# Portuguese-Canadian Taxation



## anapedrosa

Hi there,

I am just starting to research what I need to know to manage our taxes once we live in Portugal. I know that Canada has a tax treaty with Portugal and I believe that means that 15% will be held at source of our Canadian earnings (we will be drawing primarily from RRSPs and later our Pensions).

I understand we will need to complete a Portuguese tax form, and I believe that we have to claim the income we make in Canada. What I'm trying to figure out is, how does the Portuguese system take into account the taxes we have paid in Canada to avoid double taxation (which I believe is the value of the tax treaty).

Are there any Canadians with experience in this area that could provide pointers or references for me to research?

Thanks for any info that you are able to share,
Ana


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## canoeman

You declare it as worldwide income and the tax paid at source, then if you have a Portuguese tax liability that is offset *against any tax already paid on the same income*

no I'm not Canadian, but dual tax treaties work the same for most countries.


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## anapedrosa

canoeman said:


> You declare it as worldwide income and the tax paid at source, then if you have a Portuguese tax liability that is offset *against any tax already paid on the same income*
> 
> no I'm not Canadian, but dual tax treaties work the same for most countries.


Perfect, thank you. That's consistent with the way it works here for expats in Canada. Makes sense - how nice.


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## tawhiteside

Hello
I am Canadian and probably buying a home and retiring in Portugal very soon. Does anyone know how pension income from Canada is taxed during the first 10 years of residence in Portugal under the tax-exempt Non-Habitual Tax Residence Regime?Thanks!!


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## ViaVinho

Under the tax treaty, one always pays the highest tax rate _in total_. Thus, if the tax rate in Canada is 25% and in Portugal it is 20%, then 25% will be paid. In other words, Portugal will not charge you any taxes on your return. If the tax rate in Portugal is 25% and in Canada it is 20%, then you will pay 20% in Canada, and another 5% in Portugal. You effectively get credit for the 20% already paid as CM explained. In both cases, the sum of taxes paid results in the higher rate.

Under the NHR regime, you pay no additional taxes in Portugal for a given income if you have already paid taxes _on that income_ in Canada. For any income from Portuguese sources (e.g. work) you pay 20%. It seems to me the intent is to keep the tax regime the same as it was in the home country for the new resident in Portugal for 10 years and to tax PT source income at a moderate rate.

I am still trying to fight my way through the 2015 return with Financas locally who does not seem to have much experience with the NHR. You might want to be aware that you might be asked for proof of taxes paid in the home country. You can download a "proof-of-income" statement from your account on the CRA website. The statement shows the total amount of taxes due and the amounts paid. I do not know yet if this will suffice, but I did submit that with my return as proof of taxes paid.

A difficulty in completing the PT return is that it requires you to itemize sources of income and the amount of tax paid on each item. This creates difficulties as many income sources are lumped together in Canada and the overall amount is taxed. Thus you may have to prorate the taxes "paid" for each item, even if you will not be able to prove that you paid that specific amount in tax for that specific line item.

This is my first time going through these hoops, perhaps someone with experience might provide better information.


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## anapedrosa

tawhiteside said:


> Hello
> I am Canadian and probably buying a home and retiring in Portugal very soon. Does anyone know how pension income from Canada is taxed during the first 10 years of residence in Portugal under the tax-exempt Non-Habitual Tax Residence Regime?Thanks!!


Hi, 

I am not yet receiving Canadian pension, however, my mother is. In the past she was taxed on her pension in Canada, but under NHR she was not taxed here.

In Canada under the tax agreement with Portugal, we are taxed 15% non-residence tax rate on most of our income. 

However, last year my mother completed the NR5 form in Canada and they advised her that she no longer has to pay non-resident tax on her pension (CPP and OAS). I don't know yet whether this means that Portugal will now tax this income. The reason I have any doubts about this is that because Canada does not withhold taxes on Capital Gains, Portugal does tax this income under the NHR.


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## financeguy

Interesting thread. Im starting to try and understand the tax implications and how to better plan, for my own situation.

Currently, I live in Canada and generate employment income in Canada, but I also own a rental property in the USA, which generates income there. So I currently file taxes in the USA and Canada.

as Im planning to move to Portugal in the future, I will also be generating income from rental properties in Portugal. At that time, my income will be from:

rental of my USA properties
rental from my Canadian property (it is almost certain that I will keep my Canadian property for at least another 5-8 years after relocating to Portugal)
rental from my properties in Portugal

Any ideas to structure this? Perhaps incorporating in Canada or Portugal?

