Notes from the Algave

The economy is starting to move slowly in the Algarve.  If you look at the number of beautiful Lagos villas that are being built you ll get a feel for the progress.  A similar project is occurring with Albufeira apartments that will be rented in time.  Surprisingly for the Algarve, the dependence on the British pound has diminished.   The Portuguese took a bold taxation move a few years ago and this has resulted in a number of European pension recipients come to Portugal to live.  A lot are at the high end of the financial scale and more and more luxurious Algarve villas are being built.  Accessibility to the Algarve has played as huge part many airlines including Ryanair and Easyjet fly regularly to Faro

Following pressure from the Finnish government and public opinion in the Scandinavian country, Helsinki has announced a deal which will allow it to come after expat pensioners, who are residing in Portugal, for income tax payments from which they were previously exempt. The idea behind this exemption was reportedly conceived following pressure from interest groups in Sweden, and following Portugal’s agreement to waive income tax on pensions, the legislation effectively spread to cover all EU member states and any other nations with which Portugal shares tax agreements.
Scandinavian and French nationals have been particularly swift in taking Portugal up on its offer of tax exemption, resulting from the application of Article 81 of the IRS Code.
Figures from the Finance Ministry recently showed that while people taking up the beneficial tax treatment in Portugal failed to exceed a hundred a year in the first four years following its introduction, this number exceeded ten a day in 2015 and continues to rise. The special regime for pensioners allows an exemption of a foreign occupational pension so long as its beneficiary qualifies for a special tax regime for non-habitual residents.
One of the requirements is that the pensioner be a non-habitual resident for Portuguese income tax purposes, while the second is that the pension is an occupational pension, paid from a foreign source.
Should these requirements be met, the pension will not be taxed in Portugal and depending on the provisions of the applicable tax treaty, it is also usually non-taxable in the source country for the duration of residence in Portugal.
The idea behind this exemption was reportedly conceived following pressure from interest groups in Sweden, and following Portugal’s agreement to waive income tax on pensions, the legislation effectively spread to cover all EU member states and any other nations with which Portugal shares tax agreements.

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