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Portugal is seeking to encourage affluent expats to their country by relaxing their tax rules. Under new legislation, the tax authorities have stated that proof of previous residency abroad is not required.
Instead, expats merely need to sign a declaration stating they were previously residents elsewhere. This change in policy will benefit the nomadic expats who move between many countries around the world and therefore have tax affairs that are more complex.
For the last three years, expats have had a flat rate income tax of 20% in addition to an exemption of foreign income in accordance with tax treaty conditions. The rates came with certain conditions.
Expats had to qualify as being high net worth individuals (HNWIs) having been resident in Portugal for at least five years, and needed certification from tax authorities abroad to be presented to the Portuguese Inland Revenue. All overseas income had to be proven to have been taxed before and during their time in Portugal.
Now, one does not have to be an HNWI but instead a high value added workers or self-employed.
Portugal has had a struggling economy like many countries in the euro-zone and will hope the new measures attract enough expats to swell their economy. High unemployment has left the government seeking extra revenue to make up for the short fall in income tax.
As a flat rate of tax, high earners coming to Portugal will pay nothing like the high rates of tax paid in Northern European countries like the U.K. However, the price of living within Portugal has increased according to research conducted by the Post Office Expat Payments Index.