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- I am worried that the government may stop recognizing my marriage legally and I may leave the country.
- I wanted to know more about the tax implications of moving to a new country, so I asked the experts.
- They said I need to plan ahead and learn what makes each potential new home different for taxpayers.
After Donald Trump was elected in November, my wife and I seriously discussed whether we might have to leave the US. We haven’t made specific plans to leave yet, but we do worry that the new administration may take away our rights as a married queer couple. We are not alone: Many people are starting to think about leaving the country. The Washington Post reports that some high-profile Trump targets have even prepared bags.
The finances of being an expat are complex. I spoke with José Calejo Guerra, a tax lawyer and partner at CCSL Advogados in Lisbon, and Bruno Afonso and Anne Loehmer, co-founders of Taxes in Portugal. Their knowledge is specific to Portugal, but the obstacles on the US side are the same no matter where you go.
Here is their advice for US citizens considering immigrating.
Beware of assumptions and misunderstandings
“From a purely tax standpoint, it’s important to be aware that there are a lot of misconceptions,” Guerra said. The taxes you owe on a move to Portugal can add up very quickly, even if you earn no income in Portugal. Planning can help you avoid unexpected tax bills.
While you may pay higher taxes, your overall living expenses may be lower than in the US. “It’s important to understand that tax rates may be higher in Portugal, but the cost of living is much lower,” said Loehmer, herself an immigrant from Germany.
Guerra also cautioned, “You have to be aware of the conceptual differences.” The same words can mean different things in different places. “There are many concepts that do not exist in Portugal,” he said. For example, capital gains and pensions have different meanings, there are no tax-free retirement accounts and trusts are not recognized under Portuguese law.
US citizens living abroad have reporting obligations to the US government. “There’s a lot of compliance that comes with moving abroad,” Guerra said. He noted that penalties for non-compliance can be very high; some US banks will not work with expats due to onerous requirements.
“It’s very important to have tax discussions before you move to Portugal,” Guerra said, because once you’re there, there are things you can’t do and you could be stuck paying higher taxes. Ideally, he starts working with clients a year before a planned move.
Understand and prepare for the tax implications of your move
You will need a NIF number – a Portuguese tax ID number – to get a visa, but not a social security number. “Many clients are contacting us to get a social security number,” Loehmer said, “which you don’t need in Portugal unless you’re employed or self-employed.” It is essential to understand the requirements to make your move successful.
Do not assume that you are still a US citizen and pay US taxes, you will have no tax liability in your new country. Alfonso recommends getting a tax consultation as soon as you start considering a move.
“In Portugal, the tax system is based on residency, which is different from the US,” he said. Your worldwide income will be subject to Portuguese tax. You can get a tax credit so that you are not subject to double taxation, but you still have to file taxes in Portugal as well as in the US, which can be complex.
Loehmer added that it is important to sell your home in the US before becoming a resident of Portugal to avoid paying taxes on the sale in both countries.
“Speaking as a tax attorney from a tax perspective,” Guerra says, “don’t assume things are going to be the way they are in your country.”
Spend time at your destination before leaving the US for good
It is essential to spend more than a week or two in your destination before moving. In Portugal, Loehmer recommends visiting the country’s many cultures and microclimates before deciding where to settle.
“Portugal is a great country with many good things,” said Alfonso. But “you have to come with a mentality that you have to adapt”. Loehmer added a cue from an Irish immigrant: “I don’t want to be an immigrant. I want to be an immigrant.” Plan to make your new place your home.
