# Non-Habitual resident and capital gains



## zugba (Aug 15, 2017)

Hello All,

I'm an US citizen planning to move to Portugal and apply for the NHR status.

One thing that is not clear is if capital gains will be taxed by Portugal at the 28% rate or will they be tax free.

One important detail is that unlike other countries citizens, the US taxes their citizens on world wide income, even if they do not reside in the US. I'm thinking this (for once) may be helpful regarding capital gains and the NHR status.

The US - Portugal double taxation tax treaty specifies in:

Article 14 - Capital gains
Similar text as other countries, which basically seems to state that normal capital gains from securities are taxed in residing country (i.e. Portugal)

But in the PROTOCOL section, it is stated:

*(b) Notwithstanding any provision of the Convention except paragraph (c) of this
provision, a Contracting State may tax its residents (as determined under Article 4
(Residence)), and the United States may tax its citizens, as if the Convention had not
come into effect.*

Will this mean that since US may indeed (and does) tax capital gains on *US citizens*, that under the Portuguese NHR regime they will qualify to be tax exempt in Portugal?

This is all very confusion and by searching online I haven't found a clear answer on this.

I'm looking for information on US citizens that may have applied for NHR status or have more information how capital gains are taxed for their cases.

Thanks in advance.


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## Pgmills (Jan 19, 2015)

Capital gains are not exempt under the NHR scheme.


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## Naaling (Apr 9, 2015)

Pgmills said:


> Capital gains are not exempt under the NHR scheme.


Not sure that's correct. At least I hope it isn't!


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## Pgmills (Jan 19, 2015)

Naaling said:


> Not sure that's correct. At least I hope it isn't!


I know it is correct.


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## Naaling (Apr 9, 2015)

Pgmills said:


> I know it is correct.


Then I suggest you think again.

Please read this document.
http://info.portaldasfinancas.gov.p...-3DA8-4B90-A1E4-FF53BD34EF95/0/IRS_RNH_EN.pdf

And in particular the following paragraph under the heading "B – FOREIGN SOURCE INCOME"

2 - Income in category B (Self Employment), E (*Capital Income*), F (Real State
Income) and G (Increase in Wealth) – Art 81, paragraph 5 of the CIRS
Income in category B (Self Employment), obtained through high added value
rendering of services of a scientific, artistic or technical nature, or from intellectual or
industrial property, as well as, from providing information regarding an experiment
carried out in the commercial, industrial or scientific areas,* and those in category E*,
F and G, obtained abroad by non-regular residents, *are exempt* if alternatively:
a) *They are taxed by the source State/nation*, according to the convention to
terminate double taxation entered into by Portugal and the source State; or
b) *They can be taxed in another country*, in cases where the convention to
terminate double taxation has not been held into under the terms defined by
the OECD Model Tax Convention on Income and Capital, as long as it is not
a territory subject to privileged tax systems (defined by Ordinance n. 292/2011,
November 8) and, as long as the corresponding income, cannot be considered
to have been obtained on Portuguese territory, as per Art. 18., n. 1 of the CIRS of
the Personal Income Tax (IRS) Code.


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## Pgmills (Jan 19, 2015)

You cannot get the correct answer by reading that document alone. The NHR regime works hand in glove with the Double Tax Treaty between Portugal and the country where the gain arises. I haven't read the dta between Portugal and Australia but I can tell you that the dta between Portugal and the UK provides for capital gains (other than those arising from UK real estate) to be taxed in the tax payer's country of residence not in the UK. As result, the terms of the NHR exemption are not satisfied for this type of income ( because the gain is neither taxed or capable of being taxed in the Country where the gain arises).
Assuming your gains arise in Aus you will need to check the relevant dta to be clear about your own situation.


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## Naaling (Apr 9, 2015)

Therefore the situation is far more complicated than a simple "Capital gains are not exempt under the NHR scheme." 
The key issue is if the gain is, or can be, taxed in the source country, which in turn is determined by a persons tax residency and DTAs where they exist.
By the way it might surprise you to know that Australia doesn't have a DTA with Portugal. It surprised me when I found out.


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## Pgmills (Jan 19, 2015)

Fair point. I was being a little fast and loose with my wording as well as being a little UK centric!


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## zugba (Aug 15, 2017)

I'm interested to hear from US citizens that are residing in Portugal on this. Other countries like the UK have different tax agreements than the US.

The US agreement in particular seems to have a special section for US Citizens where it creates an exception in the Protocols section, to tax US Citizens.


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## dancebert (Jun 4, 2015)

zugba said:


> I'm interested to hear from US citizens that are residing in Portugal on this. Other countries like the UK have different tax agreements than the US.
> 
> The US agreement in particular seems to have a special section for US Citizens where it creates an exception in the Protocols section, to tax US Citizens.


Maybe this will be useful. It's about how the IRS treats some double taxation where the treaty says the foreign country *may* tax a US income source. 

After a deep dive into tax stuff, I posted my conclusions. The context was IRS, pensions and Spain. I'm not close enough to applying for a Portuguese visa to have examined that context. Seems the IRS regulations apply regardless of country and income source, in my humble and unprofessional opinion.

http://www.expatforum.com/expats/sp...-united-states-retirement-6.html#post11508874 Links on the page to posts by a blogger who opened my eyes to the exception that violates conventional wisdom about US citizens paying foreign taxes.


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## alexandrerocha (Sep 8, 2017)

Hi,

I am an accountant in Portugal and an expert in fiscal law.

Please contact me if you need help on tax matters, such as getting the NHR.

Thank you.

Kr.


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