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I'm considering moving to Portugal if the government stops recognizing my marriage. I asked a tax attorney what I need to know.

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The author, Laura McCamy.
  • I'm worried that the government might stop legally recognizing my marriage, and I might 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 should plan ahead and learn what makes any potential new home different for taxpayers.

After Donald Trump was elected in November, my wife and I seriously discussed whether we might need to leave the US. We haven't made specific plans to leave yet, but we worry the new administration could take away our rights as a queer married couple. We are not alone: Many people have begun thinking about moving out of the country. The Washington Post reports that some high-profile Trump targets have even prepared go bags.

The finances of being an expat are complex. I spoke with José Calejo Guerra, a tax attorney and partner at CCSL Advogados in Lisbon, and Bruno Afonso and Anne Loehmer, the co-founders of Taxes in Portugal. Their knowledge is specific to Portugal, but the hurdles on the US side are the same no matter where you go.

Here's their advice for US citizens considering emigration.

Beware of assumptions and misconceptions

"From a purely tax point of view, 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 get very high very fast, even if you don't earn income in Portugal. Planning can help you avoid unexpected tax bills.

While you may pay higher taxes, your overall living expenses could be less than in the US. "It's important to understand the tax rates may be higher in Portugal but the living expenses are much lower," said Loehmer, herself an immigrant from Germany.

Guerra also warned, "You need to be conscious of conceptual differences." The same words can mean different things in different countries. "There are a lot of concepts that don't exist in Portugal," he said. For example, capital gains and pensions have different meanings, there are no tax-free retirement accounts, and trusts aren't recognized under Portuguese law.

American citizens living overseas have reporting obligations to the US government. "There's a lot of compliance that comes with moving abroad," Guerra said. He noted that the penalties for noncompliance can be very high; some US banks won't work with emigres because of the onerous requirements.

"It's very important to have tax discussions before moving to Portugal," Guerra said, because once you're there, there are things you can't do, and you may 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 an NIF number — a Portuguese tax ID number — to get a visa, but not a Social Security number. "A lot of clients are contacting us to get a Social Security number," Loehmer said, "which you do not need in Portugal unless you're employed or self-employed." It's crucial to understand the requirements to make your move successful.

Don't assume because you're still a US citizen and pay US taxes you won't have tax obligations 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 would be subject to Portuguese tax. You can get a tax credit so you're not subject to double taxation, but you still need to file taxes in Portugal as well as the US, which can be complex.

Loehmer added that it's important to sell your house in the US before you become a resident in Portugal to avoid paying taxes on the sale in both places.

"Speaking as a tax lawyer from a tax point of view," says Guerra, "don't assume things are going to be as they are in your home country."

Spend time in your destination before you permanently leave the US

It's crucial to spend more than a week or two in your destination before you move. In Portugal, Loehmer recommends visiting the country's many cultures and microclimates before deciding where to settle down.

"Portugal is a great country with a lot of good things," Alfonso said. But "you need to come with a mentality that you need to adapt." Loehmer added a suggestion from an Irish emigree: "I don't want to be an expat. I want to be an immigrant." Plan to make your new country your home.

Read the original article on Business Insider
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