UK CITIZENS – LIVING IN PORTUGAL
As EU nationals, UK citizens have the right to free movement and residence in national territory, meaning that they are entitled to enter into Portugal with the mere presentation of a valid passport, not being necessary to present any visa.
After 3 months living in Portugal, UK nationals should apply for registration at the Municipality services of their residency area, which will formalize their right of residence in national territory. A Registration Certificate as an EU Resident (Certificado de Registo de Cidadão da União Europeia) is issued, valid for a period of 5 years.
After a period of 5 years holding a Registration Certificate and legally residing uninterruptedly in Portugal, UK nationals are entitled to request to the Border Agency (SEF) services the issuing of a Permanent Residence Card (Cartão de Residência Permanente de Cidadão da União Europeia).
For that purpose, UK nationals must pre-book an appointment with SEF before their Registration Certificate as an EU Resident expire and apply for the issuing of the Permanent Residence Card, basically, through the presentation of the applicable form, two photos and valid Passport or Identification Card. In case UK nationals change their address since the issuing of the Registration Certificate as an EU Resident, it is also necessary to present proof of the new address.
The Permanent Residence Card formalizes the right of permanent residence in Portugal and must be renewed every 5 years.
After 6 years of legal residence in Portugal, UK nationals may apply for Portuguese Citizenship, by naturalization.
The process of acquisition of Portuguese Citizenship is started before the Central Registry (extensões da Conservatória dos Registos Centrais), Civil Registries (Conservatórias do Registo Civil) or Portuguese Consulates (Serviços Consulares Portugueses), through the presentation of the applicable form and documents.
For that purpose, UK nationals must prove that they have been legally resident in Portugal for at least 6 years, that they are considered of age as per the Law, that they are sufficiently familiar with Portuguese language, that they have never been convicted for committing a crime punished with prison sentence with a maximum of three years or more and that they do not represent a danger or threat to national security or defense, for its involvement in
activities related to the practice of terrorism.
UK – BREXIT
Given the uncertainty of whether UK nationals will still have the right to move and reside freely within the territory of the EU in the post-Brexit period, it is advisable that those that are currently living in Portugal, consider taking the following actions:
- Citizens who have been in Portugal for more than 3 months - apply for a Registration Certificate;
- Citizens who have been living in Portugal for 5 years or more - obtain a Permanent Residence Card; and
- Citizens who have been living in Portugal for a period of at least 6 years - apply for Portuguese citizenship.
THE NON-HABITUAL TAX RESIDENT REGIME
This regime was introduced in 2009 and provides special tax rates and rules for qualifying individuals. The main requirements to qualify are that the applicant must become a Portuguese tax resident, having not already been tax resident in the preceding 5 years. The status of non-habitual tax resident has a duration of 10 years.
The term used to define this tax status can be confusing. However, to benefit from this regime, you are required to have your tax residency in Portugal and to live in Portugal for more than 183 days per year or to have your main residency in Portugal.
A request for non-habitual resident status must be made online at the Portuguese Tax Department’s wesbite when you apply for your tax residency in Portugal, or until 31st March of the year following the year in which you qualify as a tax resident. You do not need to purchase a property in Portugal in order to apply for non-habitual resident status. It is sufficient to lease a property, for example.
The benefits of the NHR status depend on the type of income and source of the income.
INCOME OBTAINED IN PORTUGAL
Income relating to Category A (salaries) and Category B (business and professional income) derived from high value added activities which have been considered as such by the Portuguese government, is subject to a 20% flat rate. The remaining Portuguese source income is subject to the general tax rates.
INCOME OBTAINED ABROAD
Income obtained abroad is exempt from income tax in the following situations:
- Category A (salaries) – if it is taxed in the source State in accordance with the Tax Treaty (where there is no Treaty, if the income is effectively taxed in the source State and it is not deemed as derived in Portugal).
- Other income (business and professional income derived from high value added activities, rental income, investment income and capital gains) - if the income can be liable to tax in the country of source in accordance with the Tax Treaty or the OECD Model Tax Convention, and it is not derived in Portugal nor obtained from a blacklisted country.
- Category H (pensions) – if they are taxed in the source State in accordance with the Tax Treaty (where there is no Treaty, if the income is not deemed as derived in Portugal).
