Low-Tax Countries in Europe Better than Portugal

Summary

The video discusses Portugal's NHR tax incentive, a 10-year program offering reduced tax rates for newcomers, which may not be ideal for high earners or millionaires. It compares various European tax incentives, including lump sum programs in Italy and Greece, and highlights the importance of considering tax planning, business structuring, and lifestyle factors when choosing a tax haven. The video also touches on the potential for citizenship and the trade-offs between tax savings and the complexity of tax systems in different countries.

Takeaways

• 🌐 Portugal's NHR (Non-Habitual Resident) tax incentive is a 10-year program for individuals who have not lived in Portugal recently, offering lower tax rates or exemptions on certain types of income and investment.
• 💼 For high earners or business owners, the NHR may not be as advantageous, especially if they can achieve lower tax rates through proper tax planning in other jurisdictions.
• 🏦 Andrew Henderson, founder of Nomad Capitalist, suggests that incorporating a business in certain European countries can lead to single-digit tax rates with proper structuring and planning.
• 📚 The speaker emphasizes that tax planning is crucial in Portugal, likening it to Swiss cheese with many holes, indicating the need for detailed strategies to take advantage of the incentives.
• 🚫 Portugal has a 'Black List' of jurisdictions where incorporating a business could lead to higher tax rates due to penalties, which may not be ideal for those with existing businesses elsewhere.
• 🏠 The script discusses the importance of considering not just the financial aspects but also the lifestyle, freedom, and potential for citizenship when choosing a tax incentive program.
• 💰 High earners making more than a couple of million dollars a year may find Portugal's tax incentives less competitive compared to other European countries with lump sum or non-dom programs.
• 🏡 Lifestyle factors such as language, cultural integration, and the availability of Western comforts are important considerations when deciding where to live and work.
• 📈 There is a break-even point in earnings where the benefits of Portugal's NHR program may not outweigh the costs and complexities of maintaining a business there.
• 🌍 The script encourages considering other European tax incentive programs and even looking beyond Europe for the best overall package of financial benefits, lifestyle, and freedom.
• 📝 The process of obtaining citizenship and the associated requirements, such as language learning and residency periods, are significant factors in the decision-making process for high earners and business owners.

Q & A

What is Portugal's NHR tax incentive?

Portugal's NHR (Non-Habitual Residents) tax incentive is a 10-year tax program for individuals who have not lived in Portugal before or recently, offering dramatically lower tax rates or even no tax on certain types of income and investment.

Who might not benefit from the NHR tax incentive?

High earners or millionaires may not find the NHR tax incentive as advantageous, especially if their income primarily comes from a salary, as the benefits are more significant for those with business or investment income.

What is the potential tax rate for business owners under the NHR program?

Business owners under the NHR program can potentially have tax rates in the single digits if they structure their business properly and follow specific rules.

What is the role of Nomad Capitalist?

Nomad Capitalist is a boutique consulting firm founded by Andrew Henderson that helps entrepreneurs and investors legally optimize their tax situation, lifestyle, and citizenship options.

Why might someone choose not to use companies in other jurisdictions to reduce their taxes while in Portugal?

Some individuals in Portugal may believe they cannot use companies in other jurisdictions to reduce their taxes due to the NHR program's specific requirements and the complexity of tax planning with Portugal's tax incentives.

What are some alternative tax incentives in Europe?

Alternative tax incentives in Europe include Italy's 100,000 Euro lump sum tax, Greece's similar program, Switzerland's more expensive option, and programs in Malta, Cyprus, and Estonia.

How does the tax situation in Portugal compare to other European countries?

Portugal's tax situation may not be as competitive for high earners compared to other European countries with lump sum or non-dom programs, which could result in paying more tax.

What factors should be considered when deciding to live in Europe for tax purposes?

Factors to consider include the complexity of the tax structure, the actual tax cost, lifestyle preferences, freedom, and the potential for obtaining citizenship.

What is the 'Black List' in Portugal and how does it affect businesses?

Portugal's 'Black List' refers to certain jurisdictions where businesses cannot be incorporated without facing penalty rates. This affects businesses set up in places like the UAE, Hong Kong, or the U.S., which are often on the blacklist.

Why might the NHR program be less appealing for high earners?

