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A bustling hotel lobby in Lisbon, Portugal, filled with a mix of travelers and locals enjoying the serene atmosphere. The decor features traditional Portuguese tiles and modern furniture, creating a vibrant yet cozy environment.
The scene begins with “Tax Natives,” a poised journalist with a keen eye for detail, sitting across from our “Secret Adviser,” a well-regarded tax consultant known for their expertise in Portuguese tax law. They’re seated at a small, round table adorned with a floral centerpiece.
[smiling, as they take a sip of espresso]: “Thank you for meeting with me today in such a lively setting. Let’s dive right in. Can you explain how an individual becomes taxable in Portugal?”
[leaning back comfortably, gesturing towards the window where a tram zips by]: “Certainly. In Portugal, tax residency hinges on a few key factors. If someone spends more than 183 days, consecutively or otherwise, within Portuguese territory during any 12-month period starting or ending in a fiscal year, they’re considered tax-resident. Also, having a habitual residence here during any part of that period suggests an intention to maintain and use it as such.”
[A waiter momentarily interrupts, offering a plate of pastéis de nata, which both politely decline with a chuckle before continuing the discussion.]
“And what about the types of income that are taxable for these residents?”
[nods, picking up a napkin and doodling a quick chart]: “Taxable income under Portuguese Personal Income Tax, or PIT, includes employment income, business and professional income, capital gains, and more. Each category has its specifics, like capital income from dividends and interests taxed generally at 28%, with certain exceptions.”
[laughs as a child zooms past their table chasing a balloon]: “Seems like navigating tax law here is as challenging as catching that balloon! Now, what about non-residents?”
[smiling at the scene]: “Non-residents are only taxed on their Portuguese-sourced income. This includes employment performed in Portugal or income from Portuguese real estate.”
Tell us about the Non-Habitual Residents regime which applied for certain new migrants to Portugal. It was almost mythical in its status and was a huge success. What has happened to it?
[Laughs] “As mythical as the unicorn! It was good whilst it lasted. However, the NHR regime was terminated effective January 1, 2024. It still applies to taxpayers who were grandfathered in. In other words, those who qualified to apply for the regime in 2023 and became tax residents of Portugal up until December 31, 2024. The NHR status was particularly attractive because it provided beneficial tax treatment for certain types of non-Portuguese income for its users. For example, they might be able to enjoy overseas income in Portugal without any tax.”
“Unicorn indeed! How does Portugal handle capital gains tax?”
“Capital gains are typically taxed at 28%. But if you’re selling shares of entities in offshore jurisdictions, you’re looking at a 35% rate. Interestingly, gains from real estate are taxed on only 50% of the gain at progressive rates.”
[A hotel staff member accidentally knocks over a decorative vase in the background, causing a slight commotion but quickly resolved.]
“And what about other taxes, like on gifts or inheritance?”
“Portugal does not impose a gift tax per se, but stamp duty might apply at a rate of 10%. Inheritance involving assets in Portugal also triggers stamp duty unless exempted by relation, such as between spouses or direct descendants.”
[scribbling notes furiously]: “One final question, what are the peculiarities of non-cash assets taxes?”
“Importing non-cash assets like vehicles incurs various taxes and fees. VAT applies universally, adjusted by the type of goods and the value of transactions.”
[Both stand, signaling the end of the interview.]
[extending a hand]: “Thank you for these insights. I believe our readers will find them extremely valuable.”
[shaking hands]: “It was my pleasure. Always happy to clarify these complex topics.”
If you have any queries about this article on Private Client Tax in Portugal, or tax matters in Portugal more generally, then please get in touch.
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A year after Hong Kong lifted its final COVID-19 restrictions, the city continues grappling with economic recovery challenges, exacerbated by global geopolitical tensions and high interest rates.
Despite these hurdles, the Financial Secretary, Mr. Paul Chan, unveiled several tax-related measures in the 2024-25 Budget Speech on 28 February2024, aimed at revitalising the economy.
This article delves into the key measures affecting high net worth individuals, fund managers, and property investors.
In an effort to increase public revenue, the government proposes a two-tiered standard rate for salaries tax and personal assessment.
The new regime maintains the standard 15 percent rate on the first HK$5 million of net income, while income above HK$5 million will incur a 16 percent rate.
Targeting the city’s wealthiest, this adjustment is expected to affect approximately 12,000 taxpayers, or 0.6 percent of the taxable population.
Despite these changes, Hong Kong’s tax rates remain competitive globally, with rates significantly lower than those in Australia, the United Kingdom, the United States, and Singapore.
This strategic move aims to preserve Hong Kong’s appeal as a low-tax haven for affluent professionals and talents.
In a decisive move to stimulate the stagnant property market, all existing cooling measures were abolished as of February 28, 2024.
This sweeping reform followed a partial relaxation last October, including a 50 percent reduction in Buyer’s Stamp Duty (BSD) and New Residential Stamp Duty (NRSD).
Now, both sellers and buyers face only the Ad Valorem Stamp Duty (AVD) at Scale 2 rates, which are significantly more favorable and do not discriminate based on buyer type or residency status.
This policy shift is anticipated to rejuvenate market confidence and transaction volume.
It also opens new doors for using corporate vehicles or trust structures for property purchases and succession planning, a tactic previously deterred by high Stamp Duty costs.
Aiming to solidify Hong Kong’s status as a leading asset and wealth management hub, the Budget proposes to refine tax concession regimes for investment funds, single family offices, and entities receiving carried interest.
Plans include broadening the scope of tax-exempt transactions and easing limitations on incidental transaction income, which has been tightly capped until now.
These adjustments are designed to attract more fund managers and family offices by offering tax incentives on a wider array of financial transactions.
Although specifics are pending, the commitment to expand these tax advantages underscores a clear strategy to bolster investment and reinforce Hong Kong’s competitive edge in global finance.
The 2024-25 Budget reflects Hong Kong’s strategic approach to economic recovery, with significant tax reforms and regulatory easements designed to attract high net worth individuals, enhance the property market, and cement the city’s role as a global financial hub.
As these measures unfold, they promise to reshape Hong Kong’s economic landscape, offering new opportunities for growth and investment in the post-pandemic era.
If you have any queries about the Hong Kong 2024-25 Budget, or Hong Kong tax matters in general, then please get in touch.