INVESTMENT BY RESIDENCY – GOLDEN VISA
The golden visa is a residency by investment program, which came into force in Portugal in October 2012. It provides applicants with a temporary residence permits and enables them to live and work in Portugal, with minimum stay requirements of only 7 or more days, in the first year, and 14 or more days, in the subsequent years.
In addition, applicants can enjoy visa-free travel through the 26 Schengen area countries.
After 5 years of temporary residence, the applicant may apply for permanent residency. After 6 years of legal residence, the applicant may apply for Portuguese citizenship, by naturalization, provided all requirements set out by the Nationality Act are fulfilled.
The minimum investment period is 5 years (the initial permit is valid for 1 year, and renewable subsequently for 2 periods of 2 years each). In addition, investors must fulfill the minimum residency periods of 7 days in the first year, and 14 days in the subsequent 2-year periods.
In order to qualify, you need to be a citizen of a third country (i.e. Portuguese, EU and EEE nationals are not eligible for the Golden Visa program). You must then opt for an investment route, as an individual or through a company.
UK – BREXIT
As evidenced above, the Golden Visa Program is not applicable to UK citizens for the time being. However, given Brexit and the confirmation that the UK will leave the EU, the Golden Visa Program may end-up to be an attractive solution for UK citizens to assure their residency in Portugal and, consequently, benefit from the advantages of being an EU resident.
It is possible to import a vehicle purchased abroad, whether new or used, into Portugal. However, this is a demanding bureaucratic procedure, with some costs and taxes associated, so this is an option that deserves some previous analysis and study.
BRINGING A FOREIGN VEHICLE TO PORTUGAL
It is possible to bring a foreign vehicle to Portugal by:
- Driving it to Portugal (although you will need to follow this procedure - as well as having an insurance policy valid in all the countries that you cross);
- Towing the car to Portugal, with an insured and registered vehicle;
- Contracting a transport company that will bring the car to Portugal.
More information regarding this issue can be found here.
After the car is in Portugal, it will have to be inspected in one of the official inspection sites. At that moment, Vehicle Tax and VAT should also be paid (in some cases there are tax exemptions or tax reductions, so you should previously confirm the situation considering the car you are looking to import). It will then be necessary to apply for a license plate and make the vehicle registration .
Regardless of the car, of it being used or new, you will need to apply for a new Portuguese license plate. You will need to have all the original documents of the vehicle from its country of origin and pay a fee. The license plate (“matrícula”) is issued by Instituto da Mobilidade e dos Transportes (IMT).
It will also be necessary to make the registration of the car and registration of your ownership. This will be dealt with by the “Conservatória do Registo Automóvel” and can be made online. The registry certificate (“Documento Único Autómovel”) will have the details of the vehicle and of the registered owner and may be requested at any time by the police.
In Portugal, it is mandatory to have insurance for your vehicle, so you should have an insurance policy in place, before first driving the vehicle. In order to have this insurance in place you should contact an insurance company.
BUYING A PROPERTY IN PORTUGAL
The conveyancing process in Portugal involves a number of stages, some of which are optional. There are a number of items which you should look out for:
PRELIMINARY STAGE - RESERVATION OF PROPERTY
If a payment is requested at this preliminary stage (the “reservation fee”), it is important to ensure that the reservation agreement clearly states that the payment is fully refundable, should the purchase not proceed for any reason, whether linked to the property, the seller or the purchaser (for example, if financing is not approved).
The Promissory Contract (Contrato Promessa de Compra e Venda) contains all the terms and conditions of the purchase. A deposit is payable (directly to the seller and not held in escrow) and the amount is usually 10%, but this is negotiable. A date is set in the contract for completion. Before entering into the Promissory Contract, you should be provided with updated documents to ensure that everything is in order with the property. In addition, if you are seeking financing for your purchase, you should consider including a financing clause in the Promissory Contract. Please note that if any of the parties is in breach and does not complete, the purchaser can lose the deposit paid or the seller may have to return the deposit paid, to the seller, in double.