Thanks in advance.


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## anapedrosa

The complexity of your situation is beyond my capabilities.


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## financeguy

Thanks for the reply anyways. I will search a bit further and post here any updates I may find.


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## financeguy

Another (related) question is about generating income through an incorporated business. For instance, let's assume a person resides in Portugal and owns a business, and that business purchases 5 properties, which generate rental income. Can anyone provide any info about :

Tax rate for such income (paid at the corporate level)?
Tax rate for income the owner/director of such business would pay, if he received a salary from the business he owns?

This is a fairly common scenario here in Canada, where certain people in some professions prefer to incorporate their business activities (doctors are a good example) so that they can save a fortune, as the corporation's income is taxed at a much lower rate.


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## anapedrosa

financeguy said:


> Another (related) question is about generating income through an incorporated business. For instance, let's assume a person resides in Portugal and owns a business, and that business purchases 5 properties, which generate rental income. Can anyone provide any info about :
> 
> Tax rate for such income (paid at the corporate level)?
> Tax rate for income the owner/director of such business would pay, if he received a salary from the business he owns?
> 
> This is a fairly common scenario here in Canada, where certain people in some professions prefer to incorporate their business activities (doctors are a good example) so that they can save a fortune, as the corporation's income is taxed at a much lower rate.


I think that you may want to check the laws in Canada. I believe there are restrictions on owning a corporation when you become a non-resident.


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## financeguy

Im talking about a regular, permanent resident of Portugal. Not a non resident. Such a person is moving to Portugal and will no longer live in Canada at all.



anapedrosa said:


> I think that you may want to check the laws in Canada. I believe there are restrictions on owning a corporation when you become a non-resident.


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## anapedrosa

financeguy said:


> Im talking about a regular, permanent resident of Portugal. Not a non resident. Such a person is moving to Portugal and will no longer live in Canada at all.


Yes, I understood that. You are then a non-resident of Canada. It is the Canadian law which applies to non-resident ownership of business. Unless the law has changed, you will need to collapse the corporation in Canada, which means you end up having to claim all of the funds that you have in your corporation in Canada in that year. So, if you have accumulated a lot in the corporation, you can end up with a hefty Canadian tax bill. I recommend you check with an accountant in Canada, but when I left, I could no longer hold my Canadian corporation.


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## financeguy

Ok.. looks like my previous post was unclear, and hence the confusion. What I meant was that the scenario described was in Portugal, and I would not keep any business in Canada. Being a canadian citizen in this case has absolutely nothing to do with anything. What Im trying to figure out is if there is a tax efficient structure in Portugal similar to what most people do in Canada. I mentioned the example of Canada only to illustrate how it works, but in this case, the person would be a full time resident of Portugal, and has no other business elsewhere.


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## anapedrosa

I see. I don't know how corporate structures work here, but the corporate tax rate is certainly higher in Portugal than in Canada. If you google 'Portugal corporate tax rate', you will see articles by reputable accounting firms that should help.


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## financeguy

You got it. 

In reality, Im not comparing the tax rates between those countries... the key is to determine how to better structure (from a tax perspective) a certain scenario.

To give a better idea of the goal, Im looking to purchase real estate in Portugal, and will live there on a permanent basis (and cut all ties to Canada). The amount of real estate purchase will be around $500k euros, split among a few properties. Knowing they will generate rental income, and that would be the primary source of income, how could I lower my tax load? Im talking strictly about Portugal taxation, no consideration given to tax liabilities elsewhere.

A - As an individual that owns property there, I would pay X% of income

B - Maybe, if the purchase was done through a company, that rental income would be subject to a (possibly) lower tax rate.

I had mentioned the example in Canada as most people here would do the option B (depending on the income level), as the corporation income would be passed on to the owner as dividends, which are taxed in a more favorable bracket.


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## financeguy

I think I found the answer I was looking for...

Portugal capital gains tax rates, and property income tax


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## anapedrosa

financeguy said:


> I think I found the answer I was looking for...
> 
> Portugal capital gains tax rates, and property income tax


I think that the rate in this article is for non residents of Portugal who own and rent properties here. I don't know anyone here who has a corporation set up to rent properties. 

Good luck in you right continued research.


