tax hols

[martin]

yes from 2009 the portugal govt has been offering tax hols for those who move here...erm... but no surprise they make it difficult to get.

see here
http://www.telegraph.co.uk/finance/pers ... he-EU.html

[James Faro]

Another thing that Portugal implemented of which Spain does not, is to have generous inheritance tax allowances bands so that immediate family pay little or no tax unlike Spain or the UK with a whopping 40%.

[biffa]

True! In fact there is NO inheritance tax at all between grandparents, parents and children. There is a 10% Stamp Duty payable outside those relationships - based in the tax department valuation in the case of real estate

[Farol]

True! In fact there is NO inheritance tax at all between grandparents, parents and children. There is a 10% Stamp Duty payable outside those relationships - based in the tax department valuation in the case of real estate

How long do you need to be resident in Portugal to take advantage of the no inheritance tax rules? Do the children also have to be resident in Portugal?

[James Faro]

A rather complicated grey area. If you intend to stay in Portugal on a permanent basis; to expediate that intention you can always declare your intention not returning to the UK by completing Form P85. This makes you formally notify HMRC that you are not returning back to the UK and that can be used alongside with the minimum requirement to stay in Portugal to become domiciled in Portugal. Should you pass away within the minimum stay requirements in Portugal this form can enhance the application of your surviving relatives that you intended for all intents and purposes you were satisfying the requirements prior to your demise. The current requirement is:

* they spend 183 days or more in Portugal in any tax year, or
* they have stayed less than that period but actually live in Portugal or intend to do so (e.g. own a dwelling in Portugal).

In both cases, it is important to note that once an individual becomes Portuguese tax resident, his/her family (i.e. the spouse and dependent children) will also become Portuguese tax residents.

Here is the link to the P85 form. http://www.hmrc.gov.uk/cnr/p85.pdf However, this may affect your rights in the UK to healthcare and benefits etc.

That is why it is ESSENTIAL getting advice from a qualified accountant or lawyer as the law can change at the drop of the hat especially when it comes to inheritance tax for any surviving children.

Here is a good link about the requirements in achieving Portuguese domicility and the factors that can help you: http://www.algarveresident.com/story.asp?ID=39134

By the end of the current British parliament the Conservative government is pledged to make the first million pounds free of inheritance tax. After that various rates can apply. In the current economic climate such a policy would be anathema but in four years time in the UK there will be economic recovery and this policy will be implemented.

There are many well-intentioned helpful people on this website with good correct factual advice but you NEED to see a lawyer or accountant in such matters.

- J

[themoneyman]

from my understanding - unfortunately inheritance tax may go on residence in Portugal and other Euro countries, it goes on domicile in the UK thus unless you shed your British nationality which is not an easy thing, the HMRC will still try to get their pound of flesh!

[James Faro]

When a person passes away his place of domicile is the main contributing factor as regards to inheritance tax. Thus, if a person dies in Country A and that was where he/she lived and was his/her main base, then all property is subject to tax or exemptions of that country A. Therefore any beneficiaries be it children or friends will be subject to Country A's tax laws even if they live in country B, C. D. E of F!

If the beneficiaries are declared exempt from paying little or no inheritance tax they they won't be subject to tax in their own country as there are many Double Taxation treaties especially in the European Union. This prevents being taxed twice which would be manifestly unfair.

Therefore, if a parent in Portugal which was their country of domicile regardless of their nationality, passes away, any property or money passed onto their children(who are in the UK) would be subject to Portuguese tax law which is little or none. Those assets would not be subject to tax in the UK as Portuguese laws take precedence and because there is a UK and Portugal treaty avoiding double taxation.

Of course, like any law that may change but that would be severely unlikely. For a government to do that it would be 100% electoral suicide. By the end of 2015 the British Conservative government will have introduced a one million pounds threshold free of inheritance tax. if the Labour opposition threaten to remove that then they will lose the election in 2015 as NOBODY is going to vote for a party that will land on them a potential huge tax bill!

Always get advice from a lawyer or accountant so that they can advise and alert you in case the law changes.

Cheers - J

[e-richard]

Apologies for minor thread creep:

.. This prevents being taxed twice which would be manifestly unfair...

But that's exactly what IHT is. Its a tax on already taxed income.

[themoneyman]

from experience it is not simple to declare Portuguese domicile for IHT purposes and avoid being deemed domicile in the UK. Residence at death is unfortunately irrelevant when in comes to IHT in the UK. One way is to sell all assets in the UK so that no probate procedures are taken via the UK and thus no IHT is flagged but then this is the choice of the estate as the IHT would technically apply to global assets as well so this avoidance rather than minimisation. This is something that was confirmed to me by quite a few lawyers and accountants in both countries.

[James Faro]

from experience it is not simple to declare Portuguese domicile for IHT purposes and avoid being deemed domicile in the UK. Residence at death is unfortunately irrelevant when in comes to IHT in the UK. One way is to sell all assets in the UK so that no probate procedures are taken via the UK and thus no IHT is flagged but then this is the choice of the estate as the IHT would technically apply to global assets as well so this avoidance rather than minimisation. This is something that was confirmed to me by quite a few lawyers and accountants in both countries.

Yes, you are correct here.If a person is domiciled in Portugal but if he/she has any assets left in the UK, then the UK law applies to the UK assets only. There are two ways to avoid the UK taxman getting his share on UK assets. Sell all the assets and transfer the proceeds to Portugal or transfer the ownership of them to your children or give them a part share. Seven years must pass, then IHT is avoided. With the part share value that presumably would be under the threshold of £650,000 + if the spouse's share is transferred to the partner when he or she passed away.That way the beneficiary will have the first £650,000 free from tax.

Instead of the last Labour Loony government just making £650,000 tax free they complicate things by making it only apply in certain circumstances, just like giving retaining as share of property given to the children. If that happens then the parents cannot 'benefit' from it(ie: staying in the property!). That is something not even Stalin would dream-up!

There is a lot of worry on people about this cruel and deceitful tax. The propoganda spouted by the HMRC is that IHT is a voluntary tax. What they are saying is that it can be avoided only if you make complicated planning beforehand, that is why accountants/lawyers are needed.