A Deed of Completion (Escritura) is signed by the parties or their representatives, holding a power of attorney, before a Notary, Solicitor or directly at the Land Registry. The remaining purchase price is due on this date and the ownership of the property is effectively transferred to the Buyer on this date. The purchase is then registered at the Land Registry and Tax Department .
TAXES AND COSTS
When purchasing a property, you should expect the following taxes and costs:
IMT (PROPERTY TRANSFER TAX)
This is payable by the buyer prior to completion and is based on a sliding scale, depending on the value of the property you are purchasing. The rates also vary depending on whether you are purchasing a primary or secondary residence, in accordance with the following tables:
Permanent Residence – Mainland Portugal
Secondary Residence – Mainland Portugal
This is also payable by the buyer prior to completion and is 0.8% on the value of the property. In addition, if you are seeking financing, an additional 0.6% on the value of the loan is payable.
As an example, if you are buying a secondary residence and the purchase price is €350.000 the amount of IMT payable on the purchase will be €16,964.75 and the stamp duty payable will be €2,800.
The notary fees are payable on completion. Although there is no fixed fee (it will depend on where the completion deed takes place), you can expect an average cost of €400.
The registration at the Land Registry has a cost of € 250. An additional € 250 is payable if there is also a mortgage to be registered.
In Portugal, there is a specific housekeeping law that provides for the special characteristics of the contract for domestic service (“contrato de serviço doméstico”).
The contract for domestic service is the contract by means of which an employee is hired by an employer to render services of domestic nature such as preparing meals, cleaning the house, tending to the laundry, assisting children or elderly people, gardening, etc.
CONTRACT FOR DOMESTIC SERVICE
Considering the different types of contract (fixed term or effective, with or without accommodation, including or excluding food, partial or full time, with or without trial period, etc.) care should be taken when preparing such a contract, in order to avoid future problems.
The housekeeper is entitled to receive a salary each week, fortnight or month, in accordance with what is agreed between the parties. The housekeeper is also entitled to receive a Christmas’ Subsidy and a Holiday Subsidy, as do all employees in Portugal.
The housekeeper is entitled to one day off per week (at least), which should be Sunday. The housekeeper is also entitled to holidays (22 working days per year).
Social Security must be paid for the amount of hours worked by the employee per month (with a minimum of 30 hours). The rate is 33,3% (22,3% for the employer and 11% for the employee) when the employee wishes to be entitled to unemployment benefits. If the employee chooses not to have unemployment benefits, the rate is 28,3% (18,9% for the employer and 9,4% for the employee).
SETTING UP A COMPANY IN PORTUGAL
There are two different approaches to setting up a company in Portugal:
- It is possible to buy an off-the-shelf company and have it set up in a couple of hours or
- You may want a tailored company, to be set up by a lawyer or notary and this may take from one to three weeks, depending on the specific situation (and shareholders).
If you are not interested in choosing a company’s name or are just in a hurry, you can purchase an off-the-self new company, with a pre-approved name, and have it running in 2 hours.
This service is available at several locations throughout Portugal and you can find more detailed information here: http://www.empresanahora.pt/ENH/sections/PT_inicio.
There are three main types of companies in Portugal and these are the main differences between them:
Type of Company
Private Limited Company (Sociedade por Quotas)
It is legally required to add to the corporate name "Limitada" or its abbreviation (“Lda.”).
The minimum number of shareholders is two.
The minimum share capital is €2,00 (two euros) and is divided into stakes/“quotas”.
The liability is limited to the shareholders’ contributions to the share capital.
Individual Stakeholder Company (Sociedade Unipessoal por Quotas)
It is legally required to add to the corporate name “Sociedade Unipessoal” previously to the denomination “Limitada”.
This type of company can be held by a sole quota holder who is the only holder of the entire share capital.
The minimum share capital is €1,00 (one euro).
The liability is limited to the shareholder’s contributions to the share capital.
Public Limited Company (Sociedade Anónima)
It is legally required to add to the corporate name "Sociedade Anónima" in full or the abbreviation "S.A.".
The minimum number of shareholders is five. An SA can be set up by a sole shareholder, if this shareholder is a company.
The minimum share capital is €50.000,00 (fifty thousand euros) and is divided into shares of equal nominal value.
The shareholders limit their liability to the value of the shares they subscribe.
