Finance
MONEY MATTERS Each month, Ricardo Chaves of All Finance Matters will answer readers’questions to help you to understand the often complex tax system here I am 67 years old and have just sold my property in Portugal. It was my primary residence and I sold it for ¤300,000 euros. The house was purchased in 2014 for ¤220,000 with a mortgage. The debt to the bank at the time of sale was ¤30,000. How much do I need to reinvest, to avoid paying taxes in Portugal. First in order to make sure that this was your primary residence, you need to check if the address of the house is the address registered at the Portuguese tax office. If this is not the case, you should change it at least six months prior to the sale. If you noticed this too late, please be aware that the change of address in some cases can be done retrospectively. In terms of the amount to reinvest, it works like this: ¤300,000€- ¤30,000€= ¤270,000€ So, it’s the proceedings of the sale, minus the mortgage redeemed at the time of deed. The mortgage is only considered if taken prior to 2015 and it for the purchase of the asset. How much time do I have to make that reinvestment? My new house only costs ¤200,000, can I reinvest part of the proceedings of the sale into a financial product? You have up to three years after the sale to make the reinvestment. Alternatively, you can use an asset purchased up to two years prior to the sale, to use as your new primary habitation. If the new house you purchased had a price of ¤200,000, then in order to avoid the payment of Capital Gains Tax, you need to invest an additional ¤70,000 into a financial product. Please note that this is only applicable (financial product) if these conditions are met: • Acquisition of the insurance contract, individual membership of an open pension fund or contribution to the public funded scheme must be made within six months from the date of sale • If the investment is made by purchase of an insurance contract or by individual membership of an open pension fund, they must exclusively provide the buyer or his/ her spouse with a regular periodic benefit of a maximum annual amount equal to 7.5 % of the amount invested. The reinvestment will not be considered if it is not made within the six-month period, or if in any year the value of the benefits received exceeds the limit of 7.5% Q We currently have an English Will that needs amending. This Will, currently does not mention any of our Portuguese assets. My question is, is it better to add the Portuguese Assets into the English Will or create a new Portuguese Will for this? First of all, let me inform you that in order to make the Will in Portugal, you should contact either a Portuguese notary, or a Portuguese solicitor.
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There is no need to have two Wills. You can add the Portuguese assets to your English Will, for this to be valid in Portugal – you just need to have a certified translation of the original Will. Although the Will is not mandatory, it is always recommended that you have one in order to make the responsibilities of your inheritors easier; a Will can save them a lot of time and paperwork during what will already be a difficult period due to the circumstances. As mentioned, please seek advice from a Portuguese solicitor.
You do not need two Wills – Portuguese assets can be added your English Will. For this to be valid in Portugal you need to have a certified translation of the original Will
I am considering the Non-Habitual Resident scheme. Presently I am a UK tax resident and receive Pensions from the UK, dividends from my UK company and rental income from properties in France. Will all the above be tax exempt in Portugal? The NHR - Non-Habitual Residency – scheme allows you several tax exemptions on income from foreign sources, for a limited period (ten years). The exemptions depend on the double tax agreement between Portugal and these countries. In your particular case, what will happen is that your pensions won’t be taxed in Portugal, neither will the dividends. However, the rental income will be taxed in the county where the properties are located. Although you must declare the rental income in Portugal as well, there will be no tax to pay. If your pension in the UK is private, there won’t be any tax to pay in the UK either. However, the State Pension or Civil Service Pension will always be taxed in the UK, unless it falls under the threshold limit. Please feel free to send any questions you have to ricardo@allfinance.pt. The most appropriate will be published in the first available issue of Simply Algarve
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