# National insurance whilst living in Portugal



## HowieB

Hi. I’ve recently moved to Portugal and need some advice on national insurance. I am going to apply to a non habitual resident so I can receive 20% flat rate tax on my income so I will not be paying tax in the UK. However, I would ideally like to retain my state pension in the uk by continuing to contribute to national insurance. Is it correct that I can choose whether to pay seguranca social here and continue to pay voluntary contributions to national insurance at home? I don't really want to pay in both countries. Any advice would be welcome.


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## canoeman

If your not working or earning an income in Portugal then you don't need to pay Social Security, you might need to Register for a number but that's the same as having to pay contributions.

Some further advice from HMRC here http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf but you should take advice from someone competent with *both countries* Tax & Social Security, too often advice from local accounts is inaccurate


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## HowieB

Thanks for that. Yeah I've found that accountants and even people kin the tax office don't know what they're talking about. Quite frustrating. So I will be working for a UK company but doing that work here in Portugal and being taxed on the income here too, I assume, with the NHR status. Does that class as not earning an income here?


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## canoeman

That should read *NOT* the same as having to pay contributions, you should also check your understanding of Non Habitual Scheme, from your comment I don't think you have it correct


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## HowieB

Could you explain what it is I don't have correct about the NHR scheme? I've read up as much as I could on it. Any help understanding all this would be really useful.


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## canoeman

Depends a bit on how your employed and if your seconded to work in Portugal, as a "posted worker" max of 2 years you continue to pay tax & NI in UK and are covered for health by UK, if it's your decision to live in Portugal as a Resident but work for a UK Company then totally different ball game, generally the laws of the country where you live apply to property and other taxes including worldwide income, and the country where you work laws cover employment and income tax, in your situation you need good advice but the NHRS does not necessarily mean that you will not be taxed in UK.


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## HowieB

I work for a UK company but live in portugal. I'm not posted here, I just chose to come here and intend to live here for the foreseeable future. As far as I was aware that means I pay no tax in the UK, only here at the 20% flat rate. I;m finding it very difficult to get consistent advice anywhere, even this is contrary to what I'd head before. Is there a good source of info about this stuff because even calling HMRC I get different answers.


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## canoeman

where posting at same time so missing questions/answers, this is a relatively clear info pack
http://www.pwc.pt/pt/fiscalidade/imagens/pwc_europe_best_kept_secret.pdf
These are some of points to bear in mind, but first you have to establish where your salary is earned and/or paid.

Non habitual residents will be subject to a reduced 20% PIT rate both on salaries and business and professional income of a Portuguese source arising from high added value activities of a scientific, artistic or technical nature

Non habitual residents will be exempt 
from PIT on salaries of a non 
Portuguese source if such salaries were subject to tax in the country of source under an existing Double Tax Treaty or, if no Tax Treaty exists, were subject to tax in another jurisdiction and are not considered as Portuguese source income under domestic rules.


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## HowieB

Yeah, i already read throughout that. My understanding is that there is a distinction between passive and active income. Passive being untaxed in both places and active being taxed only in the country where you live. In my case that would mean being tax in portugal at the 20% rate since I work as a designer. I don't know, maybe I'm wrong but thats the understanding i had of it.


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## canoeman

Not sure what you mean by Passive? If by passive you mean interest or pensions? then it can be subject to tax in any country your considered a tax Resident if your refering to some type of e-economy forget it.

Re read the note I extracted non Portuguese earnings are exempt if there's a dual tax treaty in place and you've paid tax in that country, if not and income is derived in Portugal then yes you could probably under NHRS pay 20% but you'd have to pay Portuguese A/S contributions.

you really should talk to one of the big firms like PWC


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## rhody

So HowieB, did you manage to get non-habitual resident status and how much did the accountant charge for you for the paperwork and advice?

Cheers,
rhody


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## HowieB

Hi. Yeah I realised it wasn't of any use to me and that accountants are changing a lot for their service to do this, I think ?3k+. It is something you can do yourself too, you don't actually need them to do the papers for you. If you find a nice person at the camera they could help you with it. Hope that helps


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## canoeman

Camera won't help they are the Administrative Offices for area noting to do with Tax, NHRC


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## HowieB

Very true, I mean the tax office.


