker clauses in the tax treaty.

Opening banking accounts has no consequences except in the case of interest (if you are so lucky) - if resident, then, even under the nhr it will be taxable in Portugal. If non resident, then it will be subject to 28% withholding tax unless you invoke the relevant double tax treaty and provide the bank with the relevant tax certificates to reduce the withholding tax to the treaty level. In some situations, it might be tax free under other internal tax laws - would have to do the necessary research, but for this purposes not necessary

Hello Tonyj1

The main thing is to comply with legal requirements and not over complicate the situation.听 It can get confusing at times as the term resident is sometimes used when referring to tax-resident and vice-versa.

Your comment "in effect you would be arguing wit yourself." is absolutely hilarious!听 I often debate with myself but would rather not over tax issues.

The tax treaty tie breaker makes the rules clear at the end of the tax year.听 It is just that at the beginning of the tax year or if you have to declare what your tax status is on official PT documentation before July, it seems odd to declare yourself as not tax resident if you are actually living (resident) in PT.

Thank you for your colour on bank accounts.听 Really appreciate your feedback and the time you have take to elaborate on these issues.

Thanks

Embee