# taxes on interest and dividend income



## highlands1234 (May 25, 2015)

Hello all,

So we are looking at moving to Portugal the first part of next year, and I believe SS tax is exempt for 10 years when over there, but wasn't sure about interest and dividend income. The first few years over there that will be our primary income so we wanted to know the tax situation regarding that. 


From my initial research, it looks like Portugal taxes interest and dividend income, but at the difference between the u.s. tax and the Portuguese tax. i.e., say I pay 15% on my interest and dividend income here in the states, but Portugal normally charges 25-30% on that income. Then based on the convention to eliminate double taxation, it is reduced to 10-15% (the difference between the two). The two links below is where I am getting this info from. 

Tax regime for non-habitual residents - Living in Portugal

http://www.plmj.com/xms/files/newsletters/2012/Maio/Dupla_Tributacao_Inte_ing.pdf


Anyone over there in a similar situation? Would like to hear what percentage you are having to pay on your interest income and dividends to Portugal. 

Thanks for the help and info.


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## Pgmills (Jan 19, 2015)

Here is a link to the Portuguese Tax Dept briefing on this matter. 

http://www.nonhabitualresidence.com/downloads/nhr_en.pdf 

The principle is that IF you are granted NHR status then all non Portuguese income from any country with a Double Tax treaty with PT will not be subject to Portuguese tax. The trick is to become non tax resident in your current country so that they pay your investment income gross and then with the NHR status here you suffer no tax at all.


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## grammymissy (Jun 21, 2009)

Hello, we moved from the U.S. In March, we will be applying for our NHR status in October, cannot apply until a resident 180 days. We have notified the Finance department of our intention, as requested, and have been approved for the 3 year tax exemption for house taxes, based on that notification. Once approved, we believe what you have stated is true depending on level of income. We are collecting a private pension, we are not yet of an age to collect SS security. Also, it is our understanding, that not all SS and pensions are tax free, it depends on the amount collected, per the tax charts. .


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## TonyJ1 (May 20, 2014)

grammymissy said:


> Hello, we moved from the U.S. In March, we will be applying for our NHR status in October, cannot apply until a resident 180 days. We have notified the Finance department of our intention, .... .


You can apply for the NHR scheme - there is no 180 minimum requirement - it is a question of fact - more to do with intention - if your permanent home is in Portugal, then you are liable for taxes on worldwide income (16 (b) of the IRS (Income Tax on Individuals) code).


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## grammymissy (Jun 21, 2009)

The Lisbon and Tomar Portugal Finance office's told us we cannot apply until we have been here over 180 days, which is when we technically become residents, our lawyer checked with them and confirmed that information for us . We are non EU, Americans, not sure if rules are different for us.


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## grammymissy (Jun 21, 2009)

PGMills, thank you for the link. Unfortunately there is no way out of taxes as a US citizen, without renouncing citizenship.....we still pay no matter where we live...


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## grammymissy (Jun 21, 2009)

http://www.livinginportugal.com/en/moving-to-portugal/tax-regime-for-non-habitual-residents/. We found this link helpful when we first started looking.


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## TonyJ1 (May 20, 2014)

grammymissy said:


> The Lisbon and Tomar Portugal Finance office's told us we cannot apply until we have been here over 180 days, which is when we technically become residents, our lawyer checked with them and confirmed that information for us . We are non EU, Americans, not sure if rules are different for us.


That is the case, but not according to the code - someone has not read it properly. There are cases where they register as soon as SEF grants residence - but even then, not according to the code as legal residence not the same as tax residence. Not really serious, except for NHR applications when say somebody takes up residence towards end of calendar year and application has to be in by 31 March of following year - in that case, I would be inclined to be safe than sorry and submit application anyway.


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## grammymissy (Jun 21, 2009)

We are applying end of next month, so plenty of time to get paperwork submitted in 2015, year we moved here and purchased our home🌻. So hopefully, no worries, even if dates are a bit off. Maybe tax office wanted less summer work to process, and put off some work until Fall, that is why we were told to wait🌻


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## highlands1234 (May 25, 2015)

Thanks you everyone for the information and input. So having looked at the pdf pgmills provided, it would appear I would not get taxed anything on my interest and dividend income as a non-habitual tax resident. However it looks like that expires in 10 years, and after that I would be taxed at 20%? Or would that rate be higher? So in 10 years time I would be paying 20% capital gains and whatever my income tax bracket is on interest income, plus another 20% to Portugal? So 40% of my income would be taken?

The silver lining I guess is even as a non-habitual resident, you are still considered a resident correct? So after 10 years you could go for citizenship and get on the Portuguese public health system? In which case that 20% would help balance out the insurance premium cost I would pay in the states.

