Now that the UK has officially left the EU, we have been granted a little wiggle room to breathe via the Brexit transition period which is now in motion and set to run until 31 December 2020.
But the clock is ticking for UK expats to secure safe protection of residence , healthcare and pensions in Portugal.
What actually changed for UK nationals living in the EU and do we have any certainty for 2021?
Brexit: What changed on 31 January?
Not much really.
The UK is still being treated as an EU member state meaning its bound by EU rules And yes the UK is still paying into the EU budget. Once the Withdrawal Agreement kicked in the UK no longer had decision-making or voting rights.
On the plus side, the UK has gained freedom to negotiate trade deals with other countries for 2021 and beyond. Which is great news for some businesses and for many of our expats who operate in other EU countries.
For UK nationals living in the EU during the transition period, freedom of movement will be retained and the right to access the same benefits as EU citizens will change very little during the transition period.
There are some exceptions.
In France, for example, one change to previous rights is that UK nationals are now no longer able to vote or stand in local elections.
For UK expats in Portugal it is firmly business as usual with British tourists and residents still being actively welcomed and reassured.
And any UK national lawfully settled in Portugal before the transition deadline can lock in a lifetime of citizens rights under the UK/EU Withdrawal Agreement. These benefits are protected for as long as you are a resident in that country.
Withdrawal Agreement and residency in Portugal
Proof of residence
To be covered by the Withdrawal Agreement, you must be settled in Portugal before 31 December 2020 and apply for updated residence documents before 30 June 2021 at your local Camara.
The Agreement allows a six-month buffer for applications but we advise to register as soon as possible to avoid potential disruption. If you already hold permanent residence, there is no cost to convert your paperwork.
Partners and dependent family members are able to join settled residents in an EU country, so long as the relationship is established before 31 December 2020.
Expiry of residency rights
You will lose permanent residency status (and associated EU rights) if you are absent from that country for five consecutive years or more.
Onward freedom of movement
The citizens’ rights only apply to the country you are resident in before the transition period ends. This means that, after 2020, you cannot automatically work or reside in another EU state; instead you may have to apply as a ‘third country’ (non-EU/EEA) national.
What does the Withdrawal Agreement say about healthcare?
If you are already a resident in Portugal your entitlement to healthcare will continue. If you hold residency documents, bring those to your local health clinic (Centro do saude) and register with them if you have not done so already.
The European Health Insurance Card (EHIC) will also provide free emergency care while travelling in other EU states but UK-issued EHICs will only remain valid up to the end of the transition period.
Withdrawal Agreement : pensions
UK retirees settled in the EU will continue to receive yearly cost-of-living increases to their State Pension payments. This will apply even if you start claiming your pension after 2020, so long as you meet the conditions to qualify for a UK State Pension.
Brexit should not affect how you can withdraw or transfer other UK pensions. A 25% ‘overseas transfer charge’ (effectively an exit tax) on pension transfers outside the EU/ EEA is applied by the UK. This could be easily extended once the UK is no longer bound by EU freedom of movement of capital, so there may be limited time to transfer without penalties.
How NHR Portugal Changes will affect pensions
Next month is set to bring a big change to Portugal’s highly generous non-habitual residence (NHR) scheme. From 31 March 2020, new residents will no longer be able to receive tax-free UK pension income under NHR.
The Portuguese Budget, due to be confirmed in March, includes a 10% tax on foreign pension income for new non-habitual residents.
But if you already have NHR status or apply before 31 March, you should come under existing rules for the rest of your ten-year NHR period.
As a result, there are just weeks left to secure full NHR benefits in Portugal.
If you’re thinking about moving permanently to Portugal and would like to discuss your plans, please book a call with one of our advisors as soon as possible.
What happens after the transition period?
When the transition period expires on 31 December 2020, automatic freedom of movement will end. UK nationals will need to make a new application to apply to live or work within the EU.
While it will still be possible to acquire residency…
…expect the process to be much less straightforward than the simplicity of today’s. Future processes could be particularly complicated if the UK fails to secure new agreements with EU countries in time.
Under current rules for non-EU/EEA nationals, each individual needs to be able to demonstrate a minimum income to qualify for residence in an EU country, at least equivalent to the national minimum wage.
This could prove especially difficult for retiree expatriates, although there are potential ways to restructure assets to meet the requirements.
If you’re thinking about moving permanently to Portugal and would like to discuss the best way to restructure assets to meet the requirements of the new rules arrange a call today.
Brexit beyond 2020
While the Withdrawal Agreement allows for an extension to the transition period (12 or 24 months), current Brexit legislation has ruled this out.
2021 still offers three possible scenarios:
- the UK has ratified a new trade deal with the EU and the new relationship begins;
- the transition period is extended as negotiations continue;
- the UK cuts trade ties with the EU (no-deal).
The ongoing uncertainty set to continue into 2021 offers a window of certainty if you act this year.
If you take steps to come under the protection of the Withdrawal Agreement, you will have locked in a lifetime of rights in your adopted EU country, whatever the Brexit outcome.
To make sure you are making the most of other opportunities within this closing window – and ensure your tax and financial arrangements are positioned for post-Brexit world
Book a call with us today