EU hits out at Portugal for its lenient expat pension tax laws

Published:  8 Mar at 6 PM
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Favourite UK retiree destination Portugal is in the EU’s sights for its lenient expat pension tax laws.

The EU’s war with retirement tax havens is now focused on Portugal’s generous expat tax laws, some of the most lenient in the entire European Union. The first shot fired across the country’s bows came from Swedish Finance Minister Magdalena Andersson, who said retirees should choose Portugal for its green wine and climate, not for its tax avoidance policies.

For many years, the country has been the preferred retirement destination for pensioners and expat professionals from across the world. As part of a plan to publicise the Algarve as a European version of Florida, the Portuguese government introduced tax exemptions for all revebue from foreign occupational pensions.

As long as expat pensioners are non-habitual residents and have occupational pensions paid from foreign sources, taxes on the pension income are not demanded. In addition, due to provisions under applicable tax treaties, occupational pensions are normally non-taxeable by the home country during the time retirees are actually in Portugal. As a result, qualifying pensioners pay zero tax on their pension incomes.

A recent survey named Portugal as the second-most popular retirement haven for British expats. Its cost of living is comparatively cheap and property costs far less than in the UK or France. As a result, the British expat community is the third largest in Europe and especially popular with those who’ve built up a sizeable occupational pension.

Unfortunately, EU pressure is now building on Portugal to change its taxation laws, with several other EU member states showing anger at the system. Last year, the Netherlands let loose an unreserved attack on Portugal’s tax regime, saying it created a tax haven in the heart of the European Union. At the same time, Finland secured a tax deal with the Lisbon parliament allowing it to come after expat retirees living in the country for previously exempt income tax payments.

France and Sweden are equally unhappy about the situation, as French and Swedish citizens about to retire overseas have been especially fast in taking up the generous Portuguese offer. Both countries are now attempting to force Portugal to revise its position on pension tax exemptions for retirees.

Source: Portugal News
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