Like Grannymissy stated, giving up U.S citizenship is not an option, I want to get the money I put into Social Security back, but I would do dual citizenship.


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## Pgmills (Jan 19, 2015)

The Non habitual resident scheme has an unfortunate name. It does not mean that one is not resident. Indeed in order to apply one has to become resident first. Classic Portuguese wording....... 
Use of the Health System is available to all residents whatever their tax status.
I am not aware that you can convert to being a Portuguese Citizen unless you have familial links so giving up US status is a non point I think.


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## grammymissy (Jun 21, 2009)

Per our understanding, as U.S. Citizens, non EU, we have to carry private health insurance for residency, which we find is working out well for use, doctors and dentists are our choosing and services have been very good. Per the SEF office in Leira, we can take a language test after renewing our 1 year residency with 2 two year residency permits, and apply for permanent residency, approx 6 years, although I read it is 10 years on a Portugal website. Once we have permanent residency, we can then apply for citizenship, and be dual residents. Of course that was the information given in April, and who knows how that will change now that SEF has been reorganizing.


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## TonyJ1 (May 20, 2014)

highlands1234 said:


> Thanks you everyone for the information and input. So having looked at the pdf pgmills provided, it would appear I would not get taxed anything on my interest and dividend income as a non-habitual tax resident. However it looks like that expires in 10 years, and after that I would be taxed at 20%? Or would that rate be higher? So in 10 years time I would be paying 20% capital gains and whatever my income tax bracket is on interest income, plus another 20% to Portugal? So 40% of my income would be taken?
> 
> The silver lining I guess is even as a non-habitual resident, you are still considered a resident correct? So after 10 years you could go for citizenship and get on the Portuguese public health system? In which case that 20% would help balance out the insurance premium cost I would pay in the states.
> 
> Like Grannymissy stated, giving up U.S citizenship is not an option, I want to get the money I put into Social Security back, but I would do dual citizenship.


Under the 'non habitual residency scheme' certain income maybe subject to a reduced rate of 20% (currently a surcharge is also applicable) on some income earned by certain professional as listed on a decree law. After 10 years, subject to normal rates as applicable to 'ordinary' residents, unless law changes in the meantime. Pensions from a foreign source are tax free for 10 years (but some conditions apply, as well as some bureaucratic steps need to be acted on).

You also need to read carefully the Portugal USA tax treaty


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## TonyJ1 (May 20, 2014)

As to entitlement to National Health - all legal residents are entitled to use the national health system as any citizen, (though in certain cases they maybe charged fees). As to the time limit I see in the regulations, ninety days residence (Despacho 25360/2001)


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## grammymissy (Jun 21, 2009)

TonyJ1, that is true that all can use the system, but as I stated, as U.S. Citizens, for residency approval from the SEF, we must carry private health insurance. Also, as U.S. Citizens, non EU, when we receive our Portugal health ID numbers, it states on the form that we are not entitled to free services, we have private health insurance. I have now seen doctors and dentists, all reduced fees, but asked for private insurance card, and card was checked during visits.


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## highlands1234 (May 25, 2015)

Thank you all for the input. So it sounds like (according to grammymissy) that while "technically" we could use the public health system as Portuguese residents, as U.S citizen they require private health insurance. Still from what I have heard the premiums are half the price that they are in the states.

From what Tony is saying, it sounds like after the 10 year exception on income tax it would revert to whatever percentage you would fall in with Portuguese tax brackets. So hypothetically (and based on the link below) if I stay 10 years in Portugal, lose my double taxation exemption, and was making between $20,001 and 40k, I would be taxed 28.5% on that income by Portugal, plus roughly another 20% by the U.S. So roughly 50% of my income would be out the window. But on the plus side, after 10 years I would not be required to carry private health insurance as a U.S citizen in Portugal as grammymissy is having to do, as I would be a Portuguese citizen. Essentially my consolation prize for paying 28.5% to Portugal is getting out of any health insurance premium. Does the above paragraph paint a fairly accurate picture?

Also from my research Pgmills, as U.S citizens we are eligible to apply for Portuguese citizenship after 10 years (5 years with temp residency, 5 years with permanent residency).


http://www.aaptaxlaw.com/World-Taxe...poration-Tax-Rate-Capital-Gain-Tax-Rates.html


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## TonyJ1 (May 20, 2014)

You need to read the double tax treaty - for some of the income, only the country of residence is entitled to tax. On other items, the country of residence gives credit or exemption for tax withheld at source. This is not an easy area to interpret - you may need specialist help on this.


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## highlands1234 (May 25, 2015)

Agree Tony. I usually do my own taxes but think when I get over there will need to get a tax specialist. Government bureaucracy is ubiquitous. It sounds like from what your saying though might not be quite as bad as I painted it (after the 10 years are up).


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