British operators anticipate up to a 600% increase in reservations for the Algarve and Madeira. During the upcoming summer tourist season, Turismo de Portugal expects to resume 700 weekly air routes with the United Kingdom that existed before the spread of Covid19. In the Algarve, Easyjet announced another 175 thousand seats for the coming months. British Airways is proposing new routes to Newcastle, Manchester and Edinburgh in addition to online agencies that are growing bookings in triple digits since the UK announcement.
The United Kingdom leaves the European student exchange programme, Erasmus, as a consequence of the post-Brexit trade agreement reached with the European Union. Prime Minister Boris Johnson announced a replacement programme, named after British mathematician, Alan Turing.
The commercial agreement established between the United Kingdom and the European Union will allow the mobility of European and British citizens for short stays (maximum 90 days consecutively). As of yet, there is still no agreement for longer stays. The agreement does not cover the right of UK nationals to enter (with or without a visa) to work, reside or remain in the EU, nor vice versa.
Even in the year of the pandemic, many British nationals continue to seek out Portugal as a popular destination. The UK government has multiplied notices to UK citizens who reside in Portugal to have their documentation in order by 31 December. Currently, there are more than 50,000 British nationals residing in Portugal, ranking Portugal in sixth place behind Spain, Ireland, France, Germany and Italy. Official data in 2019 from the Portuguese Immigration and Borders Service (SEF) indicated there were 34,358 UK citizens officially residents in Portugal. SEF officials explain that from January to October 2020, a further 6,469 new Residency Permits were issued to UK nationals for a total of 40,827 current residents. Since 2016, the year of the Brexit referendum, 19,384 Britons registered in Portugal. Up until last October, the increase reached 111%.
The British embassy in Lisbon recognises that there are, in fact, many more Britons living in Portugal than the official figures would indicate. By the end of the year, many more are expected to register officially with SEF. What is certain is that now all will have to deal with the new bureaucracy necessary to remain in the country in January 2021 and beyond. At this point, the embassy also does not have definitive record of the number of British nationals who have already completed all the necessary steps.
At the top of the concerns of the British in Portugal are upcoming changes. One of the reasons for the aggressive advertising campaign to ask British citizens to take care of all necessary documentation is also due to Portuguese bureaucracy. There may be delays in scheduling services as well as problems in accessing services due to the pandemic. The embassy clarifies that Portugal does not oblige UK nationals to apply for a new residency status according to the current agreement. However, as there are many who are still unregistered, it is important that everyone needs to become compliant to protect their rights after the transition period at the end of December. In October, the embassy, in partnership with SEF, launched a joint campaign asking the British living in Portugal to register where they reside by the end of the year.
You can drive in Portugal with a UK driving licence until it expires. You must register your address in Portugal with IMT services within 60 days of settling in Portugal. The IMT online (Instituto da Mobilidade e dos Transportes – IMT) allows for the exchange of a UK licence for a Portuguese one. Even if you are unable to affect the exchange immediately, British citizens have 90 days after 1 January, so no road test should be necessary.
Another concern is access to the Portuguese National Health System. Coverage may be dependent on your residency status. If British nationals are registered as residents in Portugal, they should have full access to the Portuguese National Health Service (Serviço Nacional de Saúde, SNS).
British embassies are no longer involved if a passport expires. Renewal is now carried out online. The embassy warns that British citizens living in Portugal that they must have a valid passport after 1 January 2021.
The British Government has posted a dedicated website called “Living in Portugal” (gov.uk/livinginportugal or sef.pt/en). The embassy indicates that the Portuguese Government is responsible for implementing the Exit Agreement. British citizens are accountable for ensuring that they have their documentation in order before the end of the transition period.
What is Forced Heirship?
In many Common Law jurisdictions, testators enjoy full freedom to leave their assets to whomever they wish. However, in other countries, this is not the case. Succession laws define given rights for the heirs. Despite the provisions made in a testament, a will can easily be overturned by these protected heirs. This is called Forced Heirship. Continue reading
As reported by the FT, the EU blacklist threatens to expose British overseas interests. If Great Britain abandons the European Union as scheduled, some UK territories may become candidates for possible inclusion in future versions of the “dirty money” list. The Americans are also unhappy with Brussels. The US seems more vexed about which territories appear on the blacklist rather than the practices that resulted in this “naming and shaming”. The deadline to form a majority to block the Blacklist is 12 March. The European Parliament is scheduled to vote its approval for the blacklist in the next week. It is improbable that the initiative can be blocked. Despite backing from France and renewed US pressure, it will be difficult for the UK to muster enough support to stop the update.
Non-Habitual Resident migrants nearly double
Improved conditions and generous tax breaks have attracted more foreigners to Portugal in the last year and a half. The increase in the number of Non-Habitual Residents was 83% over the period, currently totalling 23,767 with NHR status. The rise is mainly from France, Italy and the UK. Emigrated Portuguese nationals are also returning but only account for 6% of the total.
A common situation arises where a UK employee wishes to continue to receive a salary from a British-based company but would prefer to provide the services virtually via the internet while residing in Portugal.
Unfortunately, there are significant obstacles to this type of arrangement:
- As an employee of a UK-based company, you cannot enrol nor make contributions to Social Security (National Insurance) in Portugal.
- If you continue to declare as a UK resident but, in fact, are living and working in Portugal, you will fail to meet the criteria of the UK Statutory Residency test requirements.
- To be employed by your UK company in Portugal, the Company would need to set up a subsidiary or branch office in Portugal. While this is possible, the process involves both initial start-up costs as well as ongoing overhead to the Company. This solution is unlikely to be cost effective for just one employee.
- Once a branch office is in place, Portuguese personal income tax (“IRS”) on a modest salary (€35,000) would be ±25%. In contrast, as a freelancer in Portugal, taxation on a similar amount would be just ±5% in year one, ±7.5% in year 2 and ±10% after that.
- Post Brexit (March 2019?), requirements could become more complicated. While not even insider political negotiators know how Brexit will turn out, there is no reason to expect anything less than a more complex state of affairs for UK individuals wishing to work abroad.
Working as a PT freelance contractor to the UK Company
The best solution to the dilemma is to be a Portuguese-based freelancer, contracting with the UK Company, rather than continuing to work as a UK salaried employee. By being registered as providing “other support services” from Portugal, you will be assessed on just 35% of your gross invoicing to the Company under the Portuguese “Simplified Regime”. Social Security deductions will be made on a similar reduced basis. As already mentioned above, the final tax due should be substantially lower.
The Company should also find this arrangement to be advantageous by eliminating UK National Insurance obligations, thereby lowering overhead. Payment of freelancer invoices can continue to be made to the sole trader’s local UK bank account if so desired.
The Company hires on a project-by-project basis; the freelancer earns more; the Company lowers risk. Shifting to an independent worker status based in Portugal can create a win-win situation for all concerned.