living aboard/world circum and country of residency as a pensioneer

[Augi]

Originally Posted by CaptainRivet

HI all,


i hope some of you can help and point me in the right direction.
What country as residency to choose as a liveabord, so no taxes on foreign income/foreign pension and they don't bother you being 183days min in their country???
Just need to proof residency in any state I want and I bank account to swiss and german pension fund to transfer my pension to which state I want. So which country to choose???



Background:
I have a German passport and at the moment residency in switzerland.
From 2o2o on I will retire early and get a pension from switzerland and Germany but I won't be living anymore in switzerland/no residency soon.

I will liveaboard and do a slow world circum for min 5 years starting in March 2020.
Both countries will transfer my pension to any country I will get residency.
What country as residency to choose as a liveabord, so no taxes on foreign income/foreign pension and they don't bother you being 183days min in their country???
Heard BVI should be a good place and easy to get a residency visa/residency, true?

To clarify do you need to establish residency elsewhere to receive your pension(s) or to avoid higher taxation by Germany? If not then one option is not establish residency anywhere since you plan to be moving from place to place. If you not need to establish residency anywhere then you only need to follow the rules of wherever you are visiting in terms of length of stay as a visitor there for avoiding being taxed anywhere besides Germany.

For example US citizens do not need to establish residency elsewhere to take advantage of tax advantages a US expats. You only need to not be present in the USA for more than 31 days over the tax year.


You need confirm the rules for taxation of a pension in Germany as a citizen of Germany if you aren't present in Germany at all over the tax year or some limited period of time.

If you need to establish residency I suggest you get top professional advice to tell you the top 5 countries to consider based on your parameters and criteria. I suggest part of your criteria be once you have selected the country to establish residency that it is a country that you can manage the process to establish residency without hiring a lawyer or hiring some one else other than a limited amount to keep costs down.

[CaptainRivet]

Originally Posted by philiosophy

For me this may well be the most important discussion on this forum yet. Every full time world cruiser that is retired is dealing with these issues. So many countries require 183 presence to receive their pension and medical benifits. Solving that issue is huge.
Mexico seemed to have an easy system to allow residency. I may revisit that down the road. Australia allows the boat to stay three years before importation. Long visas seem to be doable with due diligence. Will know more on that in the next few weeks. I hope this very important discussion stays alive. Thank you for asking.

Yes you got my point

Problem is that we are forced to trick the system, and if I am forced I optimse it so I pay no tax.
The system doesn't fit this cruising livestyle and even works against it.

I don't want this thread to be a tax law optimization thread, its really like where can I register as world cruiser that just accepts that livestyle and is not controlling the 183days or offers a solution for cruising.

Why can I not register the boat in a country and then the boat itself become a residency of this country floting around the world. Simple, effective and that would be a solution and would pay my taxes there without any hestitation. Why doesn't a country eg Belize or Panama or Phillipine or... that has an easy retirement programme for residency not offering that? Don't get that. They can just do that and accept boat as residency and count these days on the boat as part of the residency and with your logbook you can proof that. Also I have no problem having a laywer as postbox that transfers important documents and can act as my legal replacement in person if something needs to be done locally.


No residency is not an option as I need to proof residency to swiss retirement authority so they transfer the pension to this country and an account there plus tell german where they have to send the german pension too. They are coordinating this, I hand in the docs to claim my german pension at the swiss pension authorities.

[CaptainRivet]

Originally Posted by Augi

If you need to establish residency I suggest you get top professional advice to tell you the top 5 countries to consider based on your parameters and criteria.

Can you name me a top professional who can tell me, willing to pay him properly ? This would be a huge help.
All I got so far is scam and tax optimisation laywers from competent till super shady so I transfer my savings so they can work with them and hide taxes or income but non of them can offer an advice on this combination of cruising and residency.

As said above I need a residency that I can proof to geneva international retirement authority so they transfer my pension there and have a proove where this money goes and it will be taxed there if tax applies locally for that income.

[Montanan]

Originally Posted by philiosophy

For me this may well be the most important discussion on this forum yet. Every full time world cruiser that is retired is dealing with these issues. So many countries require 183 presence to receive their pension and medical benifits. Solving that issue is huge.
Mexico seemed to have an easy system to allow residency. I may revisit that down the road. Australia allows the boat to stay three years before importation. Long visas seem to be doable with due diligence. Will know more on that in the next few weeks. I hope this very important discussion stays alive. Thank you for asking.

