Portugal and Pensions

bostonerimus

There are lots of ideas bop around and try to remain outside the tax authorities, but many times unless you become tax resident somewhere else you keep your original tax residency and keeping track of everything and moving every 6 months is not what most OAPs want to do. The tax treaty is the thing to look at and that does get you out of paying U.K. tax on U.K. private pensions if you are a Portuguese tax resident, but you will be liable to local Portuguese tax. The rules are different for U.K. Government pensions. So if you want to get the basics down read the U.K. Portugal DTA.

Johnnyboy11

In the Portugal scenario, are pensions like the LGPS (Local Authority), SPPA (NHS) and USS (University) classed as Government pensions and therefore liable to UK tax under the treaty?

ratechaser

bostonerimus wrote: »

There are lots of ideas bop around and try to remain outside the tax authorities, but many times unless you become tax resident somewhere else you keep your original tax residency and keeping track of everything and moving every 6 months is not what most OAPs want to do. The tax treaty is the thing to look at and that does get you out of paying U.K. tax on U.K. private pensions if you are a Portuguese tax resident, but you will be liable to local Portuguese tax. The rules are different for U.K. Government pensions. So if you want to get the basics down read the U.K. Portugal DTA.

Re the OAP point, I'd tend to agree that for the majority with modest pensions that are only retiring at the 'normal' age of 65-ish then this probably isn't an obviously attractive strategy.

But for those of us who by virtue of good fortune/planning have got a decent sized pot and are looking to get hold of our pensions as soon as the law allows, I'd be more than happy to take advantage of any decent tax residency efficiencies for a good few years, assuming I'm not living in a place that makes me miserable!

DairyQueen

bostonerimus wrote: »

The tax strategy is good as long as you become a Portuguese tax resident.. the tax treaty will not be changed by Brexit, but everything else is up for grabs. So Will Portugal allow U.K. pensioners in on Retirememt Visas and if so will they get healthcare without a reciprocal agreement from the U.K.? They might well charge very high fees to keep out the Anglo riff raff or require them to pay for healthcare.

Non-EU are entitled to participate in the Portuguese NHR scheme and the NHR is not a 'retirement visa' scheme. Indeed, even US citizens are eligible to participate . Regardless of Brexit, why would Portugal discriminate against the UK whilst the ROW is welcome? (rhetorical).

'Anglo Riff-Raff' already make-up a significant percentage of the Portuguese residents the scheme was intended to attract. In addition, the UK is a big tourist market for Portugal.

How would Portugal benefit by discouraging Brits from visiting/residing there? To the contrary, they have a great deal to lose. Not least that there are many UK-resident Portuguese citizens. The UK is a popular destination for Portuguese workers and, presumably, both countries would wish to protect the interests of their respective, ex-pat citizens.

As for Healthcare. I understand that, for retirees, this depends on whether a reciprocal arrangement exists with the country of citizenship. This is the case for all EU members but non-EU retirees (unlike non-EU workers) may not qualify post-Brexit.

Portugal could change the terms of the NHR at any time but it is very unlikely that 'special' exemptions/terms would be introduced just for UK citizens.

The double-taxation agreement is very unlikely to disappear. This predates both the UK's and Portugal's EU membership.

DairyQueen

Johnnyboy11 wrote: »

In the Portugal scenario, are pensions like the LGPS (Local Authority), SPPA (NHS) and USS (University) classed as Government pensions and therefore liable to UK tax under the treaty?

It's my understanding (but professional advice required) that all pensions in payment (excluding SP) that are funded by governments (i.e. current taxpayers) are excluded from the agreement. See here.

"Although the UK/Portugal tax treaty gives Portugal exclusive taxing rights on UK pensions, most income – including from private pensions, company pensions and the State Pension – will not be taxed under NHR. The exceptions here are UK government pensions (including local authority, army, police, teaching, fire service and some NHS pensions) which always remain taxable in the UK.

