The impact of Brexit on British homeowners in Portugal who have chosen not to adopt resident status – implications for them and Portugal’s economy.

The impact of Brexit will be felt by many across 2021, in particular British citizens who own properties in Portugal but who have chosen not to hold resident status. The impact of Brexit will also be felt by Portugal in many ways but, fundamentally, its economy will bear the brunt.

Before Britain left the European Union on December 31, 2020, British citizens were, as you know, entitled to reside in the EU and its 27 member countries with no restrictions on movement through the Schengen zone. There was also no restriction on the number of days a British citizen could stay in Portugal.

Whilst one of the fundamentals of the EU single market is unrestricted travel throughout the Schengen zone, the UK by leaving the single market and the customs union accepted giving up unrestricted travel.

The withdrawal agreement allows British citizens the right to spend a maximum of 90 days in a 180-day period in EU countries. That’s a total of 90 days whether visiting one, two or multiple EU countries. The new ETIAS scheme will operate visas from 2022 on the 90-day rule.

So non-resident British homeowners in Portugal can now spend a total of six months in a year (two separate periods of three months) at their homes in Portugal by comparison to previously unlimited time they could spend.

Whilst this makes home ownership and investment in Portugal less attractive for many British, it will also have a negative impact on the Portuguese economy that is already suffering due to the pandemic and its impact on tourism short and long term.

British citizens who opted not to be residents
The Portuguese Chamber of Commerce noted in a document published on its website in February 2019 that there were, according to the British Embassy, 35,000 UK citizens in Portugal. The Portuguese SEF said there were 20,000 UK residents in Portugal.

That means whatever definition is applied to the other 15,000 UK citizens, they are best defined as non-resident property owners but not holidaymakers/tourists. So, approximately 57% of Brits are resident and 43% non-resident.

Wikipedia back in 2006 listed a figure of 49,000 British nationals in Portugal including 11,000 living in Portugal for part of the year – those stats were estimates from the Portuguese authorities. The last census in Portugal was conducted in 2011 – at that time, the numbers recorded were 15,774 UK residents, which represented an increase of 92% on the previous census of 2001.

The stats advised by the SEF above are believed to be accurate; likewise, the British Embassy overall numbers of 35,000 British citizens. It’s fair to assume the British make up a high proportion of the higher net worth migrants to Portugal and of considerable financial benefit to Portugal.

Whether these stats have changed in the run up to Brexit is not known, but it’s fair to assume a number of British homeowners will have rejected becoming residents. They have rejected resident status when they understood the obligations they would have to undertake: principally being domiciled in Portugal, filing tax returns and having to give in their UK driving licences to be replaced by a Portuguese licence.

Whilst there are upsides, e.g., free movement in the Schengen zone, that’s not a requirement of all British citizens who are established homeowners in Portugal. There is also preferential tax status, healthcare etc.

The negative impact of the 90-day rule is twofold, firstly on British non-resident property/homeowners and secondly on Portugal’s economy.

The rule the EU/Portugal has adopted for non-residents is to regard UK tourists to Portugal on an equal basis to UK citizens who are homeowners, folk who have invested in Portugal through the purchase of property in the past. In the main, they are established homeowners who contribute and have contributed to the Portuguese economy over many years. They are real friends of Portugal.

Those individuals and their spouses pay property taxes, pay for services and towards the infrastructure of the regions they live in. They employ Portuguese citizens to look after and maintain their homes. They make a meaningful contribution financially to Portuguese society but are no financial burden to the Portuguese state.

They do not claim for healthcare or any other social services, they self-fund all areas of service. In that respect, they are a financial benefit to the Portuguese economy.

They benefit the economy by buying from the retailers and the hospitality businesses, from sports facilities and other services. With rest and relaxation being a priority, they are first-class individuals and will, on average, be in the higher net income and expenditure group.

But they are now afforded the same 90-day rule in a 180-day period for stays in Portugal which has principally been put in place for UK tourists. That restricts the time they can spend at their homes and the income they will spend in Portugal.

This will negatively affect the Portuguese economy, the labour market and it’s a negative policy to introduce. Does it have to be this way?

The impact we have described will be relevant to other EU member countries where Brits are known to own properties, such as France, Spain, Italy and Greece.

Should Portugal and other EU countries reconsider the duration/time restrictions applied to British property/homeowners in their countries?

We believe there are good grounds for reconsideration. It comes down to acknowledging the negative economic impact on Portugal. Secondly, in recognising the value of non-resident homeowners, granting them preferential duration of stay days in Portugal in 180-day periods.

Surely, as property/homeowners in Portugal and as taxpayers, they warrant a different level of status and some reward for the inward investment. We argue it’s in Portugal’s interest to offer those individuals and their spouses/partners better duration of stay terms.

We are not arguing for unrestricted travel through the Schengen zone. We understand that is a benefit bestowed on those British citizens who have taken residential status. We are not requesting preferential tax status or healthcare.

We are questioning why Portugal should deny itself continued income generation from a group of UK citizens that positively benefit the Portuguese economy. Does Portugal have to be tied to the 90-day rule in 180 days?

The Portuguese government and the relevant ministers responsible for inward investment from UK property owners should be seriously addressing this matter.

Whilst the days UK citizens can spend in EU countries was agreed by both sides in the withdrawal agreement (90 days within a 180-day period), we imagine any extension of days could be interpreted on a country-by-country basis. That allows for the fact any alteration would only be for the specific country, e.g. Portugal, not for all the countries in the EU.

There is no requirement to gain any preferential terms for unrestricted travel in the Schengen zone.

We would hope the Portuguese government would look positively on this matter and get the issue in discussions in the weeks ahead.

Roger Eastoe is a non-resident, property-owning Brit who has spent, and spends, considerable time each year in Portugal. Roger thoroughly enjoys Portugal and the Portuguese people and has done so for the last 45 years, having owned a house in the Algarve for the last 20 years.

The Resident would like to hear from readers regarding this issue. Please email the Editor at editor@algarveresident.com

By ROGER EASTOE

Source: Portugal Resident