If you are not a resident of a country, why should they treat you like one. It seems highly presumptuous to desire to receive benefits or privileges of a country to which you do not have domicile or citizenship.

I am a Montanan, living next to Canada, is proximity a basis for receiving Canadian privileges? NO. Can I legally stay for extended periods in Canada? NO. Ditto for Canadians traveling to the USA. Vast number of Canadian snowbirds travel through Montana to warmer climates for the winter and return within five months so as to retain their Canadian benefits and privileges.

It seems like people are suggesting to scam the countries somehow.

[Montanan]

Originally Posted by Cpt Pat

Correct me if I'm wrong here but, it is my belief that since I have a U.S. documented vessel, if I am living aboard that boat, I am "resident" in the United States, regardless of the vessel's location.

If you own a US documented vessel then you must be a citizen of the USA since only citizens can document a boat with the USCG.

If you are a U.S. citizen or resident alien of the USA, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

Your boat's documented status does not impact your residency status or your tax status. Residency is in the country or state in which you domicile. If you are in international waters you are not residing in any country.

As to US documentation of a vessel:

Subpart A—General
§ 67.1 Purpose.
A Certificate of Documentation is required for the operation of a vessel in certain trades, serves as evidence of vessel nationality, and permits a vessel to be subject to preferred mortgages.


That is the sole Federal purpose of documenting a boat with the US Coast Guard. In certain states a USCG documented boat does not need to be registered.

[Augi]

Originally Posted by CaptainRivet

Yes you got my point

Problem is that we are forced to trick the system, and if I am forced I optimse it so I pay no tax.
The system doesn't fit this cruising livestyle and even works against it.

I don't want this thread to be a tax law optimization thread, its really like where can I register as world cruiser that just accepts that livestyle and is not controlling the 183days or offers a solution for cruising.

Why can I not register the boat in a country and then the boat itself become a residency of this country floting around the world. Simple, effective and that would be a solution and would pay my taxes there without any hestitation. Why doesn't a country eg Belize or Panama or Phillipine or... that has an easy retirement programme for residency not offering that? Don't get that. They can just do that and accept boat as residency and count these days on the boat as part of the residency and with your logbook you can proof that. Also I have no problem having a laywer as postbox that transfers important documents and can act as my legal replacement in person if something needs to be done locally.


No residency is not an option as I need to proof residency to swiss retirement authority so they transfer the pension to this country and an account there plus tell german where they have to send the german pension too. They are coordinating this, I hand in the docs to claim my german pension at the swiss pension authorities.

Checkout Dominica Residency. Not sure if you have to be present in Dominica while you are waiting to be granted residency. All you do is show up as a visitor and apply for residency. You only have to meet some basic requirements. Again I don't know what the requirements are to be present in Dominica to become a resident. You can become a citizen by investing $100K and never even go to Dominica.

They might treat your berth in a Marina as your residency address whether you are in port or not. I don't think they tax income generated outside Dominica.

I suggest you do research to see if a berth in a marina that you rent will count as presence in what countries to satisfy residency requirements(whether you are in port or not), and at the same time if the tax rules, meet your needs. No doubt most marina's will receive your mail, you will generate a utility bill, etc. to establish a legal address.

A small country like Dominica is probably your best bet.

I suggest you check out Guatemala's requirements for residency. I know Guatemala will not tax income generated outside Guatemala. Your legal address could be a marina berth in Rio Dulce. It is highly likely that Western Europeans in the same situation as you have at least have already done the exercise that you are starting on. To network contact the biggest yacht brokers based in Rio Dulce to get referred to cruisers based there in the same "boat" as you. Then repeat for Belize, Philippines, etc. etc. I am pretty sure Guatemala is very doable for what you are looking for: Establish residency for minimal cost and time spent in country.

[Montanan]

Specific to your German sourced pension income.

People who live outside Germany may need to pay tax in Germany on their German income.

As of 2005, this applies to recipients of a German pension, even if they live outside Germany.

