As an expat living in Portugal who wants to grow their retirement fund and secure their financial future, Portuguese bonds will stand out as an attractive investment vehicle. Before investing any funds, though, it’s imperative that you familiarise yourself with the product, including its pros and cons.

This quick guide will help you understand the Portugal bond and determine whether it is a suitable addition to your investment strategy.

Portuguese Bonds: At A Glance

Firstly, the eligibility requirements for Portuguese bonds are that you must be a current resident who is planning to remain in the country for at least five (ideally eight) years. Meanwhile, the minimal investment is set to £100,000.

The investment vehicle is a premium life insurance contract designed to secure capital growth over a number of years by investing funds into a portfolio of assets. It works like other bonds and can grow separately from other investments and income streams, making it a convenient solution for those looking to diversify their retirement planning efforts.

Portuguese Bonds: Opportunities

Portugal bonds appeal to a large percentage of the 46,000+ British expats residing in the Algarve and other popular destinations, and it’s not hard to see why. Some of the most attractive features are detailed below:

●     Reduced tax obligations

The most telling benefit of using the Portugal bonds scheme is that the tax rate on any earnings is reduced from 28% to 11.2%. So, for every €1,000 you earn, you will see €888 rather than €720. This happens because the financial vehicle is specifically built with local tax systems in mind

●     Delayed tax payments

In addition to reducing your tax obligations, Portuguese bonds allow you to delay payments as you only pay tax after withdrawing funds and/or surrendering the policy. So, you can avoid paying tax until you have the capital, which also means your portfolio grows faster as no funds are lost annually to tax obligations.

●     Avoid VAT

Another tax advantage is that you will avoid VAT on all fees and charges linked to the policy. Furthermore, it’s a life insurance policy, meaning there is no VAT or stamp duty to pay. Stamp duty is usually 0.8%. So, when you consider the sums invested, this is another significant saving to boost your overall ROIs.

●     Liquidity

The last thing you want is to choose an investment asset that restricts your possibilities elsewhere. However, the Portuguese bonds agreement can be used to secure a loan. While you won’t be looking to withdraw the funds, the capital will work harder for you. This makes it one of the best portfolio additions available in Portugal.

●     Support loved ones

Investments are often used for estate planning purposes, as well as planning for your future. Portuguese bonds can be easily transferred to named beneficiaries following your death in a tax-efficient way. Meanwhile, you can change the nominated beneficiaries with relative ease at any time to protect your family’s future.

●     Flexibility

Finally, unlike many investment vehicles, Portuguese bonds are portable. This allows you to transfer them to a UK-compliant bond scheme should you move back to the UK. For this reason, Portugal bonds have a significant benefit over other products that may leave you feeling forced to remain a resident in the country.

Portuguese Bonds: Risks

As with virtually all investment vehicles and finance products, Portuguese bonds do come with some potential risks. Most notably, the underlying investments could potentially fall in value, thus meaning that the portfolio loses capital. However, this is true with any investment, and this product is designed to hold several assets to mitigate the dangers.

It does also mean having £100,000 invested for several years before you see any ROIs. if you withdraw earlier, perhaps when emigrating from Portugal, the benefits gained from having held this type of investment will be reduced.

You also typically won’t be able to hold individual shares when using Portuguese bonds while working with the wrong advisor could lead to high commission based payments that impact your overall returns.

Portuguese Bonds: Are They Worthwhile?

Ultimately, the decision as to whether Portugal bonds are a worthwhile investment will be influenced by your circumstances. If you only have £100,000 to invest, you might not want to have it all tied up in one product. Likewise, it is possible that you’ll have found better investment opportunities.

Nevertheless, most high net worth expats living in Portugal will benefit greatly from the tax-efficient bonds. To maximise the returns, though, working with a local tax advisor is highly advised.