The Non Habitual Resident law: a Case Study

 

I thought that Börje Forsberg looked tanned and relaxed. Although we had never met before, I assumed that this was because he was now retired to the Algarve. He was quick to confirm my first impressions. By his own admission, he now has a very different lifestyle to the one before his retirement four years ago, all due to the Non Habitual Resident law (NHR law).

We had organised to meet so that Mr. Forsberg, an experienced company director and still active non-executive director, could tell me a little about why he had become a resident of the Algarve, specifically the town of Lagos. In a very personal and genuine way, he was spontaneous in admitting that the death of a close friend to cancer four years ago had made him rethink his life and decide to bring forward plans to seek a change of lifestyle and reduce his “double shift of 30 years” which had taken him to hundreds of international working destinations.

That change included a renewed focus on friends, family, his grandchildren, new challenges and (surprisingly) travelling (but not work-related).

In a structured process often associated with Scandinavian thinking, his research process had included an analysis of Spain, Malta, and France, until settling on Portugal, which he had only visited twice before. After an initial visit to Cascais and the greater Lisbon area, it was Lagos, a city he describes as “genuine” and “not destroyed by tourists”, that he decided to settle, spending on average nine months of every year. Originally from Stockholm, he found that in the area, expatriates mingle easily with locals, and a sense of a normalcy prevails throughout the year (even in the heady summer season).

I assumed that his decision to adopt Lagos and the Algarve as his home involved more than the sea and pool views from his apartment, or the peaceful, balmy afternoons reading a book in the shade of the overhang of the balcony above him. He quickly expanded on the reasons for his choice: “the culture, good food, good wine” (said, it must be added, with just a hint of a smile), all added up to the “perfect” location for him. With a population of just 20,000, even the swollen summer that brought with it probably another 100,000 did not create any significant traffic jams. Perhaps it is time that they “rebuild the old bridge”, he adds as a critical afterthought, referring to the city’s once-popular crossing between the city’s promenade and Meia Praia and which due to structural instability and a lack of funds had ceded its position to a new crossing further upstream.

And, of course, the tax situation. Mr. Forsberg found out about Portugal’s Non Habitual Resident law, which allows new eligible retirees to receive their pensions tax-free in the country. Even though it was not his main motivation, the 57% tax saving was the icing on the cake. Mr. Forsberg is quick to add, though: “don’t move if saving tax is your only reason”, implying of course that his was a weighted decision involving a number of variables. But there is no doubt that for Swedes, “Portugal is the number 1 option” from a tax perspective, better than even Malta which has traditionally been the destination of choice.

True to his promise to himself “to live a completely different life”, he now runs (or jogs) five times a week, plays some tennis, reads and finds time to deal with his approximately 20 daily e-mails (which made me admiring and insanely jealous at the same time, when thinking of my own inbox).

With views over the ocean and of the communal pool in his apartment complex, there could be worse places to retire, I thought. And a 50% tax saving as an added prize…no wonder Mr. Forsberg has already convinced ten of his Swedish friends to join him.