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## rhody

So why was it not worth it? I am in a similar position, I work in software design and development for the German subsidiary of an American company and my US boss doesn't care where I work from as long as I have a good Internet connection. 

I haven't approached my company yet about it but I would prefer to keep my contract in Germany and be paid there and take advantage of the NHR status by living in Portugal. I don't need a visa for P either as I am also an EU citizen. I am guessing the German subsidiary won't care either as long as I don't ask them for anything special like being paid with income taxes taken out so I could pay the 20% or 23.5% in Portugal. They moan whenever anything changes from the norm. We do have a Portuguese office but I don't want to give up my contract in Germany to switch to a Portuguese one either.


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## TonyJ1

Don´t forget - there are social security issues as well


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## rhody

Ah right, so I guess an NHR gets treated as self-employed and has to pay 24.5% on top of the 23.5% income tax? If that's the case, then NHR is definitely not a huge advantage. Germany all in (income tax, social security, health insurance, old-age care) is about 50% too for singles and even less for married with one income. And I believe P doesn't include old-age care. The brochures from PWC make it sound like paradise. Maybe for Danish people paying 65%.


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## HowieB

I maybe wrong here, I found it very difficult to get the proper info, but I don't think the kind of work you are doing would quality for that tax rate. It has to be passive income from what I understand. Passive income being things like rent earned from a property you own in another country or stock market investments you have. These would be elidgable for the low tax rate. If it is your job then you have to pay normal tax, hence this being aimed at wealthy retirees. I am in a very similar position to you and this was what I eventually discovered, I could be wrong, if I am please let me know.


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## rhody

That's probably the crux of the matter as it is not 100% clear and thus the need for high priced accountants. According to some of the literature I have read (such as http://www.theworldlawgroup.com/Document.asp?MODE=DOWNLOAD&DocID=1673) it specifically mentions:
_Income from employment earned abroad will be exempt from Portuguese taxation as long as it is actually taxed in the source state, in accordance with an applicable double taxation agreement made between Portugal and this state. Alternatively, in the absence of such an agreement, the income will be exempt if it is taxed in the source state and may not be deemed earned in Portugal in accordance with the rules set out in the PIT Code._.

As I understand it, Germany and the UK both have tax treaties with Portugal. As I can only speak about Germany, they generally tax residents and sometimes non-residents based on the "center of life" principal. So even if you live abroad, having a house or apartment available to you or kids in school will make you tax liable in Germany. Like most states, Germany will gladly tax you if you don't specifically ask not to be taxed. You have to de-register your residency and in my case ask my employer to stop deducting income tax and social security so that I could pay the NHR rate in P. Something I think they would balk at without reducing my compensation. 

I can see it working better if one could remain employed and taxable in Germany along with all of the social benefits one has to pay for but actually live in Portugal with a bit lower cost of living (but not in every area) and much more sunshine and close proximity to the ocean. One would then have the ability to call on the German state for benefits in the case of loss of employment and should be able to maintain contributions to social security and health insurance. Health insurance is another issue being that one can use EHIC to get care in Portugal but this is something I have not fully investigated and I fear that spending too much time outside of Germany may make EHIC not an option but I don't know how they would know. As long as P grants the NHR and says they won't tax me for 10 years then I could live with being paid and taxed in Germany and maintaining my contract there which is an advantage because of the strong labor laws that favor the employee.


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## HowieB

The info I got said that I would always be taxed in the UK on my UK earnings. The double taxation agreement would just stop Portugal taxing again. I couldn't actually get out of being taxed in the UK as far as I could tell. So the 20% rate you can get on normal income would just be on income you earn in Portugal which I assume you wouldn't get any because you have full time employment in Germany. What I leanred was it sounds way better than it is unless you're retired and have external investments. Again, I could be wrong, just passing ok what I learned.


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## rhody

Cheers HowieB, that's how I figured it too. What was unclear was the part about income earned in Portugal. If one is sitting in their Algarve villa developing software, is that earning income in Portugal? But I assume like you that being paid and taxed in Germany means Portugal doesn't get anything but a person with a good salary who buys a house and/or is buying services and paying VAT in P is what they are interested in.