However, not all pensioners are liable for tax. It depends on the type of income as well as the country where the pension recipient lives.

Because not all types of income are affected -- in other words, the pensioner’s total global income is not taxed -- these individuals are deemed to have “limited” tax liability.

The question of whether a pension must be taxed in Germany depends on what kind of pension it is and in which country you are resident. The size of the pension is not relevant in terms of determining whether it is liable for tax or not.

If you receive income from Germany you may be liable to pay German income tax on this German income. This applies even if you do not have your place of residence in Germany or do not spend 183 days or more a year in the country. In this case, you have a limited tax liability with respect your German income only (cf. section 1 subsection (4) of the Income Tax Act (Einkommensteuergesetz)).

If you are resident abroad and receive a pension from Germany you can find out below whether your pension counts as pension income that is taxable in Germany.

The rules about the taxation of other income (pensions) changed fundamentally with the introduction of the Retirement Income Act (Alterseinkünftegesetz) which came into force in 2005. As part of this an amendment was made to limited tax liability in respect of other income under section 49 subsection (1) number 7 and number 10 of the Income Tax Act (Einkommensteuergesetz). The following types of pension are therefore liable to tax in Germany:

Under section 49 subsection (1) number 7 of the Income Tact Act (from 2005 onwards), life annuities and other benefits from:

the domestic statutory pension insurance system
domestic agricultural pension funds
domestic pension schemes for professional groups
a basic pension product from a domestic insurance company or other domestic paying agent
Under section 49 subsection (1) number 10 of the Income Tact Act (for 2009):

benefits paid by pension funds, pension schemes and direct insurers under section 22 number 5, first sentence, of the Income Tax Act, to the extent that the benefits are based on contributions which were tax-favoured under section 3 numbers 56, 63 or 66 of the Income Tax Act during the paying-in phase.
Under section 49 subsection (1) number 10 of the Income Tact Act (from 2010 onwards)

benefits from occupational pension schemes (pension funds, pension schemes and direct insurance companies) as well as benefits from personal old-age pension policies within the meaning of section 22 number 5 of the Income Tax Act
If you receive one of these pensions you have limited income tax liability with respect to this pension and you are, as a rule, obliged to submit an income tax return in Germany.

[Augi]

Originally Posted by Augi

Checkout Dominica Residency. Not sure if you have to be present in Dominica while you are waiting to be granted residency. All you do is show up as a visitor and apply for residency. You only have to meet some basic requirements. Again I don't know what the requirements are to be present in Dominica to become a resident. You can become a citizen by investing $100K and never even go to Dominica.

They might treat your berth in a Marina as your residency address whether you are in port or not. I don't think they tax income generated outside Dominica.

I suggest you do research to see if a berth in a marina that you rent will count as presence in what countries to satisfy residency requirements(whether you are in port or not), and at the same time if the tax rules, meet your needs. No doubt most marina's will receive your mail, you will generate a utility bill, etc. to establish a legal address.

A small country like Dominica is probably your best bet.

I suggest you check out Guatemala's requirements for residency. I know Guatemala will not tax income generated outside Guatemala. Your legal address could be a marina berth in Rio Dulce. It is highly likely that Western Europeans in the same situation as you have at least have already done the exercise that you are starting on. To network contact the biggest yacht brokers based in Rio Dulce to get referred to cruisers based there in the same "boat" as you. Then repeat for Belize, Philippines, etc. etc. I am pretty sure Guatemala is very doable for what you are looking for: Establish residency for minimal cost and time spent in country.

Don't take this as gospel, but look at the link below to get an idea about Guatemalan Residency.

https://www.mylatinlife.com/blog/201...y-in-guatemala

It is important you hire the right one(like hiring any lawyer, anywhere), but you can probably hire an immigration lawyer in Guatemala for $2K-$3K to manage the 2 to 3 year process to first get temporary residency and then after 2 years apply for permanent residency. To maintain residency I don't know what presence requirements are to be in country and maintain your residency. That is the first question to ask when if your interviewing Guatemalan Immigration lawyers. You will not need to speak Spanish.

[Augi]

Originally Posted by Montanan

If you own a US documented vessel then you must be a citizen of the USA since only citizens can document a boat with the USCG.

