Planning for the End of NHR & Taxation of Pensions
New possibilities await after NHR
If you’re currently part of the NHR scheme, you might be wondering: Do I need to leave Portugal when the NHR ends? Will I have to pay high taxes? The answer is NO. You don’t need to leave Portugal, and you WON’T face higher tax rates.
If you’re planning a move to Portugal, organising your finances early is a smart move.
Where you hold your investments matters.
Strategic planning
Proper tax planning can often lead to bigger savings than your investment returns. It’s also important to plan for the end of your 10-year NHR period. Ideally, this should be done in the first two years, but it can still be useful afterward. This helps you avoid much higher taxes when your NHR status expires. Missed the deadlines? We can still help. Taking some action is better than none.
Tax-efficient solutions are not available to download from the internet
The reason is due to regulatory compliance. The solutions must comply with local laws. Tax-efficient strategies often require careful implementation, ongoing professional management, and, most importantly, be appropriate for you.
A qualified and correctly licensed Financial Adviser is deemed to have sufficient specialist knowledge to determine whether a potential solution is appropriate for you, helping you avoid potential penalties and fees. Our Senior Financial Adviser is a Chartered member of The CISI and operates under a full MiFID II licence. Contact us for more details.
The provision of Investment Advice is a regulated activity and you are protected under the Adviser’s professional indemnity insurance.
To know more about current NHR updates, see our article here.
What we offer
Those that benefited from NHR prior to 2020 are now becoming acutely interested in how their pension will be taxed after their 10-year period has elapsed.
The same rules will apply to them as to new arrivals. Upon first glance this may appear horrific especially when the higher rate band of income tax (48%) is relatively easily reached however all is not lost. It is possible to apply a tax treatment to foreign pensions that computes to tax rates under 10%.
Whilst foreign pensions are not specifically catered for in the Portuguese tax code they do mention guidelines that are applicable and a corresponding course of tax calculation that typically leads to a favourable outcome for foreign retirees. To understand more please get in touch for a personalised consultation. The other potential consideration is whether to potentially move your pension to a Trustee that is well used to members that live outside of the UK or your home country.
Ingenium Financial typically does not move pensions away from the UK due to punitive overseas transfer taxes that were introduced relatively recently.
Other Assets
Aside from tax on pensions, consideration should be given to other assets which should also be reviewed. It may well be so that a PCIB would work well in parallel with your pension to reduce taxes overall and completely protect you from what might be considered a seriously ‘cold shower’ after the expiry of your NHR 10-year period.
NHR 2.0
A new, significantly more limited version focused heavily on scientific research and innovation (IFICI) replaced the original NHR, excluding most foreign retirees. The given name to this popular sometimes causes confusion in that is not a right to residency per se, more a tax concession that is granted to qualifying, new tax residents.
Frequently Asked Questions
Tax efficient savings and investments
How to pay less tax in Portugal?
For expats living in Portugal there are some tax saving solutions available for those who have ability to invest lump sum cash savings to generate future income.
The solutions tend to be what are known as Portuguese Compliant Investment Bonds. Can be introduced to you by an appropriately licenced Financial Adviser.
The solutions are fully allowable to all residents of Portugal and are compliant with the Portuguese tax code.
What is a Portuguese Compliant Investment Bond (PCIB)?
A tax efficient savings and investment wrapper approved by Portuguese IRS for use by residents of Portugal.
Owners can benefit from tax free growth and reduced level tax on income.
Need full explanation and advice prior to establishment.
How can an expat invest in Portugal?
Expats can invest in Portugal through regulated financial institutions using structures that allow access to both Portuguese and international investments.
Common options include bank investment accounts, brokerage platforms, and insurance-based investment structures such as Portuguese-compliant bonds (PCIBs). The most suitable option depends on residency status, tax situation, investment goals, and whether the individual plans to remain in Portugal long term.
It is important for expats to consider Portuguese tax rules, reporting obligations, and cross-border implications before investing.
Can I manage a PCIB myself?
No, the financial regulator requires the providers of PCIBs to insist on the appointment of an appropriate Financial adviser.
The FA will explain some of the most complex features of the PCIB and ensure that it is well managed going forward. The investment portfolio held within a PCIB can be created and managed in several different ways to suit the client’s needs. To ensure that the FA provided to you comes under the highest levels of scrutiny and protection, seek an adviser who works directly under a MiFID II licence.
If you are a resident of Portugal you may want to seek an adviser based in Portugal who is familiar with local taxation and for potential ease of communication.
What are the available tax-efficient saving structures for residents and expats in Portugal?
Tax-efficient saving structures in Portugal typically include insurance-based solutions, retirement plans, and carefully structured investment portfolios.
For residents and expats, Portuguese-compliant insurance bonds (PCIBs) are often used to defer taxation on investment growth, simplify reporting, and allow flexible investment management. Other options may include pension solutions (PPRs) or standard investment accounts, depending on personal circumstances.
Does a PCIB only allow investments inside Portugal?
No, a PCIB allows investments in a globally based portfolio, subject to minor constraints.
The investment strategy spreads capital across various asset classes, regions and currencies to reduce risk and enhance potential returns. A PCIB is typically located in either Ireland or Luxembourg.
As both countries are located within the EU, the PCIBs are fully compliant with Portuguese tax law (one of the qualifying criteria).
Sometimes people confuse these structures with golden visa requirements.
Is there a minimum investment amount required to open a PCIB account?
Yes, the minimum cash amount typically is €100,000 or currency equivalent.
There are several providers, and the percentage fee basis will typically reduce the more you invest.
Although the investment is made whilst being resident in Portugal, other major currencies aside from Euro can be used or held in the investment, such as USD and GBP.
Fees, licence, qualification
What is the average cost of using a financial adviser?
Using a financial adviser could cost approximately 1 percent p.a. There are also charges applicable to the use of a financial solution.
Only a MiFID II adviser is required to provide you with explicit, clear and transparent information in relation to your expected fees and charges. Some of the applicable fees provide added insurance relating to the advice you receive and indemnify your investment.
How should you choose a financial adviser as an expat?
Look for an adviser who is qualified to UK level 4 or EU level 5 or equivalent and works under a MiFID II licence.
An adviser with knowledge of both Portugal and your original home country would be advantageous.
Seek an adviser experienced in cross-border advice.
How to check the credentials of a financial planner?
You should familiarise yourself with the credentials of the individual providing the advice to you and understand how they are licensed and regulated.
You can engage with a Chartered adviser who works under a MiFID II licence.
Cross-border planning
Do I need a specialist in cross-border financial planning when living in Portugal?
Yes, cross-border financial planning is important for individuals with assets, income, or pensions in more than one country.
Do UK tax rules still apply after moving to Portugal?
It depends on assets that you are holding in the UK.
You could become tax resident in Portugal and therefore UK taxation is not applicable except in the case of UK property.
Special attention could be given to UK inheritance tax.