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The Mass Exodus of British Nationals to the Iberian Peninsula Image

The Mass Exodus of British Nationals to the Iberian Peninsula

April 14, 2022

Moving to Portugal under NHR, Spain Visa and Gibraltar Residency – the Tax Benefits Explained


One of the biggest consequences of Brexit for British citizens is the loss of our ability to live, study and travel in the EU wherever we like for as long as we like. Today, strict rules govern residency in the EU – UK nationals can only spend 90 out of every 180 days there unless they obtain a visa.


Increasing numbers of British nationals, however, are still making the move to places such as Spain, Portugal and Gibraltar, despite the challenges involved. We explore why.


Portugal, Spain and Gibraltar: why move there?


From the outset it’s easy to see why these locations attract British expats. Sunny, warm weather, renowned beaches, vibrant cities and cuisines, and welcoming people have long been mainstays of Spain, Portugal and Gibraltar. But making a permanent move to these places also comes with a range of tax benefits – from Portugal’s favourable Non-Habitual Resident program to Gibraltar’s hospitable tax environment and successful post-Brexit strategy, alongside a range of attractive visas in Spain. Here’s what you need to know.


Residency in Portugal – the options


There are several pathways to residency for expats in Portugal.


If you’re planning retirement in Portugal and can show you receive passive income, Portugal’s D7 Visa, known as the Passive Income Visa, is a common option. It’s also suitable for those who receive income from investments or rental properties, and in some cases, it can be approved for those working remotely. Criteria for a D7 Visa includes minimum income requirements (at least €7,620 per year or €11,430 for a couple).


Once you have the D7 Visa you can remain in Portugal for four months, and then obtain a residence permit for one year. This can then be renewed every two years, and eventually after five years you can obtain a permanent residency permit.


The Golden Visa in Portugal (Autorização de Residência para Investimento) achieves residency through investment, usually through purchasing real estate valued at €500,000 or above or €400,000 if the property is located in a low-density area. Recent changes mean that the purchased property now cannot be located in the more popular regions such as Lisbon, Porto or the Algarve to qualify for the Golden Visa. Once you have the Golden Visa you can apply to become a permanent Portuguese resident and gain Portuguese citizenship after five years. It’s an especially good choice for expats looking to travel or spend lengthy amounts of time in the UK as the visa only requires you to spend at least seven days in Portugal in the first year and 14 days in the following two-year periods.


Finally, a D2 Visa is best suited for those establishing a business in the country. This Portugal residence permit is designed for independent professionals, professionals and entrepreneurs. It requires establishment of a company (such as a limited liability company or sole proprietorship) in Portugal.


The benefits of these visas in Portugal are manifold for British nationals. Firstly, it means you have the right to live, work and study in Portugal as well as travel freely within the 26 countries of the European Schengen Area, and the right to live in the EU should you later obtain Portuguese citizenship. Furthermore, once you obtain one of these visas you can then apply for Non-Habitual Resident status (NHR) – a regime that offers significant tax benefits in your first 10 years of residency in Portugal.


Non-Habitual Resident (NHR) program


Application guidelines are strict (you have until the 31 March of the following year to apply for NHR once resident in Portugal) and there are a number of requirements you must fulfil, but if successful NHR status opens up a raft of advantages for British expats in Portugal.


These includes preferential income tax rates if you earn income or are registered as self-employed – a flat tax rate of 20%. Those retiring to Portugal from the UK will find NHR status particularly advantageous – the tax rate on pension income is just 10%, or lower if you hold a QNUPs or QROPS and correctly structure your income benefits.


Foreign sourced income is also exempt from taxation under NHR in Portugal, and there is the possibility for dividends to be tax-free in both Portugal and the UK. This is because it would be deemed foreign sourced income in Portugal and also exempt from taxation in the UK due to the ‘disregarded income’ rules for non-resident UK citizens.


Residency in Spain


Like Portugal, Spain offers a number of resident visas for British nationals that offer an exciting opportunity to establish a new life in this = beautiful country as well as open up the ability to travel visa-free within the rest of Europe. Here’s what you need to know.


Golden Visa in Spain

As with its Portuguese equivalent, this is a way of getting residency in Spain via investment, typically real estate worth €500,000 or more. Again, as it only requires a single visit to Spain every year it’s a good option if you anticipate still spending significant amounts of time in the UK or elsewhere. Permanent right to live in Spain can be achieved after five years, and Spanish citizenship after 10 years.


