With 20 years’ experience living and working in Portugal, Raoul Ruiz Martinez manages RZ Financial Planning, a Private Office Service company.

Is Your Passion Also an Asset Class?

The importance of long-term appreciation and portfolio diversification is well understood, but what about the connection between these factors and your identity?

Do you have a wealth ecosystem? Do you consider yourself, at any level, an investor in your passions?

Whether your interest lies in cars, coins, or wine (among many categories covered in a Luxury Investment Index), these investments can serve as a ‘side hustle’ within your broader wealth ecosystem, complementing your overall management and financial planning strategy.

The joy you experience from your passion investment should not be overshadowed by anxiety over volatility or the challenge of a prolonged sale. And, as always here in Portugal, there is the question of tax.

“Passion investments can be both exciting and profitable.”

Art as a Passion Investment

Portugal boasts a vibrant art scene, with many established and emerging artists making their mark on the international market. If you decide to invest in a piece by an up-and-coming Portuguese artist—whether hoping to choose someone who gains popularity or simply because it’s a piece you love—you’re in luck. If this asset is held for personal enjoyment, any capital gains realised upon future private sale are not subject to personal income tax. You are not required to report this income in Portugal.

This favourable tax treatment is good news for anyone considering an entry-level investment in an exciting piece of art. As it appreciates in value, you can enjoy it in your home. To preserve its condition, seek professional advice on mounting and framing, and be mindful of placement—especially in Portugal’s sunny climate, where direct sunlight could cause damage.

For private investors, art transactions that are considered “non-recurrent activities of transferring movable property” do not require income reporting. Your advisor can clarify the distinction between non-recurrent activities and business activities.

If you acquire a piece of Portuguese art that becomes too valuable in personal significance to sell, rest assured that, technically, Portugal does not have an inheritance tax. There is a Stamp Tax, but artwork is generally excluded, unless it is classified as national heritage. Therefore, gifts or inheritance of such art typically have no tax implications.

Digital Art and NFTs

As of 2023, digital art and NFTs are classified similarly to physical artwork. Gains from the sale of NFTs by private investors are not taxable. However, if NFTs are gifted or inherited, taxation options differ from those for physical artwork. This is an evolving area of tax law, so consult current guidance before making portfolio changes.

The Value of Passion Investments

Passion investments diversify your investment portfolio and help manage the overall risk within your wealth ecosystem.

The primary rule of passion investments is to consider them as one player in your wealth ecosystem. Managing and strategically planning each component of your wealth ecosystem is essential.

Whether it’s a classic car, art, collectable wines or whiskeys, art or valuable furniture, jewellery, or other collectibles, place these items in your life with care. Value the joy they bring to you and your family, and, when it’s time for a change, approach it with clarity about taxation and asset management.

Got a minute?

Why don’t you send your queries about your move to Portugal to Raoul via hello@wherevermags.com and we will get his response in the next issue!