Dividends are the lifeblood of any company, and when you earn them they are taxed in the country where the company that issued them is based. However, if you hold Portuguese residency, you might be able to avoid paying taxes on your dividends in Portugal instead of in your home country, effectively reducing your tax burden by as much as 50%. Here’s how it works!
Where should I open a company?
Whether you’re opening a company in Portugal or live in Portugal and opening a company, you may be interested in having a UK company to produce many benefits. You will have minimal tax rates, you can keep a high-income salary, and enjoy the advantages Portugal has to offer.
Although you might consider opening a company in another country (sometimes for reasons of simplification), we recommend starting with a UK company. It’s easy to do, provides global access, and you’ll find that many opportunities will only be available to companies registered in England. Opting for UK companies makes tax returns simple—most decisions are made at home by yourself. Your business is unlikely to need any legal contact beyond a Portuguese lawyer if required.
What are dividends?
A dividend is the share of a company’s profits, which the company distributes to its shareholders. Dividends are an important source of profit for investors, including individuals who hold common stock in their portfolio, mutual funds that hold stocks as investments and pension funds that buy shares in corporations. Dividends are an attractive investment because they produce reliable income from the companies that are paying them, whether you own one share or thousands.
How do I receive my dividends?
To be precise, you’re operating in the UK and would like to receive funds to a Portuguese account without the bother of exchanging currency; we would suggest either of these two choices:
- From a UK company account, pay to a UK personal account, then transfer to a Portuguese personal account, the only factor being the exchange rate fee.
- Create an account with a British company in both sterling and euros, then shift euros to a Portuguese personal account. The rate of exchange will stay the same and your GPB will stay unaffected. As I mentioned, there would still be a charge from sterling to euros, but it would be minimised.
RHJ Accountants can help you to set up a bank account so that you have a smooth transition to Portugal. Get in touch with us today to learn more.
Do I pay income tax when I receive them?
If you have a UK company and live in Portugal, the dividends will be taxed at 0% as long as you’re a non-UK resident. To receive these tax exemptions, you need to consider if you are able to fulfil the requirements for Non-Habitual Residency (NHR) and our tax advisers can determine this for you. If you would like a complimentary 15-minute discussion with a certified tax professional to discuss your situation and make a plan for paying 0% tax in Portugal, we are here to help!
The only type of tax the company would be required to pay would be corporation tax, which many companies already have to pay, which currently stands at 19%.
Any other advice for me?
When you relocate to Portugal, you will need to become a citizen or resident of the country, so it is helpful to reside within the European Union. In the simplest terms, if you live in Portugal for more than 183 days, you will usually be classified as a tax resident. But of course, if you come to Portugal from a non-EU country, you will need to apply for and receive a visa to stay permanently.
If you would like to move to Portugal, RHJ Accountants have another sister company, RHJ Law, who will help you choose the right visa and we can set up a meeting with our lawyers so you can receive legal help to make the transition.
If you’re considering a move to Portugal, you may be thinking about buying a property, and we can tell you everything you need to know about that here in our other article. Also, we have another article to tell you about the different types of insurance you might want to consider when you move to Portugal to make your transition easier. With all these articles we have, you can either keep reading or arrange a 15-minute phone consultation with our expert team to ask all your questions.
How RHJ Accountants Can Help
We recognise more than ever that individuals and businesses from the UK and other countries may be globally mobile. We aim to make you aware of the tax-efficient opportunities, available tax relief and structure finances for life at home and abroad.
Our international team of specialists operate from offices in the UK and Portugal. We work together synergistically to provide tax efficient solutions to our clients to help them grow their business whilst keeping tax liabilities to a minimum – perfect solution for US expats!