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## TonyJ1

financeguy said:


> Interesting thread. Im starting to try and understand the tax implications and how to better plan, for my own situation.
> 
> Currently, I live in Canada and generate employment income in Canada, but I also own a rental property in the USA, which generates income there. So I currently file taxes in the USA and Canada.
> 
> as Im planning to move to Portugal in the future, I will also be generating income from rental properties in Portugal. At that time, my income will be from:
> 
> rental of my USA properties
> rental from my Canadian property (it is almost certain that I will keep my Canadian property for at least another 5-8 years after relocating to Portugal)
> rental from my properties in Portugal
> 
> Any ideas to structure this? Perhaps incorporating in Canada or Portugal?
> 
> Thanks in advance.


In general, the rules are as follows:
If you reside in Portugal, you are subject to tax on a worldwide basis on all income.
Off course, then there are all the ifs and buts, and to this you look firstly under local law which in certain circumstances may exempt certain income from taxes all together or tax certain income at a reduced rate (NHR regime, law applicable to annuities), and secondly you need to look at the relevant provision of the double tax treaty. As you have income which source is Canada and other income which source is the US, you have to look specifically at the relevant treaties between Portugal and these countries.
I have not checked the specifics, but in general terms if you are receiving rental income from Canada or the US or most other countries for that matter, the country where the property is situated, will usually tax such rental income. Such income will also be taxable in Portugal, but Portugal will allow credit for taxes charged on such income up to the limit of Portuguese tax chargeable on such income. However, if you are benefiting from the provisions of the NHR scheme, such rental income will not be subject to tax in Portugal. It still has to be declared in the Portuguese tax return. Just be aware there are time limits to register / request the benefits of the NHR scheme. If application is made even one day late, it will not be condoned. 
On another issue,I think it is not a particular good idea to incorporate these investments from a Portuguese perspective - capital gains on fixed investment are likely to be tax free under the nhr rules as the the countries where such fixed properties are situated, usually retain the rights to tax capital gains in terms of most double tax treaties - but again you would have to check if this is the case as to the investments in Canada /USA


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## financeguy

Correct - that 28% flat rate seems to be for non residents.. but the rate for residents that draw income from rental is also set at 28%, unless the person falls under a lower income bracket overall, since he would then be able to assess the rental income using the personal bracket.

https://www.economias.pt/escaloes-de-irs/


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## TonyJ1

financeguy said:


> Correct - that 28% flat rate seems to be for non residents.. but the rate for residents that draw income from rental is also set at 28%, unless the person falls under a lower income bracket overall, since he would then be able to assess the rental income using the personal bracket.
> 
> https://www.economias.pt/escaloes-de-irs/


If the rent is from abroad (non black listed country), it is classified as category 'F' income. Category F income is exempt from taxation in Portugal under the NHR scheme, as in principle the US and Canada tax this income. Ordinarily you are right, but the NHR is an exception to the rule


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## JamieCan

tawhiteside said:


> Hello
> I am Canadian and probably buying a home and retiring in Portugal very soon. Does anyone know how pension income from Canada is taxed during the first 10 years of residence in Portugal under the tax-exempt Non-Habitual Tax Residence Regime?Thanks!!


Did you ever get an answer to your question. I am canadian and been here close to a year - covid- and am looking at this question. Most sites are about UK expats, but, like you, I want to know what will happen with my pension income from Canada. I would love to hear from you on this matter, I assume you have found out.


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## ViaVinho

JamieCan said:


> Did you ever get an answer to your question. I am canadian and been here close to a year - covid- and am looking at this question. Most sites are about UK expats, but, like you, I want to know what will happen with my pension income from Canada. I would love to hear from you on this matter, I assume you have found out.


Hello, my experience is this:
1. Canada - my pensions (CPP and Employment) have the first $12,000 not taxed, thereafter taxed at 15%.
2. Portugal - under the NHR my Canadian pensions are not further taxed. If no NHR, I expect the Portuguese exemption on pension income (about $6200 - not the $12,000 Canadian one) - will apply and a credit will be given for taxes paid in Canada to offset the taxes due in Portugal. Overall, you will pay higher taxes in Portugal. Please be aware that the _very same_ income can be taxed differently from one jurisdiction to the next depending on how the tax official processing your tax return interprets your situation.

Hope this helps a bit,
VV


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## ViaVinho

I should also mention that under the new NHR regime a 10% Portuguese income tax is payable on pension income from abroad, rather than 0% as before.


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## TeriM

I am confused about OAS if you are no longer a resident of Canada. If you have resided in Canada for over 20 years but move to reside in Portugal do you then get cut off from receiving OAS ?