DOCUMENTS AND/OR INFORMATION REQUIRED
In order to start the process of incorporation of a company in Portugal these are the documents and/or information required to proceed:
- A list of potential names for the new company to be incorporated;
- The object of the company to be incorporated;
- The shareholders of the company;
- The articles of association that will be applicable to the new company;
- The directors of the company.
A company can be legally incorporated at a Portuguese lawyer’s office and must be registered at the Commercial Registry afterwards. All companies are required to have, at least, a certified accountant (some companies require an auditor).
PERMITS - “LICENCIAMENTO ZERO”
The initiative “Licenciamento Zero” (Zero Licensing) was launched with the objective of supporting entrepreneurs starting new businesses, namely small businesses, by making it easier and quicker to obtain the legal permits for several activities.
The list of activities that can be easily granted a permit has been growing in the last years and now contemplates a large list to suit several different projects.
All the services for obtaining permits can be made online, through the website of the “Portal do Cidadão”:
In this platform it is possible to start permit procedures related with:
- Permits for local accommodation - “Alojamento local”;
- Permits for commercial shops, services and restaurants – “Estabelecimentos de comércio, serviços e restauração”, which include permits for different businesses, like restaurants, bars, vehicle repair shops, laundries, tattoo shops, tanning salons, funeral homes, etc.
- Legal communications related with sales – “Saldos e Liquidações”;
- Permits for real estate agencies – “Mediação Imobiliária”;
- Other services, which include permits for very different activities like tourism accommodation, small supermarkets, travel agencies, etc.
The information regarding the documents required for each permit or authorization can be found on the platform, so you collect all documents before filing the process online.
These permits can be obtained entirely online with a Portuguese (electronic) Citizen Card. If you are not a Portuguese citizen, a lawyer will be able to obtain these permits for you, online, by using their professional (electronic) card.
THE EU SUCCESSION REGULATION
The EU Succession Regulation, or Brussels IV, came into force on 17th August 2015. It is directly applicable in the 27 “Regulation” states, but Denmark, the UK and Ireland have “opted out” of the Regulation. However, it will still affect anyone owning property or assets in a Regulation state, including Portugal.
WHAT HAS THE REGULATION CHANGED?
Previously, in Portugal, a person’s nationality was applicable to their succession. With the Regulation, it is now the law of habitual residence that will apply to a person’s succession. If someone is considered habitually resident in Portugal, for example, then Portuguese law will apply to their succession. This may be a cause for concern because Portuguese law has rules of forced heirship, which means that you can only dispose of a certain portion of your estate by will. The remainder will necessarily go to your “legal” heirs, who cannot be disowned. This means that if you currently have a will leaving everything to your spouse, for example, this is not possible under Portuguese law if you also have surviving parents or children.
CHOICE OF LAW
The law of habitual residence will not apply if you make a will expressly choosing the law of your nationality (but only the law of nationality - if you have more than one nationality, you can choose any one of these).
If you are a British national, for example, with closest connection to England and Wales, you can make a will stating that you would like the law of England and Wales to apply. This means that you have testamentary freedom (i.e. you can benefit who you like under your will) and you can thereby ensure that your wishes are met and the Portuguese rules of forced heirship do not apply.
DO I HAVE TO DO ANYTHING IF I AM HABITUALLY RESIDENT IN THE UK?
Many people think that if they are habitually resident in the UK (England and Wales), then English law will apply anyway so there is no need to make a choice of applicable law. Although it is correct to state that as the law of habitual residence, English law should, in principle, apply, because of a legal concept known as the “doctrine of envoi”, we will look to the UK’s private international rules to see which law applies.
The UK applies the law of domicile to moveable assets and the law of the country where the asset is situated, for immoveable assets. This means that if you are considered habitually resident in the UK, you may be faced with the situation where English law applies to your moveable assets (for example, a bank account) in Portugal, but Portuguese law applies to your immoveable assets (for example, a property) in Portugal.
However, if you have made a choice of law, the doctrine of renvoi is set aside and it is it the internal law of the law you have chosen, that will apply, in accordance with your wishes.
In conclusion, it is important to give careful consideration to your individual circumstances and see how the Regulation may impact any lifetime or estate planning that you have undertaken to ensure that your wishes are met.