For high earners, the NHR program might be less appealing due to the increased complexity of tax planning, the need for more audit procedures, and the potential for higher ongoing effort and costs.

What is the impact of the tax planning process on businesses incorporated outside of Portugal?

Businesses incorporated outside of Portugal may face penalty rates if they are on the country's Black List. This could lead to higher tax costs and the need for restructuring the business to comply with Portuguese tax incentives.

How does the potential for citizenship influence the decision to live in a European country?

The potential for citizenship can be a significant factor, as some countries like Portugal offer more flexible and faster citizenship processes, which can be an added benefit for those willing to invest time in living in the country.

What are the considerations for businesses that are not based in the cloud and have operations in other countries?

Businesses with operations in other countries may need to consider the impact of restructuring to comply with the tax incentives of a European country like Portugal, which could affect their tax efficiency in their home country.

Outlines

00:00

🌍 Portugal's NHR Tax Incentive: Pros and Cons for High Earners

The first paragraph introduces Portugal's NHR (Non-Habitual Resident) tax incentive, which offers a 10-year tax break for new residents. It highlights that while the program can significantly reduce tax rates, including to single digits for some business owners, it may not be advantageous for everyone, particularly high earners or millionaires. Andrew Henderson, founder of Nomad Capitalist, explains that tax planning is crucial and that incorporating a business in other European jurisdictions could be more beneficial, depending on individual circumstances. The paragraph also touches on the complexity of using the NHR system and the potential for lower tax rates with proper structuring, but warns of the 'blacklist' which restricts certain jurisdictions for business incorporation to benefit from the NHR program.

05:02

🏦 Tax Incentives and Lifestyle Considerations in Europe

The second paragraph delves into the financial and lifestyle implications of choosing a tax jurisdiction in Europe. It discusses the trade-offs between the NHR program in Portugal and other European tax incentives, such as Italy's lump sum tax, Greece's similar program, and the more costly options in Switzerland. The paragraph emphasizes the importance of considering the complexity of tax structures, ongoing maintenance costs, and the potential for citizenship when choosing a country to reside in. It also raises the question of whether Europe is the best place to live and work, given the various tax incentives available globally, and suggests that the decision should be based on an individual's income, tax rate, lifestyle preferences, and willingness to learn a new language for citizenship purposes.

Keywords

💡NHR Tax Incentive

The NHR (Non-Habitual Resident) Tax Incentive is a program offered by Portugal to attract foreign individuals by providing a reduced tax rate for a period of 10 years. It is a central theme of the video, as it discusses how this incentive can be advantageous for certain income types, especially for those with investment income. The video mentions that while the NHR program is well-known, it may not be the best option for high earners or those with certain business structures.

💡Tax Planning

Tax planning refers to the strategy of arranging one's financial affairs to minimize tax liabilities. In the context of the video, tax planning is crucial for individuals considering Portugal's NHR program, as it involves structuring one's business and income in a way that takes full advantage of the tax benefits offered. The video suggests that proper tax planning can lead to significantly lower tax rates, sometimes even in the single digits.

💡Single-Digit Tax Rates

Single-digit tax rates refer to tax rates that are less than 10%. The video highlights that with proper tax planning and structuring, it's possible to achieve such low tax rates in Portugal, which can be very attractive for certain types of income earners. This is contrasted with other European countries that may offer different tax incentives or structures.

💡Lump Sum Taxation

Lump sum taxation is a system where an individual pays a fixed amount of tax regardless of their actual income. The video mentions Italy as an example of a country that offers a lump sum tax program, which can be an alternative to Portugal's NHR program for certain individuals, especially those looking for a simpler tax structure.

💡Non-Dom Programs

Non-Dom (Non-Domiciled) Programs are tax schemes that allow residents to be taxed on a 'remittance basis,' meaning they are only taxed on income and gains arising in the country if they are remitted to the country. The video discusses how such programs, available in countries like the UK, can be compared to Portugal's NHR for individuals considering their tax residence.

💡Tax Residency

Tax residency is the status of an individual or a business for tax purposes, which determines the jurisdiction in which they are taxed. The video explains that becoming a tax resident in Portugal under the NHR program can have implications for how one's global income is taxed and that this status should be carefully considered when planning one's tax strategy.