So if you take your non-government UK pension as regular income, you can generally do so as a non-habitual resident without being taxed in either country."

bostonerimus

DairyQueen wrote: »

It's my understanding (but professional advice required) that all pensions in payment (excluding SP) that are funded by governments (i.e. current taxpayers) are excluded from the agreement. See here.

"Although the UK/Portugal tax treaty gives Portugal exclusive taxing rights on UK pensions, most income – including from private pensions, company pensions and the State Pension – will not be taxed under NHR. The exceptions here are UK government pensions (including local authority, army, police, teaching, fire service and some NHS pensions) which always remain taxable in the UK.

So if you take your non-government UK pension as regular income, you can generally do so as a non-habitual resident without being taxed in either country."

Government pensions are usually dealt with under a separate article in DTAs, This is the case for the UK Portugal DTA and they are taxable by the UK when paid to Portuguese tax residents.

Nick_C

According to my Portuguese husband, Lisbon is being overrun by French and Chinese ex pats attracted by the tax breaks. Property prices have gone up significantly. As have prices in bars and restaurants. Local people are being priced out of their own country.

This policy is not popular with ordinary people. The long term consequences have not been thought through. The scheme might last for ten more years. Or it might not.

bostonerimus

DairyQueen wrote: »

How would Portugal benefit by discouraging Brits from visiting/residing there? To the contrary, they have a great deal to lose. Not least that there are many UK-resident Portuguese citizens. The UK is a popular destination for Portuguese workers and, presumably, both countries would wish to protect the interests of their respective, ex-pat citizens.

As for Healthcare. I understand that, for retirees, this depends on whether a reciprocal arrangement exists with the country of citizenship. This is the case for all EU members but non-EU retirees (unlike non-EU workers) may not qualify post-Brexit.

What you say may well be the case. However, the rules that could allow a UK OAP to retire to Portugal will be uncertain for a while as the UK becomes a "third country". If the UK allows Portuguese citizens to retire to the UK and access the NHS as a resident then I can see Portugal doing the same.

Johnnyboy11

DairyQueen wrote: »

It's my understanding (but professional advice required) that all pensions in payment (excluding SP) that are funded by governments (i.e. current taxpayers) are excluded from the agreement. See here.

"Although the UK/Portugal tax treaty gives Portugal exclusive taxing rights on UK pensions, most income – including from private pensions, company pensions and the State Pension – will not be taxed under NHR. The exceptions here are UK government pensions (including local authority, army, police, teaching, fire service and some NHS pensions) which always remain taxable in the UK.

So if you take your non-government UK pension as regular income, you can generally do so as a non-habitual resident without being taxed in either country."

I had a feeling that would be the case. The below extract is from the DTA itself:


(1) (a) Subject to the provisions of sub-paragraph (b) of this paragraph, remuneration or pensions paid out of public funds of the United Kingdom or Northern Ireland or of the funds of any local authority in the United Kingdom to any individual in respect of services rendered to the Government of the United Kingdom or Northern Ireland or a local authority in the United Kingdom in the discharge of functions of a governmental nature, shall be taxable only in the United Kingdom.

nigelbb

DairyQueen wrote: »

It's my understanding (but professional advice required) that all pensions in payment (excluding SP) that are funded by governments (i.e. current taxpayers) are excluded from the agreement. See here.

"Although the UK/Portugal tax treaty gives Portugal exclusive taxing rights on UK pensions, most income – including from private pensions, company pensions and the State Pension – will not be taxed under NHR. The exceptions here are UK government pensions (including local authority, army, police, teaching, fire service and some NHS pensions) which always remain taxable in the UK."

The rule that Government pension are taxable in the country of origin seems to be standard in all dual taxation treaties. It only covers those who were directly employed by central or local government so for example the overwhelming majority of those on an NHS pension are NOT classed as Government pensioners. It's only those who were in jobs that moved from the NHS to a local authority who had the option of joining the LGPS but preferred to stay in the NHS pension scheme who are classed as Government pensioners.