# Expat tax



## siobhanwf

We have a new section of the forum especially for those sometimes complicated tax questions that can arise for expats all over the world!!

Expat Tax - Expat Forum For Expats, For Moving Overseas And For Jobs Abroad


----------



## rfeddes

Hello everyone,

lately I have read on different websites about 

Portugal offers the new tax resident an income tax free holiday for 10 years, including receiving your pension tax free. They have a reasonable range of double tax treaties to protect the income from being taxed in the country of origin. Capital gains however remain taxable in most circumstances in Portugal, except that gains on the sale of UK property by a Portuguese resident is tax free. Legitimate offshore structures are available to shelter gains and income regardless of the new 10 year exemption.

The 10 year tax holiday was introduced back dated to 1st January 2009, but the Portuguese tax authorities have been dragging their feet on granting any exemptions, placing several (probably illegal) hurdles in the way. Nonetheless, with careful planning, this exemption will have to be granted and if combined with some other tax structures, makes Portugal an attractive haven. 

I am from the Netherlands and live in Thailand at the moment. Portugal does have an agreement with the Netherlands concerning double taxation.

Does anyone knows anything about this issue?

Irene


----------



## siobhanwf

rfeddes said:


> Hello everyone,
> 
> lately I have read on different websites about
> 
> Portugal offers the new tax resident an income tax free holiday for 10 years, including receiving your pension tax free. They have a reasonable range of double tax treaties to protect the income from being taxed in the country of origin. Capital gains however remain taxable in most circumstances in Portugal, except that gains on the sale of UK property by a Portuguese resident is tax free. Legitimate offshore structures are available to shelter gains and income regardless of the new 10 year exemption.
> 
> The 10 year tax holiday was introduced back dated to 1st January 2009, but the Portuguese tax authorities have been dragging their feet on granting any exemptions, placing several (probably illegal) hurdles in the way. Nonetheless, with careful planning, this exemption will have to be granted and if combined with some other tax structures, makes Portugal an attractive haven.
> 
> I am from the Netherlands and live in Thailand at the moment. Portugal does have an agreement with the Netherlands concerning double taxation.
> 
> Does anyone knows anything about this issue?
> 
> Irene



Hi Irene 

This has previously been discussed on the forum. I will see if I can trace back to the original thread


----------



## siobhanwf

FOUND IT 


http://www.expatforum.com/expats/po...living-portugal/70181-portugal-tax-haven.html


Have a read Irene.


----------



## rfeddes

Hello Siobhán,

I just have read the messages. Is it possible to pass me the links?
Thank you very much.
Irene


----------



## siobhanwf

You might like to try and get hold of this book by Belvin Franks.

http://www.blevinsfranks.com/en/content/438/Financial_Guide_Books


----------



## rfeddes

thanks Siobhán!


----------



## siobhanwf

rfeddes said:


> Hello Siobhán,
> 
> I just have read the messages. Is it possible to pass me the links?
> Thank you very much.
> Irene




No links were posted but you might try googling _10-year income tax exemption portugal_


----------



## canoeman

pm Robc


----------



## harryw

Irene
I am a US citizen, living in Thailand and planning to spend a good deal of my retirement living in Europe. I was set on Spain, but having read more about their inheritance tax and requiring disclosure of all bank accounts, it has scared me off. If you gained any more information on Portugal taxes, i would be grateful if you could share with me. Thank you


----------



## canoeman

Inheritance issues for non Portuguese are beneficial as Portugal accepts the inheritance laws of your country of birth, so if your American you can leave your estate as American Law dictates, there is no inheritance tax to spouse, *your *children, parents, legacies to others Stamp Duty of 10% of* taxable* value.