💡Blacklist

In the context of the video, a 'blacklist' refers to a list of countries or jurisdictions that are deemed unfavorable for tax purposes by Portugal. The video discusses how having a business incorporated in a blacklisted country can lead to higher tax rates or penalties, which is a factor to consider when evaluating the NHR program.

💡Citizenship

Citizenship in this video refers to the legal status of a person that links them to a country and grants them certain rights and privileges. The video contrasts Portugal's citizenship requirements with those of other countries, noting that Portugal may offer a faster path to citizenship for those who meet certain criteria, which can be an attractive feature for some individuals.

💡Freedom

Freedom in the video is discussed in terms of personal and financial autonomy. It relates to the flexibility and control an individual has over their lifestyle, business operations, and tax obligations. The video suggests that while Portugal offers certain freedoms, such as a potentially faster path to citizenship, other countries might offer different types of freedom, such as less complex tax structures or more lenient residency requirements.

💡Lifestyle

Lifestyle in the video refers to the quality of life and living conditions in a country, including factors like language, culture, social amenities, and overall comfort. The video suggests that Portugal offers a good lifestyle for many, with a friendly environment and Western comforts, but it also prompts individuals to consider whether the lifestyle aligns with their personal preferences and needs.

Highlights

Portugal's NHR tax incentive offers a 10-year tax break for newcomers, potentially reducing tax rates to single digits.

For high earners or millionaires, the NHR may not be the most advantageous tax deal.

The NHR system can be particularly beneficial for those with investment income rather than salary.

Tax planning is crucial when utilizing Portugal's NHR to avoid being penalized by the 'Swiss cheese' of tax incentives.

Some businesses can be incorporated in other European jurisdictions to reduce taxes while living in Portugal.

Italy and Greece offer lump sum tax programs, providing an alternative to Portugal's NHR.

Switzerland and Malta have different tax structures that may be more suitable for certain individuals.

Estonia's corporate system allows for tax payment only when money is distributed, which may not be ideal for all businesses.

The cost of taxes in Portugal compared to other European countries should be weighed against the benefits of the NHR.

Portugal's NHR might be less competitive for individuals earning more than a couple of million dollars a year.

The complexity of Portugal's tax structure and the associated administrative costs may outweigh the benefits for high earners.

Citizenship opportunities and the ease of obtaining them should be considered when choosing a tax jurisdiction.

Portugal offers a faster path to citizenship compared to other countries like Ireland, which requires more time and potentially learning a new language.

The lifestyle, language requirements, and overall freedom in Portugal should be factored into the decision-making process.

For businesses already established, moving to comply with Portugal's tax structure may not always be feasible.

There's a break-even point in the low seven figures where other European countries may offer better tax deals than Portugal.

Less well-marketed programs in countries like Italy, Ireland, and Cyprus should also be considered for tax optimization.

The decision to move to Europe for tax benefits should also take into account the overall lifestyle, freedom, and citizenship opportunities.

Transcripts

Portugal's nhr tax incentive is one of

the best known tax incentives in the

world right now and yet if you're a

millionaire or you're a high earner it

may not be the best deal for you I'm

going to run down a number of different

considerations and tell you how to

choose the best tax incentive in Europe

[Music]

