I have been reading the articles posted on the forum regarding Portuguese residency with great interest and I’m still confused. I purchased an apartment and intend to use it for a few weeks holiday each year, the rest of the time I was hoping to rent it to cover the running costs.

My lawyer in Portugal has suggested that I should apply for Portuguese residency, as it would cut my capital gains tax should I decide to sell the property in the future and not purchase another Portuguese property. But according to information posted on the forum, I would have to be spending 180 days or more in Portugal to apply and would also have to complete a yearly tax return declaring my world-wide income. Is the information my lawyer is providing me wrong?

Regards,

Joe

Joe, if what you say your lawyer has told you is accurate I am amazed. You show an address in Scotland. Presuming you live there, work there and pay taxes there how can you become tax resident in Portugal?

So what are the rules regarding residency in Portugal. Would it be better for me to be paid my pension in Portugal or the UK ?? Are you better off with regard to capital gains etc ??

Gary

PS Still have 9 years till I retire !!!

He informed me that you can still have residency but not tax residency. You are only resident for tax when you spend more than 180 days in Portugal, and as I only spend a few weeks each year I would not be taxed in Portugal on my world-wide income.

Joe

Joe, I think you will find that if you renting and creating an income on a Portuguese property, you will have to complete a tax return in Portugal. I stand corrected here. Get in touch with Sovereign and query it with them. All the best

I think the lawyer has got his wires crossed a bit.

Holding a Residency Card would normally mean that you are also a tax resident here. Indeed on renewal of authorisation of residency the Foreign Service may ask to see your tax return. However simply holding an authorisation to reside here is insufficient to assist with capital gains alone. From the point of view of being able to avoid, defer or minimise a tax on a capital gain made on the sale of a property you must prove to the tax department that the sale involved your principal place of residence, that is the address they have you registered at and that you are a taxpayer.

I can't see how a person living in the UK or elsewhere can legitimately claim to be tax resident here and it sounds a dangerous thing to attempt bearing in mind the exchange of information provisions between EU tax authorities.

My initial impresion was he was trying to have me spend some more money with him by suggesting he applied for residency for me. But I'll take on board the feebck.

Joe

Be careful with these people who offer to apply for residency for you. OUr elderley neighbours paid approx 1000 euros for a lady in Lagoa (no names mentined) to apply for their residency - in reality, it only costs a few euros per person. She saw them coming. Also do not trust the lawyers, ours was given Power of Attorney to complete our purchase when we were in the UK and he gave the builder 80,000 euros of our money in cash. I now know that this is the norm in Portugal when you sell a property but he could have asked !

P.S. The answer would have been NO WAY.

Hi Joe,

I think Mike is correct. I am in a similar position to you and have to file a tax return in Portugal declaring all rental income on my holiday home. There are , of course, allowable expenses which can be used to offset any potential tax liability that arises.

The net tax payable in Portugal should also be declared on your UK tax return, there is an agreement between the nations so you don't pay twice!

Finally, and importantly, you must advise the UK tax authority which of your homes is your primary residence. This is for capital gains tax, you cannot change your mind on a whim, so be sure to get advice.