How will inheritance tax affect you in Portugal?
When you are purchasing property in Portugal, it is very important to make sure you have considered inheritance laws.
Your worldwide estate is incredibly important and protecting this by knowing how inheritance tax can affect this in Portugal is very important. The system in Portugal is different to what you may be used to in the UK, so it is very important to make sure you have spent some time looking into this before you move – and it’s always a good idea to speak to an independent financial advisor who can offer expert guidance on how this may affect you.
General Portuguese inheritance rules
Basic Portuguese law protects immediate relatives (such as children, parents or spouse) from inheritance tax.
Basic Portuguese law protects immediate relatives (such as children, parents or spouse) from inheritance tax.
Regulations state than a minimum of 50% must go to spouse and dependents (although this will be affected by other factors, such as the number of children), unless the will states otherwise. All residents are encouraged to make a will to ensure that their assets go to the right people – especially if they wish to leave anything to a friend or a more distant relative. In this case, tax will need to be paid on anything, but the value of the estate altogether will include any deductions and fees will come out of this. Of course, depending on any significant debts this could mean those inheriting may have to pay.
Legislation
EU legislation now means that you can choose whether you follow the inheritance laws of Portugal or your home country. This means that you can assess all the options available to you before deciding what would suit you best. As with everything tax related, we highly recommend speaking to an independent legal professional to ensure you (and your family) do not lose out.
UK Inheritance Tax
You may well be liable for UK Inheritance Tax even once you are living in Portugal, as this will depend on your domicile status. If you remain domiciled in the UK, UK Inheritance Tax is automatically applied to your worldwide assets, and despite the double taxation treaty, you (or more likely, your beneficiary) may well be taxed in both countries. This is so important to get right, making it prudent for you to find out as much as you can in advance and be aware of all your tax and inheritance liabilities.
Make sure you plan ahead to ensure your funds are not affected by inheritance tax.
Currency planning
As with all financial aspects of a move to Portugal, it is very important to make sure you consider the impact of currency exchange when sending funds from the UK to Portugal. By planning your transfers, you can maximise the value of your estate. Using a currency exchange specialist to send your money internationally, you can take advantage of favourable exchange rates, as well as having access to numerous tools and resources to help you send your funds between Portugal and other countries at the right time for you – especially when the currency markets are volatile. Our partners, Smart Currency Exchange, can help make sure you maximise your funds and minimise your risk – find out how they can help you today.