Over the past few decades, Portugal has become one of the prime destinations for UK expats to relocate or retire to, thanks to favourable tax cuts and an enviable climate.
The European country keeps leading the charts for living standards for expats, including security and healthcare.
But as Portugal evolved to accommodate and attract a greater number of foreign nationals, so did the financial advisory landscape.
Gavin Scott, senior partner of Algarve office at Blevins Franks, told International Adviser that the European Savings Tax Directive and the Common Reporting Standard made people realise that “numbered accounts and secrecy are the planning tools of fools and time long past”.
He said that now financial advice is more likely to look at a client’s financial situation as a whole, with a particular focus on succession planning.
“Portugal is a great proposition for expats,” Scott said. “It continually scores highly in polls and surveys for the standard of living including security and health care. Add the weather, a stable political landscape and an extremely attractive tax regime and you have an extremely good, if not unbeatable, proposition.”
The ’10-year tax scheme’
This is because, over the past decade, consecutive governments of different political alignments have not touched the offering available to expats, keeping its tax breaks up and running.
Scott continued: “For over ten years Portugal has offered new arrivers a 10-year tax scheme that now caps income tax on overseas pensions at 10% and provides a tax exemption on certain other sources of overseas income, like interest and dividends – of course the devil is in the detail and you should take expert advice prior to moving.
“This regime has been in place through changes of government from the right, through the middle to the current left as it has provided Portugal with a rich source of immigrants buying property and boosting the local economy with their spending.”
The regime even prompted UK nationals to spend covid-19 lockdown in the country.
“I know of a couple of cases where they have decided to stay on and make Portugal their tax base and home,” Scott said. “The Algarve in particular has benefited from a very low infection rate as well as a high degree of compliance with social distancing and mask wearing throughout the pandemic.
“This has enhanced people’s perception of the Algarve as a safe place to live with a lot of space and an abundance of fresh air.”
Enquiries
Unsurprisingly, many expats’ plans to relocate were stopped altogether in March due to the pandemic, but enquiries seem to have picked back up since, Scott claims.
“The phone stopped ringing in March, but by the time the summer arrived British resolve kicked in and people intending to move here realised that, with Brexit on the horizon, they would need to get on with making their plans.
“A lot of our new clients come to us from our online presence such as our website for tax downloads or social media for articles and updates.
“As a result, we’ve spent a lot more time on the phone this year rather than face to face but momentum has returned so strongly that we expect to onboard around 60% of this year’s new clients in the last two months of the year.
“I project new client acquisition will probably finish around 20% up on 2019.”
Number of advisers could shrink further
Despite the great interest shown by Brits in relocating to Portugal, Scott believes there isn’t much “healthy competition” in terms of financial advice.
He said: “Blevins Franks are one of an extremely small number of advisers that employ only fully UK qualified, registered and regulated advisers with UK tax and pensions specialists capable of providing a full financial, tax and succession planning service.
“Sadly, that number only looks like to decrease with Brexit.
“Blevins Franks is Brexit-ready with an ethos and determination to comply with the highest level of regulatory supervision wherever we provide advice and that will be from local offices in our core countries of Portugal, Spain, France, Cyprus, and Malta.”
Client reviews
One of the issues expats in the EU are currently having to deal with as a side effect of Brexit, is the one regarding UK bank accounts closures.
“That’s been a tricky one as not all UK banks are making the same noises,” Scott said. “Some have written to their clients asking them to make other arrangements and others have done nothing denying that there is a problem when contacted.
“As advisers, we have been using the uncertainty as an opportunity to review our client’s needs and requirements. In many cases, UK bank accounts have been kept open as a convenience rather than a necessity, as their Portuguese or offshore bank can provide all of the services that they require both in Sterling and Euros.
“It’s been a good opportunity to review not just how we use our bank accounts but also the potential consequences of retaining UK ties and connections after we have moved away, specifically with regard to succession and, of course, inheritance tax.”
Specialist advice will be needed
Scott doesn’t believe Brexit will have a negative impact on the European financial advice sector, but British expats will need to carefully consider their situation and turn to specialist professionals once the UK becomes a ‘third country’.
“As they say, the future is bright, nae, extremely bright, for the world of expat advice in Europe.
“It will be even more critical that people planning a move take appropriate and specific advice, prior to that move, as the UK becomes a ‘third country’ and ceases to be a part of the EU.
“Engaging with a cross-border specialist that not only understands the rules in the country you are moving to, and has advisers living there, but the one you are moving from will be critical to getting the appropriate advice.
“That advice is likely to become even more complex thereby ensuring that a growing number of people will require specialist and expert advice.”