If you are a U.S. citizen or resident alien of the USA, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

Your boat's documented status does not impact your residency status or your tax status. Residency is in the country or state in which you domicile. If you are in international waters you are not residing in any country.

As to US documentation of a vessel:

Subpart A—General
§ 67.1 Purpose.
A Certificate of Documentation is required for the operation of a vessel in certain trades, serves as evidence of vessel nationality, and permits a vessel to be subject to preferred mortgages.


That is the sole Federal purpose of documenting a boat with the US Coast Guard. In certain states a USCG documented boat does not need to be registered.

The above is not true in regards to foreign earned income if you are present in the USA 31 days or less over the tax year. In that case your first approx. $101K of foreign EARNED income is not taxed by the USA. There are other tax benefits to being an expat like housing credits, offset USA taxes with forgien paid tax, etc, etc Like anything USA tax related it can get complicated. Either consulate the tax code if you are masochist or hire an expat accountant to advise you.

[a64pilot]

Originally Posted by Cpt Pat

Correct me if I'm wrong here but, it is my belief that since I have a U.S. documented vessel, if I am living aboard that boat, I am "resident" in the United States, regardless of the vessel's location.

I haven’t read the rest of the thread but I believe your an US resident until or unless you surrender your Citizenship, I don’t think it’s anymore complex than that, now of course as a Citizen your expected to pay taxes, and I suspect that is the crux of these types of discussions and I also believe that are actually more geared towards those that have CPA’s and Lawyers either on staff or at least on retainers.

Again, I’d suspect that if you surrendered your Citizenship, don’t expect to see any Social Security and or Medicare.

[hpeer]

Originally Posted by a64pilot

I haven’t read the rest of the thread but I believe your an US resident until or unless you surrender your Citizenship, I don’t think it’s anymore complex than that, now of course as a Citizen your expected to pay taxes, and I suspect that is the crux of these types of discussions and I also believe that are actually more geared towards those that have CPA’s and Lawyers either on staff or at least on retainers.

Again, I’d suspect that if you surrendered your Citizenship, don’t expect to see any Social Security and or Medicare.

Sometime in the late ‘60’s the US Supreme a court filled that the USA has the right to grant or deny USA citizenship. But also it does NOT have the right to dictate to other countries what their citizenship requirements are. (VERY loosely summarized).

Therefore multiple citizenships are allowed. So I have dual citizenship in USA and Canada. I have TWO passports. But I can’t get a Canadian credit card because having never earned income in Canada I have no tax number. Go figure.

Germany, OTOH, required my Wife to surrender her citizenship when she became a USA citizen.

[Augi]

Originally Posted by Augi

To clarify do you need to establish residency elsewhere to receive your pension(s) or to avoid higher taxation by Germany? If not then one option is not establish residency anywhere since you plan to be moving from place to place. If you not need to establish residency anywhere then you only need to follow the rules of wherever you are visiting in terms of length of stay as a visitor there for avoiding being taxed anywhere besides Germany.

For example US citizens do not need to establish residency elsewhere to take advantage of tax advantages a US expats. You only need to not be present in the USA for more than 31 days over the tax year.


You need confirm the rules for taxation of a pension in Germany as a citizen of Germany if you aren't present in Germany at all over the tax year or some limited period of time.

If you need to establish residency I suggest you get top professional advice to tell you the top 5 countries to consider based on your parameters and criteria. I suggest part of your criteria be once you have selected the country to establish residency that it is a country that you can manage the process to establish residency without hiring a lawyer or hiring some one else other than a limited amount to keep costs down.

If you want to go the easy but expensive route to find the best solution talk to Henly Global(see link). Henly Global will know exactly all the requirements in Germany and Switzerland to reduce the taxes you pay and be able to receive your pensions. Right a way they will know which countries potentially are best for you to establish residency.

https://www.henleyglobal.com/residen...SADEgJT4_D_BwE

[hpeer]

Originally Posted by Augi

Checkout Dominica Residency. Not sure if you have to be present in Dominica while you are waiting to be granted residency. All you do is show up as a visitor and apply for residency. You only have to meet some basic requirements. Again I don't know what the requirements are to be present in Dominica to become a resident. You can become a citizen by investing $100K and never even go to Dominica.

