Portuguese UK residents and UK Portugal property owners in tax representative countdown
Tens of thousands of Portuguese residents in the United Kingdom, including kids, and British citizens with second homes in Portugal will have to appoint a tax representative over the next 90 days or risk a fine of €7,500.
This requirement is as a consequence of Britain’s exit from the EU, but has caught citizens and professionals by surprise because the issue has not been communicated by consulates or the Secretary of State for the Portuguese Communities.
The ruling will also affect thousands of UK citizens who own property in Portugal and who, if their property taxes are not paid and up-to-date, could risk having their properties seized and sold by public auction if they fall behind on tax payments and don’t have a lawyer.
Furthermore, some 15,000 UK residents who have second homes in Portugal may not have yet appointed a tax representative in Portugal and legally need to do so.
According to the online news source ECO, some Portuguese citizens who have been living in the UK for years complain that there has been a lack of information and say that appointing a third party as a tax representative is absurd at a time when there are tax reporting incentives to file taxes remotely via the Internet.
“It does not make sense in a digital world whereby the tax authorities notify tax payers via e-mail. Moreover, I have always received letters from the tax authorities here at home in the United Kingdom,” one Portuguese tax payer told the Lusa news agency.
This expense of hiring a lawyer, which can range from €50 to €600 a year, can be multiplied by aggregate family members, since all of them must have a tax identification number issued automatically with their citizens card, including minors.
“The new situation for Portuguese residents in the United Kingdom could lead to situations of abuse. The vast majority of people who have a tax identification number and who do not have tax matters in Portugal, should not have to pay for a tax representative,” says lawyer Sandra Carito who has legal business in both countries.
In her opinion, the amount charged should be adjusted to meet the needs of the client, it being normal to pay more in cases that require a specific services, or less if the person has no property or dealings in Portugal other than simply having a bank account.
The failure to appoint a tax representative, in addition to a fine that could vary between €75 and €7,500, means that they cannot complain or appeal against a tax order, with very real consequences.
“If someone (who has a property in Portugal) forgets to pay their property tax (IMI) they could face having their property seized and sold publicly without even being notified because they don’t have a tax representative. The bank can also block their account until the situation is remedied,” says lawyer Miguel Reis.
The appointment of a tax representative is mandatory for NIF tax number holders whose tax residence is in another country, or who are absent from Portuguese territory for more than six months, but it is optional for residents in EU or European Economic Space countries, including Norway, Iceland and Lichtenstein.
The Portuguese Government estimates that the Portuguese community in the UK is about 400,000 people, taking into account that around €375,000 are registered at Portuguese consular offices that have a UK address on their citizens card.
The situation, aimed at preventing tax fraud, will also affect thousands of British citizens with second residences in Portugal.
“Since the UK is no longer part of the European Economic Space, administrative cooperation in terms of tax no longer applies. It is important to mention that a tax representative is necessary to ensure a permanent contact between the tax authorities and tax payers,” the Portuguese tax authorities told Lusa.
Sandra Carito thinks that UK citizens who have a property in Portugal, but are not based in Portugal for tax reasons, will complain because they will have to pay a tax representative simply to receive proof of payment letters from the tax authorities.
“When a UK resident moves overseas, they only have a duty to inform the HMRC (the UK tax authorities) and can do so directly without having to appoint a tax representative.”
Christina Hippisley, who heads the Portuguese Chamber of Commerce in the UK which regularly runs property investment events aimed at UK nationals looking to buy a second home or retire to Portugal, said that the issue had been made clear, and that many British property owners of second homes in Portugal now had accountants, especially those who had bought to rent out.
However, she said that some second home property owners in resorts or condominiums, or those who have properties solely for their own use, may yet to have met their new legal and fiscal obligations, with an estimated 15,000 British property owners with a second home in Portugal liable to be affected