Thanks to their advantageous tax frameworks, both Mauritius and Portugal have become popular destinations, particularly for French retirees. We take a closer look at the advantages and disadvantages of each country.
Europe's Florida" for the PortugalThere's no shortage of eulogistic terms to describe these two destinations, which in just a few years have become veritable tax havens, especially for retirees. What are the advantages of each and what are the mistakes to avoid before taking the plunge?
Becoming a non-habitual resident in Portugal
The Portugal has become one of the favorite destinations for French expatriates. Thanks to the RNH status (non-habitual resident), retired expatriates are tax-exempt for ten years, provided they spend at least 183 days a year there and have not been a tax resident for the past five years. This highly attractive measure, introduced in January 2013, is aimed at both wealthy retirees - the country has no wealth tax and no inheritance tax - and the more modest, who see their purchasing power multiplied by around 40 % compared with France.
So much so that the French have become the leading foreign real estate investors in Portugal in 2016 (3,300 transactions), ahead of the British and Chinese. One in four foreign buyers was French in the first quarter of the year, according to the Portuguese property professionals' association Apemip. Of these, 80% were retirees from the private sector, as well as professionals (technicians, architects, engineers, artists, healthcare professionals, etc.), RNH status allowing them to be taxed at only 20 % on income generated and received in the Portugal. "The majority of requests do not come from very wealthy French people, but from middle-class retirees who often already had plans to retire in the South or abroad, and the tax advantage directed them to the Portugal "explains Cécile Goncalves, director of the Franco-Portuguese real estate agency Maison au Portugal.
However, without questioning the status of the RNH, "the changes in legislation brought about by the new left-wing majority in Portugal could mitigate a number of advantages of the current tax system".says Xavier Rohmer, partner at August Debouzy (see below). The Portuguese Finance Bill for 2017, which could still be subject to numerous amendments, provides for new tax measures, including the introduction of a specific tax (of 0.3 % on the cadastral value of property) for owners on their real estate assets above a certain amount.
Mauritius: not just for the ultra-rich
Contrary to the image that Mauritius is sometimes wrongly given, you don't have to be a multimillionaire to expatriate there. "It's perfectly possible to buy an apartment for a few hundred thousand euros in an area reserved for foreigners".The Mauritian people are perfectly fluent in French," says Jean-Philippe Carbonni, sales director of the Domitys group of senior residences. This main island of the Republic of Mauritius is certainly more than eleven hours away from France, but with only a two-hour time difference, and the Mauritians are perfectly French-speaking. "An estimated 10,000 French people live in Mauritius. Most of them are expatriate executives and professionals of all kinds, but there are also between 1,500 and 2,000 retired couples - whether or not they are tax residents of Mauritius".says Guillaume Levêque, lawyer and notary with Groupe Monassier. To revitalize the economy, the Mauritius Chamber of Commerce and Industry is aiming to attract 200,000 foreign retirees over the next four years.
Cascading benefits
In addition to its mild year-round climate, crystal-clear waters, fine sandy beaches and a cost of living 20 to 30 % lower than in France, Mauritius also offers investors a highly advantageous tax environment.
Firstly, it allows them to exclude real estate acquired in Mauritius from their wealth tax base, even if they remain tax residents in France. Secondly, it offers those who acquire Mauritian tax residence a number of advantages: a flat-rate tax of 15 % on income, no social security contributions, no property or housing tax, no tax on the added valueno wealth tax, a VAT of 15 %.
Obtaining a Mauritian resident permit
The easiest way for a Frenchman to become the full owner of a property in Mauritius is to invest in an integrated resort scheme (IRS) or the real estate scheme (RES), grouped together and replaced by the "property development scheme" (PDS) in 2015. If the value of the PDS property purchased exceeds 500,000 dollars (former IRS) and if the other conditions for obtaining Mauritian tax residency are met (living there for six months a year, etc.), the investor will obtain Mauritian tax resident status in exchange. If the value invested is lower (former RES), the investor may reside in Mauritius for up to six months of the year, but will not be granted tax residency. For those who purchased property before 2015, the IRS and RES systems remain valid.
Mauritius is not sought-after for its low rental yields. Developers do, however, offer attractive potential capital gains (average capital gains of 25 % over an average holding period of four years in the IRS Anahita, for example), but a thorough examination of the quality of the program, the developer's financial guarantees and its anchoring in the Mauritian economy are essential.
A recent opening
Another cautionary note: while the country's political and legal system may be stable today, it's not always so. "The opening up of the real estate market to foreigners thanks to RES status, IRS, is less than fifteen years old. Before that, there was no such thing as a sustainable, freehold investment. The Mauritian market has evolved and adopted international standards in recent years, but this is still relatively recent for investors who appreciate the benefit of hindsight".warns Guillaume Levêque. In his office, requests from French retirees to leave for Mauritius have dropped since the Portuguese RNH status came into competition in 2011. "The lesser distance for retirees, the European culture, the presence in the euro zone and the less elitist image of the Portugal - the average investment in either country is roughly equivalent (between 500,000 and 600,000 euros) - benefit the latter. "he explains.
