YOUR money

RICARDO CHAVES HAS AN EVER-GROWING INBOX OF REQUESTS FOR INFORMATION ABOUT THE FINANCIAL ISSUES THAT AFFECT YOUR LIFESTYLE HERE. THIS MONTH, HE EXPLAINS THE CURRENT GOLDEN VISA SITUATION AND ANSWERS QUESTIONS RELATING TO PROPERTY AND TAX

What is the situation with Golden Visas? I thought they came to an end but I keep seeing property ads with Golden visa mentions? Is there any other scheme that helps if you want to invest in property?

Portugal is closing the Golden Visa programme. The draft law will be discussed in the next few days and once this is approved new applications will no longer be accepted. However, any existing application can still be processed, providing this is done before the law comes into effect.

The law will not affect the rights of applicants and their families who have already obtained the respective residence permits, and the current rules regarding minimum permanence in Portugal will continue to apply.

It is expected that in the future new applications for this residency programme will only be available for those investing in artistic production, or in the recovery or maintenance of cultural heritage, but details of the exact terms and conditions are not yet available.

I’m thinking about buying an old property here as a project. What is the tax situation when I have completed the work and want to sell? Do the monies I have spent in developing it come off the taxable sum? When you restore a property, all the invoices related to the project are deductible from the capital gains. Typically, the cost of the ruin, plus all costs associated with the rebuild will be deducted from the sale price and only 50% of the capital gains will be taxed.

You need to ensure that all invoices are legally issued and include the name, NIF and address of the property. The invoices need specific detail, as all property sales are subject to a tax audit and the tax authorities will verify each invoice. Also make sure that you request invoices for each owner. So, if you own the property with your partner, always ask for two invoices when possible, so that each one of you has the invoices related to their share of the costs. This will avoid situations where one partner has a gain and the other has a loss because most invoices are in his/her name. The fact that both are taxed jointly does not offset the gain from one partner against the loss of the other partner, and this could introduce an unwelcome and unpleasant surprise when you realise how much your tax bill actually is.

I am looking to sell a flat in the UK which is currently rented out. What investment types do you recommend here – I should have around £400,000 (UK pounds) after all associated costs are paid. I want my money somewhere safe but still generating a decent rate of interest.

You should seek financial advice from a qualified professional, who is an expert in financial planning and has expertise in Portugal but is also qualified to offer advice in products from other countries. In terms of tax, if you are considering making capital investments and have Non-Habitual Residency status, you must consider that most benefits are related to foreign source income. In fact, income such as dividends or interest from a foreign source, providing they are not generated in a blacklisted jurisdiction, will typically be declared in Portugal, but not taxed, despite possibly not being taxed in the country of source either.

An IFA should be able to advise you on the best products available and explain, for instance, the benefits of investing in capital assurance products, which attract a lower capital gains tax rate if the money has been invested for more than eight years. In such cases, instead of paying 28% tax, only 40% of the gain is taxed at that rate, which means that the effective rate is 11.20%. This may be an option for those clients who, when finishing their NHR period, will have their pension income taxed under the progressive tax rates.

The idea of using my property and grounds as a suitable venue for a wedding or special event is very appealing. What do I need to be aware of before I think about the how and when?

You have two options; the first one is to rent your property for wedding events and pay tax on the income received. This is normally taxed at 28% and you can deduct costs that are related to the rental.

If you prefer to organise the event yourself, then this will not be deemed as a rental, but you will have to register as a business, which can be done as a sole trader. The business may have lower taxation but will have other implications, such as VAT registration, accountancy fees and social security contributions, which you need to be aware of.