Non-Lucrative Visa Spain

Like Portugal’s D7 Visa, this is a great option for British expats planning retirement in Spain as to qualify one must receive income passively via pension, investment, rental income or savings. You must demonstrate you have sufficient income for self-sufficiency (a minimum of €27,792.92 per annum) as working in Spain or the UK is not permitted. This residency permit in Spain is valid for one year and can be renewed for two more years and another two-year period following that. You can then apply for permanent residency.


Entrepreneurs Visa and Highly Qualified Professional Visa


The Entrepreneurs Visa is intended for those who aim to establish a pioneering business that promotes the socio-economic development of Spain – these are typically technology companies. The Highly Qualified Professional Visa can only be obtained by employers offering individual employment in Spain.


All of these residency visas offer the opportunity to live, study and work (aside from the Non-Lucrative Visa) in Spain, as well as pathways to Spanish citizenship and the ability to travel in the 26 countries of the Schengen Area. If you’re planning on establishing a new life in Europe then Spain represents an extremely attractive option.



Why move to Gibraltar from the UK?


Due to its small size this British Overseas Territory can sometimes escape consideration as a destination for expats but living in Gibraltar has equal appeal to Spain and Portugal. There’s the obvious – balmy weather, beaches and friendly, English-speaking locals, plus a common legal and education system with the UK and a dynamic economy with high employment – but Gibraltar residency also comes with generous financial benefits.


Prime among this is the benign nature of Gibraltar’s tax environment, which will be of particular attraction to Gibraltar expats with business interests, high-net-worth individuals and wealthy retirees.


Gibraltar residents are not taxed on savings, and there is no VAT, inheritance tax, capital gains tax or wealth taxes. It’s also possible to avoid taxation for income obtained from investments. For those retiring to Gibraltar, pensions in a Gibraltar QROPS (Qualifying Recognised Overseas Pension Scheme) are taxed at just 2.5% on income drawdown. The Rock is also a hospitable place for businesses with 12.5% corporation tax, and employees can also benefit as income taxes in Gibraltar do not exceed a marginal tax rate of 25%, regardless of earnings.


There are also special schemes for skilled high-level executives and high-net-worth individuals. For the former, tax can be capped at £39,940 for the first £160,000 of salary. For high-net-worth individuals it’s possible to obtain a Category 2 tax status that will cap tax liability to the first £105,000 of worldwide taxable income, and Category 2 individuals need only pay a maximum of £37,310 tax per annum regardless of income.


After Brexit


Despite the initial uncertainty over what Brexit would mean for Gibraltar the Rock has forged a confident path in the years since 2016, establishing important agreements and treaties that will boost Gibraltar’s appeal and reputation as a business centre. One example of this is a double tax treaty between the UK and Gibraltar governments. Coming into force in 2020, as well as eliminating double taxation on income and capital gains tax it bolsters Gibraltar’s commitment to tax transparency.


Another development of note is improving tax relations with Spain – historically the source of much discord. A tax agreement that came into force in March 2021 is geared towards improving tax cooperation between the two jurisdictions and establishes rules covering tax residency and double taxation in Spain and Gibraltar.


Perhaps most significant are the continuing discussions between the UK and Spain on free movement of people and goods between Gibraltar and the EU. An agreement was reached at the end of 2020 to avoid the establishment of a hard land border between Gibraltar and Spain and to let Gibraltar become part of the Schengen passport-free travel area. This agreement is not legally binding and negotiations are ongoing, but if ratified into law (Treaty is signed) then Gibraltar’s allure as a destination for British expats will be enhanced even further.


Property in Gibraltar


Property is in constant demand on the Rock, with living space at a premium due to new arrivals and businesses moving to Gibraltar. The market has also experienced some disruption in the earlier post-Brexit years. However, the advent of the new agreement mentioned above has led to strong property pricing and a vibrant property market. Demand is still outstripping supply, but several new developments have been launched in recent years with more to follow, such as the residential and commercial urban district of Victoria Keys, as well as developments such as Euro-City.


The Iberian Peninsula: Full of Possibilities


For Brits looking to move abroad and create a new life in Europe the Iberian Peninsula is replete with potential. Establishing a new, financially prosperous life there is very possible, as long as you carefully plan your relocation and seek the expert advice of qualified financial and wealth management advisors on residency and tax matters before making the leap.


Give us a call today on +44 207 998 0570 or e-mail enquiries@fwm.gi to book your free, no obligation consultation.