As an expat in Europe, relocating to a new country opens opportunities to perk up your investment portfolio. Portugal, in particular, offers expats attractive tax benefits through investment and savings products, such as the Portuguese Investment Bond. This unique product provides a tax-efficient vehicle to grow wealth while enjoying the Portuguese expatriate lifestyle.
What is the Portuguese Investment Bond, and How Does It Work?
The Portuguese Investment Bond (PIB) is a single premium life insurance contract invested in a diversified portfolio of assets. Designed specifically for Portuguese residents, it enables tax-efficient wealth accumulation over an investor's chosen timeframe.
Functionally, the PIB works much akin to traditional government or corporate bonds. Investors loan their money to be invested until the desired maturity. However, one of the biggest draws of this bond is the favourable tax treatment upon withdrawal. Rather than being subject to Portugal's standard 28% rate on investment income, earnings from the Portuguese Investment Bond are taxed at just 11.2%. That's a big saving.
Is The Portuguese Investment Bond a Good Choice for Expats?
The PIB offers a raft of benefits that expats in Portugal can take advantage of:
Tax Efficiency
Unquestionably, the primary advantage of the Portuguese Investment Bond is the ability to legally minimise tax liability on investment earnings. This allows expats living in the country to preserve more of their hard-earned wealth. It pays to keep your investment tied for 8+ years to reap the biggest tax benefits.
Tax Deferral
Adding to the tax efficiency, no tax whatsoever is due until the bond is wholly or partially surrendered. This valuable deferral benefit enables the invested capital to compound growth for years or decades before taxation for a beefy return.
Easy Succession Planning
Bondholders can nominate beneficiaries to receive the investment proceeds in a tax-efficient manner upon the holder's passing. Crucially, these beneficiary details are amendable anytime, and death benefits transferred are exempt from Portuguese stamp duty.
No VAT on Charges
There is no VAT payable on the bond's annual fees and administrative charges. This maximises the portion of the investment retained for growth.
Portable Bond
For expats who may eventually relocate from Portugal, the investment bond offers flexibility. It can be converted into a UK-compliant variant, ensuring continuous tax efficiency regardless of future geographical changes.
The Bottom Line
The Portuguese Investment Bond can be a worthy investment option for expats residing in Portugal. The tax-efficient benefits coupled with a set-it-and-forget-it investment style can be quite appealing. But it's not for everyone. Contact us for a no-obligation consultation to find out if it fits into your long-term wealth strategy and investment portfolio.