so if you're not familiar with

Portugal's nhr system it's basically a

10-year tax incentive for people who

have not lived in Portugal before or

recently you can go there you can get

dramatically lower rates and in some

cases you don't have to pay anything at

all on many different types of income

and investment if you have a salary

that's not going to be quite as

advantageous but if you're running a

business many people don't even know

that you can get rates down into the

single digits and so it's definitely one

to consider but it's not for everyone if

it's your first time here I'm Andrew

Henderson founder of nomad capitalist

we're a boat T consulting firm that

helps seven and eight figure

entrepreneurs and investors legally go

where you're treated best from lowering

your taxes to improving your lifestyle

to having options with things like

second citizenship you never can have

too many options in a crazy world as we

have today you can learn more at

nomadcapitalist.com so a lot of folks

who are living in Portugal think that

they cannot use companies in other

jurisdictions to reduce their taxes and

this is where the NHL gets a little bit

dicey because I'm not giving you tax

advice here and everyone's situation is

different of course so I don't want to

speak too specifically but generically

uh there are people depending on how you

run your business depending on who's

running the business the business can be

incorporated somewhere else in Europe

and you can do the proper tax planning

there must be tax planning with Portugal

as I've said it's the Swiss cheese of

tax incentives that you have to have

planning but you can potentially pay tax

rates in the single digits if you

structure things properly and if you

follow some rules I told you I had a

friend who's living in Portugal who

thought of his company uh had to be

paying like 25 tax I'm like that's not

what you have to do but you have to

follow some systems so you can get your

tax rate down to

you know somewhere in the mid single

digits however then you look at okay

what are my other options in Europe

right I can go to Italy if I'm single I

can pay 100 000 Euros lump sum Greece

has a similar program with some more you

know Hoops to jump through Switzerland

it's going to cost me more depending on

why citizenship is it cost me a lot more

um you've got non-dumb countries I have

a Malta Cyprus uh in Europe that you can

take advantage of right for some people

not most you can take advantage of

estonia's corporate system

um where you just basically pay when the

money is distributed probably not good

for most businesses but occasionally is

a good deal and so when you start to

compare hey if I make you know three

million dollars in Portugal considering

the dollar in the Euro are pretty much

at par now uh hey I'm gonna pay 50 more

tax than I would living in Italy or

living you know somewhere else I might

pay 75 more tax than I would living in

Ireland where I have more control right

where I'm either paying a flat amount or

I'm controlling how much tax I pay based

on a remittance model right and so if

you spend most of what you earn then

Portugal may be better

if you make less than 2 million euros

poor children may be better but people I

think think that because Portugal has

this very popular nhr tax program that's

the only option and what I want you to

know is you've got again lump sum

programs non-dumb programs available to

you what I would also consider is do I

want to live in Europe at all and so

obviously if I can live in a country

like Malaysia instead of my company the

UAE I can just potentially have a zero

zero zero tax system Europe is never

going to be that way Europe is generally

going to say hey again pay us a hundred

thousand a year make all you want hey

only pay us on the money that you bring

into the country and then so you control

what it costs you to live which is why

again if you're if you're living on

dividends from a company that's that

Portugal allows you to have your

business Incorporated in that can be

better okay and so the other challenges

I see in Portugal is number one with

their Black List where there's certain

places your business can't be

incorporated someone like myself who

moved there we have companies set up in

places like the UAE Hong Kong the U.S

that would generally be on Portugal's

Blacklist and so

that means that I'm going to pay a

penalty rate I don't want to restructure

my entire business to move there so if

you're just starting out and you have

the ability to structure your business

any way you want and you want to go to

this more complicated structuring and

you're willing to pay a single digit

rate and you're going to follow some

rules then Portugal could work but again

if you're going to pay five or six

percent and you're gonna have to go

through in those jurisdictions that are

not blacklisted you're gonna have to go

through more audit procedures you have

to provide more paperwork there's going

to be more ongoing effort that's going

to have a tall that's going to have a

Time cost that's going to have an actual

cost that could be unappealing right and

so

what I look at is how much money am I

making and what's my tax rate going to

be in a non-drum jurisdiction in a lump

sum jurisdiction in a place like

Portugal it has an exemption okay now I

don't necessarily look at the time frame

because in 10 years who of us knows

where we're going to be living right in

10 years you know when they start

charging you the the normal taxes you

run to the next place right because the

lump sums don't always last forever the

non-doms can eventually uh go away so if

you want to live in Europe you have to

accept that you know you might be moving

around every 10 years if your soul goal

is reducing taxes right so the other

Factor then is

um you know again how much money am I

making and what's my rate each of those

different jurisdictions if you're making

more than a couple million you know

dollars a year you're probably going to

find Portugal to not be as competitive

again you're going to find things like

certain capital gains certain incomes

not treated as well as they would be in

one of those other types of