They might treat your berth in a Marina as your residency address whether you are in port or not. I don't think they tax income generated outside Dominica.

I suggest you do research to see if a berth in a marina that you rent will count as presence in what countries to satisfy residency requirements(whether you are in port or not), and at the same time if the tax rules, meet your needs. No doubt most marina's will receive your mail, you will generate a utility bill, etc. to establish a legal address.

A small country like Dominica is probably your best bet.

I suggest you check out Guatemala's requirements for residency. I know Guatemala will not tax income generated outside Guatemala. Your legal address could be a marina berth in Rio Dulce. It is highly likely that Western Europeans in the same situation as you have at least have already done the exercise that you are starting on. To network contact the biggest yacht brokers based in Rio Dulce to get referred to cruisers based there in the same "boat" as you. Then repeat for Belize, Philippines, etc. etc. I am pretty sure Guatemala is very doable for what you are looking for: Establish residency for minimal cost and time spent in country.

There is a WIKI for that.

https://en.m.wikipedia.org/wiki/Domi...ment_programme

This program requires you to invest your money, but presumably you will make some return in that investment. Personally I would only do it if I could afford to loose that investment.

FWIW, we are USA citizens. We live outside the USA about 10 months a year. We have a small hunting cabin that we use as our official “residence” so that we have a place to get our drivers license and bote. Other than that all our mail goes to a mail forwarding company.

The mail forwarding companies reside in either Florida or Texas because those states have good tax codes for retirees. The mail forwarding company can and does advise on how to obtain legal residence in that state; if needed.

[CaptainRivet]

Originally Posted by Andy Todd

Google 'Non Habitual Residency in Portugal'. Key points:


- You pay tax in Portugal at 0% on foreign income for 10 years.

- The country you come from must have a double tax treaty with Portugal. In which case you don't pay tax there. You leave your pensions where they are. Germany and Clock&ChocLand both qualify.

- You need be in Portugal for 184 days OR have a residency there with the intention of living in it. There are companies that help you meet this requirement without having to be in Portugal.

Thank you, Portugal seems doable and that seems the right path... Non habitual residency..

Have checked all the requirement and they fit. An agency figuring that out in detail and come back with an offer to me. And they don't check your 183days what agency and some unsere of the retirement Algarve forum said too. Swiss pension authorities just sent to you once a year a piece of paper which need to be stamped by th Portuguese local office that you have residency... Agency takes care of that and you get a postbox adress.

And for 30k euro you even get a small house close to the beach and eg Faro or Portamaeo, Algarve. Then I have property and a good winter home for my parents :-) so somebody is there from time to time. and that's OK to invest that amount then.

[Montanan]

Originally Posted by Andy Todd

Google 'Non Habitual Residency in Portugal'. Key points:


- You pay tax in Portugal at 0% on foreign income for 10 years.

- The country you come from must have a double tax treaty with Portugal. In which case you don't pay tax there. You leave your pensions where they are. Germany and Clock&ChocLand both qualify.

- You need be in Portugal for 184 days OR have a residency there with the intention of living in it. There are companies that help you meet this requirement without having to be in Portugal.

Originally Posted by CaptainRivet

Thank you, Portugal seems doable and that seems the right path... Non habitual residency..

Have checked all the requirement and they fit. An agency figuring that out in detail and come back with an offer to me. And they don't check your 183days what agency and some unsere of the retirement Algarve forum said too. Swiss pension authorities just sent to you once a year a piece of paper which need to be stamped by th Portuguese local office that you have residency... Agency takes care of that and you get a postbox adress.

And for 30k euro you even get a small house close to the beach and eg Faro or Portamaeo, Algarve. Then I have property and a good winter home for my parents :-) so somebody is there from time to time. and that's OK to invest that amount then.

FYI.

Tax in Portugal: The basics
The Portuguese tax year follows the calendar year and ends on the December 31st.

If you are moving to Portugal you are required to register as a tax payer before you embark on any paid activity in Portugal. You need to register to become a tax payer which requires you to obtain an NIF (Numero de Identicacao Fiscal) which can be requested from a local tax office.

Portuguese tax residents, including expats, are required to submit an annual income tax return early in the following year. The deadline for submitting your Portuguese income tax annual return is between 1st April and 30th June of the calendar year following the end of the previous tax year.