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## TonyJ1

The rules are briefly as follows:

Foreign income earned by the qualifying professions (such as engineers, it professionals, artists) are either not subject to further tax if it has been taxed in the foreign country in accordance with the rules of a double taxation treaty entered into by Portugal and the source country of that income. If there is no double taxation treaty, then it would not be subject to further tax in Portugal if it has been taxed in the foreign country (also have to watch out for black listed countries). If the professional is independent, generally the double taxation treaties provide that the residence country has the right to taxation (in this case Portugal) but not always). If it is in the nature of a salary, then the rules of the double taxation treaty would have to be looked as well, but generally if the taxpayer is not resident in the foreign country i.e. spends more than 183 days in the tax year that country, and he spends more than 183 days in the tax year in Portugal, than Portugal would have the right to taxation. Off course, each treaty has to be carefully considered.
As to the social security aspect, a worker can be 'seconded' to Portugal and carry on contributing to the home country, if there is a social security treaty - again the wording of the treaty has to be considered. 
The 23 odd % payable in Portugal, is by the employer - the employee is subject to 11% contribution.

The rules applicable to pensions, and other income are different from the above rules. Anyhow, the legislation is available in Portuguese, and can be stuck into a translator and the gist of obtained - see article 81 of the Portuguese tax code for individual taxpayers.
In short, if the income stream is complicated - better to get a professional assessment.


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## GoingOut

Hi all - apologies for resurrecting an old thread but it hit upon similarities to my situation.

I currently work via a UK LTD company and pay myself a salary but take most of the income in dividends. I have worked in Spain and Poland for the past few years but looking at taking up residence in Portugal and the NHR scheme.

From the above I would guess that my salary would be taxed @ 20%, but the dividends would be tax free: "The NHR regime represents a major step forward in making Portugal a tax free jurisdiction for individuals in receipt of qualifying non-resident income. Qualifying income includes pension, dividend, royalty and interest income."

I would continue to make voluntary NIC contribution to the UK - do I also need to make contributions in Portugal or do I require private medical insurance?

HowieB - how did you get on? I would be interested in your story, successes and pitfalls. I'll be arriving in Portugal in October and need to get my backside in gear.


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## ccm47

Hi Going Out, You need very competent professional advice.
The way I read your post is that you own the limited company and thus will have established a place of trading for the company for the time you have worked in those countries. Your company should be paying its share of tax, and complying with the regulations in the country in which you are working, Obviously if you have employees in the UK then at least you have retained some rights to continue to use a UK address for the company, if no other employees??? 
As a director you are an employed earner and should be paying social security costs in full. 
Payment of voluntary contributions in the UK is not intended to remove obligations from a company.


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## Robert Taylor

What is the difference between a Portuguese TIN number and FISCAL number. I am attempting to purchase Medal insurance and have the TIN number. They said no go without the fiscal number.


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## RichardHenshall

_Numéro Identificação Fiscal_ (NIF) is translated by Google as Tax Identification Number. Is that where you got your 'TIN' number from?

It would more commonly be known as your Fiscal Number if you're an English speaker.


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## Robert Taylor

I provided the insurance company my TIN number ..not what they wanted. They specified fiscal number instead . Apparently 2 different items


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## RichardHenshall

If your 'TIN' number isn't an unhelpful translation, I don't know what it is. If it was issued by the Portuguese tax authorities and has 9 digits (usually presented as xxx xxx xxx) you could try re-branding it as your Fiscal Number and offering that to Medal.


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## Robert Taylor

Thank you but they requested both sets of numbers. Maybe I am running into a clerk with an attitude. I just contacted two Portuguese tax representatives for clarification.
Thank you


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## RichardHenshall

I realise now that the TIN may identify you in the States to the US IRS. Ignoring the unhelpful Google translation used, have a look at https://www.portaldocidadao.pt/en/w...umero-de-identificacao-fiscal-pessoa-singular for some guidance on how to obtain a Portuguese Fiscal Number (NIF). It may be helpful to also look at the original Portuguese version without translation to get the correct abbreviations/acronyms.

If you've already got your Portuguese NIF, it may be that they want both your Portuguese and American numbers?


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