jurisdictions and so you want to analyze

that a lot of folks who have different

kinds of incomes who have different

kinds of gains are not going to be

treated as well in a country like

Portugal on top of the fact that again

you've got to work with a more limited

list of resources than you wouldn't

let's say in Italy okay where you have

more flexibility where the company is

set up right in Italy system you want to

have your company in the UAE free zone

you can and so now you've got you know

lower tax costs and you've got a lower

ongoing maintenance cost because there's

really no audit work to do in most of

the free zones right but so besides the

financials and besides the actual effort

in doing this you have to ask yourself

if I'm living in Portugal long enough to

be deemed a tax resident is that more

free if I'm looking at Freedom right we

talk about Freedom finance and lifestyle

is Portugal more free than another

country in the European Union I don't

think Portugal is terrible I don't know

that it's also that much different than

other countries that have tax incentives

so that's probably a push what's the

lifestyle okay in Portugal it was in

Lisbon Riesling everyone speaks English

people are friendly it's not the most

developed place in the world but it has

a lot of Western Comforts if you're

looking for you know shopping malls in

every corner you're not going to have

that as you would in let's say you know

Asia or or in Dubai or what have you but

you've got a lot of you know nice places

Americans are going there and they're

really enjoying it so on freedom you've

got to make a determination on lifestyle

you've got to make a determination on

citizenship which to me is an extra

benefit of living somewhere if you're

going to put in the time to where you're

a tax resident and you're actually going

to spend part of your life in a country

can't I get citizenship and so that

regard Portugal is going to be more

flexible and so if you're making you

know a million dollars a year there may

be Portugal's a better deal and you

won't have that much work potentially

for your company to go through the

Audits and deal with the hassles of

being in the whitelisted jurisdictions

Portugal has if you make more than that

if you're making three million dollars a

year and say hey you know what I'd

rather pay a bit more in Portugal

because I can get citizenship more

easily if you're willing to learn

conversational Portuguese you're going

to have to spend a little bit less time

in Portugal than you would let's say

Ireland to become naturalized right so

Ireland they speak English you don't

have to learn a new language to become

naturalized but they're going to require

if you want citizenship in the same

five-year residence period to spend more

time substantially more time in the

country you're not going to be doing

much traveling outside of Ireland in

Iowa not being in the Schengen area

right they know every time you leave

Ireland right I'm not saying you know

cut but I'm saying you know certainly

Portugal you've got a bit more

flexibility but you've got to learn the

language countries like Italy right

you're not going to get citizenship in

five years but you're gonna get it in 10

years so they're more flexible but it's

a longer period of time and again you're

going to learn some conversational

Italian so you have to learn if you're

going to go to Europe what I would look

at is what's the complexity of the tax

structure Portugal's gonna be more

complex especially for high earners

what's the actual cost well do that

complexity Portugal is going to cost

more there's a break-even point

somewhere in the low seven figures where

you'd be better off going somewhere else

right and so then you want to look at

well if I'm going to live somewhere

what's the lifestyle what's the freedom

that's up to you to factor in we talked

to people about that that we work with

all the time but what's the citizenship

right am I willing to learn the language

have been talking to more folks recently

that are a little bit older no we're not

we're not looking to learn a language

right and their their businesses are

very successful and their businesses in

other countries may not work as well

with Portugal structure by the way even

in the United States it may require

someone restructuring to where you may

have to in some cases make your business

if it's overseas all right so let's say

you're leaving behind a business in the

US there may be sometimes when you need

to make that less tax efficient for U.S

purposes in order to comply with what's

happening in Portugal and so if that's

the case then that's a strike against it

right

um because not everyone is moving a

business that is living in the cloud

essentially to anywhere in the world

some people still have businesses in

other countries and that may not always

work with Portugal but the citizenship

is faster uh is a bit more flexible but

doesn't require a language so these are

the things that you have to think about

what I want you to know is okay programs

that aren't as well marketed right you

don't hear that much about Italy in

comparison at least I don't in the

Western World you don't hear about as

much about

Ireland or Cyprus you hear a decent

about my Malta but malta's program I

think people find it to be very

confusing right look at all these

different programs in Europe and then

consider whether Europe is only the

place to be

and so these are the factors I'm not

convinced that a Malta or Cyprus gives

citizenship quite as easily as a country

like Portugal but I think it's

theoretically possible to get there and

so this is what you're looking at when

you're figuring out hey I'm moving my

business can my business be moved

overseas at all or am I leaving it

behind how does it affect a blacklist in

a European country which wouldn't exist

in most of the parts of the world when

I'm going and taking advantage of a tax

incentive and what's my actual money

getting paid and so if you follow those

criteria a lot of folks just aren't

going to work out Portugal again the

breaking point for me is low seven

figures uh especially if you've already

got your citizenship covered somewhere

else