For example, income received between 1st January 2018 and 31st December 2018 will need to have submitted their tax return by 30th June 2019.

Am I a Portuguese tax resident?
At a basic level, the rules for becoming a Portuguese tax resident are relatively straight forward.

The simplest approach is that if you are in Portugal for 183 or more days in a single calendar year, you will typically be classed as a Portuguese tax resident. However a number of other factors may also see you deemed as a tax resident including:

You have a permanent residence in Portugal on December 31st in that tax year
If the head of your household is a tax resident in Portugal
If you are part of the crew on a ship, yacht or aircraft which is owned by a Portuguese entity
If you work for the Portuguese state, regardless of the country you work in
Portuguese Income Tax
If you are classed as a tax resident, your worldwide income is subject to Portuguese income tax. This income could include salary, rental income and capital gains.

Portugal has various tax treaties with other countries, including a tax treaty with the UK, which ensures that you should not have to pay tax more than once on any income in multiple jurisdictions. The typical arrangement is a tax credit against what would be your tax owed Portugal for the amount of tax paid in the foreign country with the double taxation treaty for the foreign sourced income.

If you are a non-resident in Portugal, only income earned in Portugal will be liable for tax, typically at 20%. However, lower tax rates exist for income received from property.

Portuguese tax for non-habitual tax residents
In an effort to attract leading talent and also high net worth individuals, the Portuguese tax system has a favourable tax system for non-habitual tax residents.

The non-habitual residence (NHR) tax regime was introduced in 2009 and can provide tax benefits for an individual in their first ten years of residence in Portugal.

For non-habitual residents, the flat rate of 20% is applied to income received, regardless of the level of income. The current highest income tax band in Portugal charges 48% tax on income, which is a massive difference.

Aside from the flat rate 20% income tax, there is a reduced or deferred tax rate on dividends or other income from investments – and in some cases the income may be exempt from tax.

There is also no inheritance tax, gift tax or wealth tax in Portugal for non-habitual residents. There is inheritance tax on tax residents.

For people with pensions there is beneficial tax treatment for income received from pensions and other life insurance products.

To qualify for the non-habitual resident status you must not have been a tax resident in Portugal for any of the previous five tax years. You also need to meet the criteria for being a tax resident in the year of application – the simplest way of achieving this is to be present in Portugal for more than 183 days. Finally, you need to apply via the Portuguese tax authorities (and, of course, you need to be approved).

Since 2009 and the introduction of the Non-Habitual Residence (NHR) tax regime, Portuguese authorities have been enticing wealthy individuals and families to relocate to Portugal using significantly beneficial tax treatment for the first ten years that they live in Portugal.

While this may sound like the preserve of the uber-rich, this isn’t necessarily the case and is a tax system which is open to those currently in certain types employment as well as retirees who either live, or are planning to live, on an income from pension from outside Portugal.

What is Non-Habitual Residency status?
The Non-Habitual Residence status was introduced in Portugal to offer people a legitimate way for people to earn, save and invest in a jurisdiction without paying tax on things like inheritance, the disposal of assets and pension income. Being granted NHR status ensures that, for ten years, people who are tax resident in Portugal (and accepted for Non-Habitual Residence status) can essentially receive certain incomes free of tax both in Portugal and in the country of the income source.

The Non-Habitual Residence regime could be especially beneficial for retirees as income which is received from pensions overseas is not taxed in Portugal on the basis that it has normally be taxed at source (i.e. the location of the pension). By way of example, in the OP's case taxable in Germany since that is the source country of the pension income.

Non-habitual residence status also means that people living, working and receiving an income in Portugal are subject to only 20% of their entire Portuguese based income, and also means that they can potentially claim 25% of this tax as a cost for acquiring their income. This could effectively bring the effective rate of income tax down to a NET of just 15%.

Applying for Non-Habitual Residence status
If an individual wants to apply for Non-Habitual Residence status, there are a number of requirements which must be met as a minimum, including:

You must not have been resident in Portugal for the previous five tax years
You must be physically resident in Portugal
You must also be resident in Portugal
When applying, you must be a tax resident in Portugal
You must own (or rent) a property in Portugal
While the process, provided it is executed correctly, can be relatively straightforward it can often take a fair amount of time. To maximise your chances of becoming a Non-Habitual Resident, it is vital that you seek expert advice at the beginning of the process.

