In times of economic uncertainty, Portugal is trying hard to make sure that their ever so important expatriate population doesn’t reduce in numbers. This January saw two important changes in the country’s taxation policy that can be beneficial to foreign residents in Portugal. The government introduced a new tax rate on luxury property and a change in the blacklist of jurisdictions.
Portugal’s Tax on Property
Before January 1, 2017, Portugal levied a hefty 1% tax on properties valued at €1m or above.
The good news is that the government abolished the old rate and announced a lower rate in October last year.
But there is a hitch. The lower annual rate of 0.3% that came into force on 1 January applies to properties valued at €600,000 and above. In other words, the tax rate has come down, but so has the property tax threshold.
However, the new property tax allowance applies per person. It means that a couple, for example, will only pay a tax on a property/properties over €1.2m providing it’s a joint ownership.
The same rule applies to companies and estates which each qualify for the €600,000 tax allowance.
Portugal’s Tax Blacklist Changes
The Portuguese Government has also announced changes to their famous Blacklist of Jurisdictions.
Countries on the blacklist are deemed tax havens. If a tax resident of Portugal has a bank account or investment in a blacklisted country, their income is taxed at a higher rate of 35%, compared to the flat rate of 28%.
The blacklist used to include Guernsey and Gibraltar, for example.
From now on the blacklist will not be the only reference to determine if a territory is a tax haven. Instead, the territories with tax rates 60% lower than corresponding taxes in Portugal will be blacklisted.
This removes such territories as Jersey, Isle of Man and Uruguay from tax haven list.
Read the full story in the International Adviser