The Portuguese Bond is a unit-linked single premium life insurance contract that is invested in a portfolio of assets. It is a form of long-term investment that can secure significant tax benefits in Portugal.
The Portuguese offshore investment bond is designed for individuals who require a tax efficient investment vehicle which meets their changing needs with the potential to secure capital growth and realise those benefits at a time of their choosing.
The policy is not taxable until the bond is surrendered or a withdrawal is made. Surrenders and withdrawals are extremely tax-efficient, as just the capital gains element is subject to tax. The tax rate which is applied to a total or partial surrender depends on how long you have held the policy for.
Offshore Bond Taxation in Portugal
Up yo Year 4
28% tax on gains only
Between 5 & 8 Years
22.4% tax on gains only
After 8 years
11.2% tax on gains only
Please see an example of how a withdrawal works:
The Key Benefits of Portuguese Compliant Bonds are as follows:
Able to benefit from a favourable tax treatment of life policies in Portugal. No tax is payable until the policy is surrendered or a withdrawal is made. When this happens, tax is only due on capital gains in the value of the policy.
Ease of Succession Planning. The ability to transfer your wealth in a tax efficient manner to your nominated beneficiaries.
Life insurance premiums are excluded from stamp duty and VAT in Portugal.
There is no VAT to pay on fees and charges applied to the policy either as the insurance company is based in Ireland.
Death payments to beneficiaries also fall out of the scope of Portuguese stamp tax (Imposto do Selo.)
The policy can be pledged as security for a loan should you require liquidity.
The policy is portable so you can convert to a UK compliant bond should you return to the UK. There is a life cover optionality to ensure it becomes portable without the need for an endorsement to comply with UK tax law.
You are able to use segmentation as an effective way of mitigating tax if you were to return to the UK.
Policyholder can change the nominated beneficiaries at any point in time provided they are not appointed on an irrevocable basis.
Insurance is easy to set up compared to other more complex cross-border vehicles such as SIFs, SICAVs, SPFs or trusts.
Detailed tax reports covering capital gains, dividends or interest is not required as the entirety of the investment portfolio benefits from ross roll-up of gains for tax purposes.
Whether you are living in Portugal already or moving to Portugal from the UK, we strongly recommend you download and read our Portuguese Bond guide which tells you everything you need to know about tax on compliant offshore bonds in Portugal.
Speak directly to a locally based, professionally qualified, independent financial advisor about your expat tax planning requirements in Portugal by contacting us on Tel: +44 207 998 0570 or email firstname.lastname@example.org