What foreign income is considered exempt from tax in Portugal through the Non-Habitual Residence Status?
There are a number of foreign income sources which would be exempt from tax, both at source through tax exemption double treaties, and in Portugal. These include income from:

Foreign pensions, including private and personal pensions in the UK. While the pension income may be taxed at source, it may also be possible to transfer the pension to a jurisdiction which means tax is also not deducted at source.
Investment income, such as dividends and capital gains and rental income. Royalties which are received in another country may also be exempt under a Non-Habitual Residence status.
Income from foreign employment, provided it is taxed at source under double tax treaty agreements.
In all cases, it is vital that the income is not received, or deemed to be originating from any Portuguese source.

Tax on income from employment in Portugal
The Non-Habitual Residence status in Portugal also offers tax benefits to people who are planning to live and work in Portugal. If you are considered as working in a "high added value" profession, you may be able to take advantage of a tax rate of 20% of any income generated from Portugal.

There are a number of professions which are eligible, centred around activities which could be considered scientific, artistic or technical in nature.

This means that you may be able to benefit from becoming non-habitually resident in Portugal if you are any of the following:

Architects or engineers
Actor, fine artist or musician
Doctor or dentist
Teacher or lecturer
Senior management
How do you apply for Non-Habitual Residence status?
While not every application for Non-Habitual Residence status will be successful, the process does not take long and, providing it is handled correctly, can even be achieved within weeks of the original application.

The key to remaining eligible and maximising your chances of success is to speak to someone who is an expert in understanding the eligibility criteria and has experience of assisting people through the process.

It is important to remember that your behaviour, including buying a property in Portugal, will all have a bearing on whether you are able to become Non-Habitually Resident in Portugal.


3 - What types of income are eligible for exemption under NHR regime?


Foreign-sourced passive income (interest, dividends, certain royalties, other income from capital, capital gains and income from immovable property) derived by NHR is exempt (without progression except in the case of capital gains on real estate) in Portugal, provided that it is potentially liable to taxation in the source State (i) under the rules of an existing Double Tax Treaty (DTT) or (ii) in the absence thereof, under the rules of the OECD Model Tax Convention if such income is not deemed to arise from a State, region or territory included in the Portuguese tax havens’ blacklist nor from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced income from pensions is IRS exempt (with progression) if not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced employment income is IRS exempt (with progression), provided that it is effectively taxed in the source State (i) under the rules of a DTT or in, the absence thereof, (ii) of the OECD Model Tax Convention, as long as such income is not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced employment income is IRS exempt (without progression) in Portugal, provided that it is income derived from high value added activities of a scientific, artistic or technical nature and it is effectively taxed in the source State (i) under the rules of a DTT or in, the absence thereof, (ii) of the OECD Model Tax Convention, as long as such income is not deemed to arise from a Portuguese source under the IRS Code territoriality rules.
Foreign-sourced income from independent personal services is IRS exempt (without progression) in Portugal, provided that it derives from high value added activities of a scientific, artistic or technical nature, as defined by Ministerial Order, and is potentially liable to taxation in the source State (i) under the rules of an existing DTT or (ii) in the absence thereof, under the rules of the OECD Model Tax Convention, if such income is not deemed to arise from a State, region or territory included in the Portuguese tax havens’ blacklist nor from a Portuguese source under the IRS Code territoriality rules.


4 - What types of income are eligible for reduced rates under NHR regime?


Income deriving from employment or independent personal services of a domestic or foreign source but not qualifying for the mentioned exemptions will be liable to autonomous taxation at a special 20% flat rate and not to the general and progressive IRS rates (currently of up to 53% for yearly taxable income above € 250.000), provided that it derives from high value added activities of a scientific, artistic or technical nature.

5 - What are considered high value added activities of a scientific, artistic or technical nature?


