Sort of…! This is the way I understand it - though i could be wrong:
Benefits / Negatives for you - Income Tax & Social Security
If you move and work remotely from Portugal, you can can apply for NHR (reduce your income tax to a fixed 20%), BUT, you will have to pay Social Security, which is pretty high. In the UK, for higher earners, Social Security tax / NI, is capped and so it might only be ~4% of gross income. In Portugal, it isn’t capped, so it really is ~11% of your gross income. If you’re only doing it for 2-ish years, then you can apply to continue paying UK National Insurance (instead of Portuguese Social Security) - as it’s considered to be “temporary”, but i think your employer has to fill in a form to request that.
So, you can save a fair amount on your income tax, but when you factor in the personal allowances you get in the UK (first ~£10k is exempted of income tax in UK) + factor in higher Social Security payments in Portugal, the savings won’t be as much as you first think (at least, it wasn’t for me). Added to that, you can’t come back to UK for more than ~90 days / year (number of days varies on circumstances, but roughly) - that might be fine for you, but just mentioning it… plus, if you sell UK assets (e.g. your main house), you’ll have to pay Portuguese capital gains tax - whereas in the UK as a UK tax payer, that would be exempt as it was your main home.
Impact on Employer
- Tax: your UK employer will be able to change the UK tax code to a “works abroad” tax code.
- National Insurance / Social Security - as above, they might confirm you’re only working abroad for a couple of years so you can continue to pay UK National Insurance (instead of Portuguese Social Security)
The negatives for your employer is that (as far as i understand it), if the employer doesn’t fill out the “he’s only there for 2 years, so we will pay UK NI” form, then they will be liable to pay Portuguese Social Security for you, which is much higher for them (i think 5-10% higher from memory). They will also have to make sure that you comply with all Portuguese laws in terms of your employment etc.
Solution 1 - become a contractor
You could become a self employed contractor with them - i.e. you quit your job / no longer are an employee, but they take you on as a contractor. You are then liable to sort out all your tax / social security etc. To me, the issue with this approach is you lose all your protections - e.g. if they want to lay you off, you don’t get redundancy and they can just lay you off for no reason as you’re not an employee.
Solution 2 - use a middle man / “Body Shop”
My company has done this before. Basically, you technically become an employee of a different company (it’s a specialist company, that’s used for this purpose - to act as a middle man) and they take care of tax / national insurance etc, but you continue to provide your services to your original-employer. This middle man / body shop invoices your old-employer (with a slight uplift for their costs) and the middle man/body shop pays you. The benefit is that they take care of local taxes / laws / issues.
Here’s a bit I found about this, which explains it a lot better:
the person resigns and sets himself up as self employed in the other country, agreeing a contract for services with the UK company. Here they accept total responsibility for conformity with local legislation (tax, social security, immigration, employment law) as well as organising their own life insurance, medical cover, pension etc.
You identify a local “body shop” which employs the person and sets up a contract for services with the UK company. All employment issues are now with the body shop and no longer with you.
Find a Spanish body-shop and transfer his employment contract to this local company, who will bill you for the services of this person (with a mark-up). You will also probably need to give him guarantees concerning future dismissal rights, recognising length of service etc.
As a longstop, he could set up his own business and invoice you, thereby transferring the risks to himself. He will need to charge you an amount at least equal to his salary plus employer’s contributions, plus medical and pension contributions…plus mark-up to cover professional accounting advice and administrative fees.