The United Kingdom has a high tax rate. Compared to European counterparts, the UK’s tax rates are considerably higher. The 2019 study of UHY (Urbach Hacker Young International Limited) suggests that the “UK taxpayers on the same salary would pay a 46.1% tax rate, less than in Ireland, Belgium or the US, but above the European average tax rate of 44.2%”.
The Law in the UK requires its citizens to pay taxes even if they do not reside in the country. Citizens who are burdened by high tax rates seek alternative routes to be exempt from these taxes, at least partially. There are two popular methods for doing so, and they both lead to Portugal Golden Visa:
- The Double Taxation Treaties (DTA),
- Non-Habitual Resident (NHR).
The Double Taxation Agreement (DTA) Method
The Double Taxation Agreements refer to the taxation contracts signed between two countries. These contracts enable citizens to avoid paying taxes on the same income twice. Normally, UK citizens must pay taxes even if they live abroad. Thanks to these DTAs, citizens do not have to pay the same taxes for two different countries. The UK currently has DTAs with more than 130 countries.
Normally, real estate gains, bank interests, dividends, and many other incomes are taxable in both countries of residence. Yet, DTAs eliminate most of these taxes. A resident living in Portugal pays taxes for only the taxable incomes in Portugal. Tax rates in Portugal are significantly lower than in the UK. So, it is a good idea to become a Portuguese resident through the Portugal Golden Visa Program.
Note: The Portugal Golden Visa Program is only available for non-EU citizens. So, the UK citizens must wait until January 1st, 2021. After Brexit’s orientation period is finished, the UK citizens may apply for the Golden Visa.
The Non-Habitual Resident Program (NHR) Method
Portugal’s Non-Habitual Resident Program enables residents to be exempt from their income taxes from another country. The program is effective for ten years. The NHR Program started in 2009. Since its inception, many UK citizens took advantage of the scheme. To be eligible for the program, applicants must either be an EU/EEA/Swiss citizen or a Golden Visa holder.
The UK is about to leave the EU. So, for UK citizens, the Portugal Golden Visa option is a great route. After the Golden Visa is received, it is very easy to apply for the NHR regime. After a successful application to the NHR, the UK citizens are exempt from the following taxes:
- Income on Real Estate
- Capital Gains
- Wealth Tax
- Gifts or Inheritance