Ministerial Order no. 12/2010, of January 7, defined the “high value added activities of a scientific, artistic or technical nature” qualifying for the regime. It encompasses a wide range of professions and activities, as follows:

1 - Architects, engineers and similar technicians:

101 – Architects
102 – Engineers
103 – Geologists

2 - Visual artists, actors and musicians:

201 – Theater, ballet, film, radio and television Artists
202 – Singers
203 – Sculptors
204 – Musicians
205 – Painters

3 – Auditors:

301 – Auditors
302 –Tax Consultants
4 - Doctors and dentists:

401 – Dentists
402 – Analyst Doctors
403 – Surgeons
404 – Board doctors in ships
405 – General Practitioners
406 – Dentists
407 – Dentist Doctors
408 – Physiatrists
409 – Gastroenterologists
410 – Ophthalmologists
411 – Orthopaedists
412 – Otorhinolaryngologists
413 – Paediatricians
404 – Radiologists
405 – Doctors in other specialties

5 - Teachers:

501 – University professors

6 - Psychologists:

601 – Psychologists

7 - Professional services, technicians and similar:

701 – Archaeologists
702 – Biologists and experts in life sciences
703 – Computer Programmers
704 – Software consultancy and activities related to information technology and information technology
705 – Computer programming activities
706 – Computer consultancy activities
707 – Management and operation of computer equipment
708 – Activities of information services
709 – Activities of data processing, hosting information and related activities/Web portals
710 – Activities of data processing, hosting information and related activities
711 – Other information service activities
712 – Activities of news agencies
713 – Other information service activities
714 – Scientific research and development
715 – Research and development of science physical and natural
716 – Research and development in biotechnology
717 – Designers

8 - Investors, administrators and managers:

801 – Investors, administrators and managers of companies promoting productive investment, if allocated to eligible projects under tax benefits contracts awarded under the Tax Code for Investment, approved by Decree-Law No. 249/2009, of 23 September
802 – Senior employees of companies


6 - Who may apply for the NHR regime?


Individuals who become resident for tax purposes in Portugal without having been so in the previous five years.


7 - How do I acquire tax residence in Portugal?


Staying for more than 183 days in the Portuguese territory, whether these days are consecutive or not, in any 12-month period beginning or ending in a given tax year;
If staying for a shorter period, having in the Portuguese territory, on any day of the period referred above, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode;
Being, on December 31st, a crew member of a ship or aircraft at the service of an entity with residence, head office or effective management in Portugal.


8 - What is the procedure to register as tax resident in Portugal?


Registering as a tax resident in Portugal is a requirement to obtain the non-habitual resident status, which means that those wishing to apply for the regime generally must:

i. register as non-resident taxpayers;

ii. obtain residence permits (for non-EU nationals) and residence certificates (for EU nationals);

iii. register as tax residents; and

iv. only then apply for the non-habitual resident status.


9 - How do I apply for the NHR status?


An application must be submitted until March 31st of the tax year following that in which Portuguese tax residence is acquired. This application is addressed to the Director of the Taxable Persons Registration Service (Serviços de Registo de Contribuintes). Moreover, individuals must submit a statement whereby they solemnly declare that they have not fulfilled the criteria necessary for being considered a Portuguese tax resident during the preceding five year. From August 2nd, 2016 onwards, the application and submission of the statement is done through the tax authorities’ website.


15 - Am I required to provide proof of Portuguese tax residence?


As explained in FAQ #7 above there is more than one way to acquire Portuguese tax residence. The 184-day rule is not mandatory as long as one has, in the Portuguese territory, a dwelling under circumstances that lead to the presumption of an intention to hold and occupy it as a place of habitual abode. The Portuguese tax residence, in principle, will not be challenged by the Portuguese Tax Authorities. However, it could be challenged by an income source State, especially if one spends time in that State. In this regard, a number of precautions are advisable: a) keeping a calendar that tracks one’s days of stay in Portugal and in other countries; b) avoiding short-term rentals and frequent address changes within the Portuguese territory from the moment one becomes a tax resident herein; c) ask for invoices with the Portuguese tax number (NIF) on a recurring basis when one acquires products/services in Portugal. The latter will allow the individual (i) to better prove his/her effective presence in Portugal, if challenged, (ii) to benefit from certain deductions on the Portuguese tax assessment, if he/she has taxable income at standard tax rates, and (iii) also make him/her eligible for a State lottery!