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## NickZ

No. You can't receive the GIS supplement top up but OAS and CPP is fine. 






Old Age Security: While receiving OAS - Canada.ca


Old Age Security (OAS) provides monthly payments to seniors who are 65 years or older, are or were Canadian citizens or legal residents, and have resided in Canada for the required number of years.




www.canada.ca





You need to check the social security agreement also but in general the big issue with OAS is how much you'll receive.


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## Snowbuddy

I am hoping there is a Canadian that has been through this before, and can answer my question.

I understand how the double taxation agreement works - example - I will pay 15% to Canada on RRSP or RRIF withdrawels. With the new NHR Portugal may want 10%, so having paid the 15% to Canada, that should be the total paid. 

My question - Let's say my RRSP or RRIF grows in value over the course of the year - my RRSP is self-directed, and I have the funds invested in stocks - If those stocks increase in value, or pay dividends - these are tax sheltered in Canada.

But - are they tax sheltered in Portugal?

My worry is that Portugal would want to tax the capital gains or dividends inside the RRSP/RRIF.

Has anyone been through this, and could you recommend an accountant familiar with the Canadian RRSP and Portugal taxation?

Thank you


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## TonyJ1

In principle as these funds are 'owned' effectively by the administrators, anything happening within the funds will not be taxable in your own name. The tax event happens when the funds are paid out - the same as if you were in Canada.

The double tax treaty, particularly article 18 of the double tax treaty dictates the rules of which country can tax what. 

In any event, dividends earned from a Canadian company whilst under nhr status, as well as interest, would not be subject to tax in Portugal even if directly held. Another matter on financial instruments, but as the double tax treaty gives the Canadian Revenue the power to tax previous residents and nationals (for a limited period), it would mean that any capital gains would only be taxed in Canada under the nhr rules has the Portuguese statute effectively exempts from Portuguese tax if the other country 'can' tax such income (whether i does or not, it is not relevant). This would be the rule for capital gains / dividends / interest owned outright, therefore the investments held through retirement instruments cannot be more taxed more unfavorably.


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## J OMeara

Speaking of taxation, for a Canadian who is now a permanent resident of Portugal and filing tax there, what is the status of a Canadian Tax-Free Savings Account (TFSA), how are any funds withdrawn from a TFSA treated for Portuguese tax filing purposes? 

I haven’t been able to find any information online but maybe I haven’t look hard enough!

(Right now the question is hypothetical, I haven’t moved yet but trying to figure it out.

Thanks.

John


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## fngood

Seems this thread gets bumped every couple of years, so here to do my part on that. 

Rather than asking a bunch of questions that require too much context, has anyone found an accountant/lawyer familiar with Canada/Portugal tax treaty that can properly answer these questions? Looking to set up a corp in Portugal which will own and operate rental properties there and I want to make sure I structure it in the most tax efficient way possible. I am a citizen of Portugal (by birth right), but still a resident of Canada for now.

Feel free to DM me with any suggestions to good accountants, in either country, that can help me properly understand and structure this.


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## Ciara Tiara

canoeman said:


> You declare it as worldwide income and the tax paid at source, then if you have a Portuguese tax liability that is offset *against any tax already paid on the same income*
> 
> no I'm not Canadian, but dual tax treaties work the same for most countries.


N/R assets are not taxed at the source in Canada. Why should there be tax paid on N/R assets when resident in Portugal? This is why accountants should be consulted, not open forums.


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## Strongholda87

J OMeara said:


> Speaking of taxation, for a Canadian who is now a permanent resident of Portugal and filing tax there, what is the status of a Canadian Tax-Free Savings Account (TFSA), how are any funds withdrawn from a TFSA treated for Portuguese tax filing purposes? I haven’t been able to find any information online but maybe I haven’t look hard enough! (Right now the question is hypothetical, I haven’t moved yet but trying to figure it out. Thanks. John


 If you found the answer to this, I would love to know as well


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## Strongholda87

Or same question as the one above, does anyone know someone that would be able to help with TFSA questions. I'm sure having RRSPs is a simple thing for the portuguese to understand. I am worried that my TFSA would be taxed while I held it or when I withdraw it and if so, maybe I would rather move what i can into my RRSP 

If anyone has any knowledge of what's what, or who can provide that knowledge, I would greatly appreciate it


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## barcomi

Hello,

I am wondering if you found answer to the TFSA question. Would TFSA income be taxed if someone moves permanently to Portugal?


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