The Advantages of Luxembourg Insurance Wrappers for Expatriates in Portugal

Featuring Luso Financial Planning – www.lusofinancial.com

For expatriates living in Portugal, especially those who have benefited from the Non-Habitual Resident (NHR) regime, one of the smartest ways to manage and protect your wealth is through Luxembourg insurance wrappers—also known as life assurance bonds or investment-linked life policies.

At Luso Financial Planning, we specialise in helping international residents structure their investments to be both tax-efficient and secure. Here’s why Luxembourg insurance wrappers are increasingly popular among expats in Portugal.

✅ What Is a Luxembourg Insurance Wrapper?

A Luxembourg insurance wrapper is an investment product issued by a life insurance company regulated in Luxembourg. It allows you to hold a diversified portfolio of investments (funds, ETFs, cash, etc.) within a single life assurance policy.

It’s widely used by expatriates across Europe to combine investment flexibility, estate planning benefits, and attractive tax treatment.

🌟 Key Advantages for Portugal-Based Expats

1. Tax Deferral

One of the biggest advantages is tax deferral:

• You don’t pay tax on investment gains as long as they remain inside the wrapper.

• This allows your investments to compound over the years without annual tax drag, growing your wealth more efficiently.

2. Reduced Tax on Withdrawals

When you do take money out:

• Only the gain element of your withdrawal is taxable in Portugal.

• And after holding the wrapper for five years, only 80% of the gain is taxable; after eight years, only 40%.

• With the standard flat tax on investment income at 28%, this can reduce your effective tax rate on gains to around 11% (40% of 28%).

3. Protection and Security

Luxembourg is known for its unique “Triangle of Security”:

• Your assets are held in a ring-fenced custodian bank account separate from the insurer’s balance sheet.

• This means even if the insurer fails, your assets remain protected.

4. Estate Planning Benefits

Luxembourg insurance wrappers can:

• Bypass probate, allowing faster and simpler transfer to beneficiaries.

• Offer flexibility in naming beneficiaries directly, supporting your wishes even within Portugal’s forced heirship framework.

5. Investment Flexibility

These wrappers support a wide range of investments, allowing you to:

• Diversify across funds, ETFs, or discretionary managed portfolios.

• Choose the currency that matches your lifestyle or financial goals, helping reduce currency risk.

6. Portability

If you move from Portugal to another EU country, your wrapper often remains compliant and tax-efficient in your new country of residence.

⚖️ Why Luxembourg Over Other Jurisdictions?

While some insurance wrappers are offered from other jurisdictions, Luxembourg stands out because of:

• Its strong investor protection framework.

• High regulatory standards and transparent oversight.

• A reputation as Europe’s leading centre for cross-border insurance products.

🧭 How Luso Financial Planning Helps

At Luso Financial Planning, we help expatriates:

• Assess whether a Luxembourg insurance wrapper fits their situation.

• Structure wrappers tailored to income needs, risk appetite, and family planning goals.

• Stay compliant with Portuguese tax rules while maximising tax efficiency.

Whether you’re preparing for life after NHR or simply want to grow and protect your wealth, Luxembourg insurance wrappers can be a highly effective part of your financial toolkit.

Interested in learning more?Visit www.lusofinancial.com to arrange a consultation and discover how to build a secure, tax-efficient future in Portugal.