# USA disability benefit taxable in Portugal?



## Mac62 (May 13, 2015)

Hi folks,

Does anyone know if this is taxable in Portugal?

Thanks in advance!


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## Moulard (Feb 3, 2017)

Its complicated. Treatment of pensions in tax treaties always is... But basically it will depend on whether the disability benefit is deemed a social security payment or a pension payment that is the consequence of past employment.

Article 20 paragraph 1(b) 


> ...social security benefits and other public pensions paid by a Contracting State to a resident of the other Contracting State or a citizen of the United States may be taxed in the first-mentioned State.


Thus if your payment is a form of social security it would only be taxable in the US - if say it was an SSDI / SSI type payment from the DSS or other US public entity.

If however it is some for of other disability benefit, paid in consideration of past employment then it would taxable by Portugal AND the US (because the following article is not protected by the savings clause)

Article 20 paragraph 1a) 


> pensions and other similar remuneration derived and beneficially owned by a resident of a Contracting State in consideration of past employment shall be taxable only in that State;


Unless it was a past employment derived benefit for work with the government paid from government funds...

Article 21 Paragraph 1(a) 



> Any pension paid by, or out of funds created by, a Contracting State or apolitical or administrative subdivision or a local authority thereof to an individual in respect of services rendered to that State, subdivision or authority shall be taxable only in that State.


In which case it would only be taxable by the US.


Here is a link to the treaty..
https://www.irs.gov/pub/irs-trty/portugal.pdf
You should also be able to find a technical memorandum that provides a slightly more plain English explanation of the text.


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## Mac62 (May 13, 2015)

Hi Moulard,

Thank you for the reply! 

It is a direct payment from the SSA and not related to any past employment, and is my only income.

I tried looking at the treaty but to be honest could not make head nor tail of it, I'll look for the plain language explanation again. I assume this would be a pretty easy answer for a tax professional if I went for a consult?


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