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Michael Koppel
Michael Koppel,
Category: International Tax
Satisfied Customers: 113
Experience:  Senior Tax Associate at Veolia
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What would we need to do to in order get Non Habitual

Customer Question

What would we need to do to in order get Non Habitual Residency in Portugal?
And what are the rules to end our UK tax residency?Context:
Myself and my partner have been living in the UK for years (8 for her, >20 for me). We have a small UK limited company (we’re both directors and shareholders; and I am the only company employee). My partner has a PAYE job. We are both Irish citizens and intend to apply for the British citizenship in a couple of months. If for any reason we're not eligible for the citizenship, we'll probably move countries since both of us can work remotely, and Portugal would be our favourite country to move to. I own a house in the UK, and my partner owns an apartment in Dublin.
Submitted: 2 months ago.
Category: International Tax
Expert:  Michael Koppel replied 2 months ago.

Hi

I am one of the tax experts on JustAnswer and can help you with your query.

In order to qualify for non habitual residency in Portugal you would need to work in a profession that is classed as “high value-added activities”. Here is a link to the latest list of professions that fall within that category, https://www.plmj.com/xms/files/03_Novidades_legislativas/2019/010_outubro/NI_NHR-New_high_valueadded_activities.pdf.

In order to break UK tax residency you would have to be non-resident in line with the Statutory Residency Test (SRT). There are three tests where if you meet any of them you would become automatically non-resident, the ones applicable to you would be whether you spend less than 16 days in the UK in a tax year, or whether you work full time overseas.

Noting for the second one that this would have to apply for a whole UK tax year. But if it didn't apply for the whole first tax year you move but it did for the second you could potentially split the first tax year into a period of UK residency and UK non-residency, based on the date you move.

If you don't meet any of the automatic non-residency tests then you would look at if you meet any of the automatic resident tests, the most prevalent being if you spend more than 183 days in the UK in a tax year.

If you don't meet any of those then you would look at the sufficient ties test which determines your residency position based on a combination of how many ties you have to the UK and how many days you spend here.

The SRT is quite complex but I hope that gives an overview. If you need any further information please let me know.

Customer: replied 2 months ago.
Thanks for the link re “high value-added activities”. Does this apply to foreign sourced income? Neither of us are likely to work to a Portuguese company.My partner would continue working as a full time employee of her UK employer, just remotely; and I'll be employee of our UK limited company. What tax will we be liable for?
Expert:  Michael Koppel replied 2 months ago.

The high value added activities exemption does apply to foreign sourced income, and provides a tax exemption from foreign sourced income.

In terms of UK tax on your employment income, you would only be taxable on your UK workdays if you were working overseas.

However a point worth noting is that Portugal may class your Portuguese workdays, working for a UK company, as Portuguese income.