Thanks to advantageous tax frameworks, both Mauritius and Portugal have become popular destinations, especially for French retirees. Here is a detailed review of the advantages and disadvantages of each country.
The Florida of Europe" for the PortugalThere is no shortage of complimentary terms for these two destinations, which have become true tax havens in recent years, particularly for retirees. What are the advantages of each and 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 exempt from tax for ten years, provided they spend at least 183 days a year there and have not been a tax resident for the last five years. A very attractive measure implemented in January 2013, which is aimed as much at wealthy retirees - the country has neither ISF nor inheritance taxes - as at the most modest, who see their purchasing power multiplied by about 40 % compared to 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. Thus, one foreign buyer out of four was French in the first quarter of the year, according to the association of Portuguese real estate professionals Apemip. This is 80 % of retired private individuals, but also liberal professions (technicians, architects, engineers, artists, health professionals, etc.), RNH status allowing them to be taxed at only 20 % on their 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 French-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 benefits 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 changes, 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 sometimes gives wrongly, it is not necessary to be a multimillionaire to expatriate there. "It is quite possible to acquire 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. "It is estimated that there are 10,000 French people living in Mauritius. Most of them are expatriate executives, professionals of all kinds, but also between 1,500 and 2,000 retired couples - whether or not they are Mauritian tax residents.Guillaume Levêque, lawyer and notary, member of the Monassier Group. In order to revitalize the economy, the Mauritius Chamber of Commerce and Industry has stated its intention to attract 200,000 foreign retirees within four years.
Cascading benefits
In addition to its mild climate all year round, its transparent waters, its fine sandy beaches and a cost of living 20 to 30 % cheaper than in France, Mauritius also offers investors a very advantageous tax framework.
First of all, it allows them to remove from their wealth tax base the real estate acquired in Mauritius even if they remain tax residents in France. It also offers to those who acquire the Mauritian tax residence many advantages: a flat tax rate of 15 % on income, no social security contribution, no property tax or housing tax, no tax on the added valueno ISF, a VAT of 15 %.
Obtaining a Mauritian resident permit
To become a full owner of a property in Mauritius, the easiest way for a French person is to invest in a complex with the status of "integrated resort scheme" (IRS) or the real estate scheme (RES), regrouped and replaced by the "property development scheme" (PDS) in 2015. If the value of the property purchased under the PDS exceeds 500,000 dollars (former IRS) and if the other conditions for obtaining Mauritian tax residency are met (living in Mauritius for six months a year, etc.), the investor will obtain Mauritian tax resident status in exchange. If the value invested is lower (former RES), he will be able to reside in Mauritius up to six months in the year, but the tax residence will not be granted. For those who bought property before 2015, the IRS and RES systems remain valid.
Mauritius is not sought after for its low rental yield. On the other hand, developers offer attractive capital gains potential (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 is stable today, it is not without its own problems. "The opening of the real estate market to foreigners through RES statutes, IRS is less than fifteen years old. Before, the freehold and sustainable investment did not exist. The Mauritian market has evolved and adopted international standards over the last few years, but this is still relatively recent for investors who appreciate the benefit of hindsight.Guillaume Levêque warns. In his office, requests for departure of French retirees to Mauritius have decreased since the arrival of the Portuguese RNH status 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.