As a resident you should make a yearly IRS return declaring world wide income, Portugal has dual treaty with USA so you don't get taxed on same money twice, but you need to research the tax implications for your own specific case, whether you comply 10 yr scheme or whether it would suit you etc, before you decide whether you'd like to live here or start the Residence application process


----------



## harryw

Thank you. This is a much better situation than Spain. Would you be able to suggest any cities that have charm, but a reasonable cost of living? Spent most of my time looking in Spain and now I am writing it off


----------



## canoeman

My personal preference is Coimra


----------



## harryw

Thank you, I just happened to be looking at Coimra


----------



## fromhereonout

Looking at moving to Portugal myself, live in the US right now and am finishing up grad school. Likely moving over there regardless, but this would be quite the bonus if everything fell into place and my wife and I qualified.


----------



## harryw

As I am at retirement age, inheritance tax is a big vonsideration. What is the pull of Portugal for you?


----------



## fromhereonout

I actually lived there already from 2007-2009 before I was married doing service for the church there. I learned Portuguese over that time interacting and working with Natives the entire time, so that is always nice to have in my back pocket. But ultimately I just fell in love with the culture and how relaxed and laid back the feel is there (in comparison to America at least haha). Also, the prospect of being able to travel so cheaply from country to country in Europe is a big pull for us as we would love to visit all the cool places it would otherwise cost $3,000 for us to just fly over there from here in the States.

We have friends throughout the country as well which is nice, natives, but a few are fluent in English which will be nice for my wife who doesn't know much of the language at all. I lived in Porto and Viana do Castelo during my time there so those are likely the spots we would consider moving back to, although I know the expat community is typically in the south in Algarve or Lisboa, etc. 

I need to speak with someone there, an accountant or lawyer, that knows more than me about this stuff, but we would be self-employed. I recently started a business online and our income would be coming from that. Anyway, not 100% sure about which income taxes fall under that tax holiday or not, but since we are still so young we don't really have any other income or pensions or retirement or inheritance, etc. Appreciate any feedback or knowledge you guys have, and I hope things are going well over there!

Preston


----------



## canoeman

Preston, no your income wouldn't come under that scheme or the golden handshake scheme, your 1st hurdle would be applying for Residence the natives might not like being referred to as such yes there's a large concentration of expats in the Algarve but there are far more spread throughout the rest of Portugal


----------



## Yolandahana

*Tax & Tax Returns In Portugal*

_I have experimented with living in Portugal and have decided to stay here!(Portugal that is). Sorry to dig up an old issue but it pertains to declaring my income and whether I will be taxed on it. My income is my NHS pension, widow's allowance and a small pension of my husband's. I have read through posts in threads but would appreciate a simple update summary... Cookbook style would be appreciated. I should mention I am a UK citizen. Many thanks._


----------



## canoeman

As you've decided to stay then you should register as a Resident, as a Resident your required to file a Tax Return each year 
Portuguese Tax Year is Jan to December as Bicky just posted returns made as below

Statements delivered on paper: 
a) from 1 February until 17 March to declare income exclusively in categories A and H, 
b) from 16 March to 30 April, in the remaining cases. 
statements sent over the Internet: 
a) from March 10 until April 15 to declare income exclusively in categories A and H, 
b) from 16 April to 25 May, in the remaining cases.

The Tax Law has changed it's now necessary to make a return if your pension/s are *+293€ pm * but this doesn't necessarily mean you'd pay any tax, it's advisable to use an account first year or so to understand system and if there's any claimable items in your income, expenditure


----------



## Yolandahana

canoeman said:


> The Tax Law has changed it's now necessary to make a return if your pension/s are *+293€ pm * but this doesn't necessarily mean you'd pay any tax, it's advisable to use an account first year or so to understand system and if there's any claimable items in your income, expenditure


Many thanks. My pension is taxed at source which means The Tax Master in the UK gets the tax prior to me receiving my pension. Am I wrong in assuming that I would not be taxed again in Portugal, if I am already taxed in my country of origin? I better chat to an accountant


----------



## canoeman

Your not taxed on same income twice, you still need to declare and show tax paid in UK. Reguires careful record keeping as it's 2 UK Tax years into 1 Portuguese tax year.

Do you mean you receive a UK Pension that *has* to be taxed in UK, like a Civil Servants if so it can be worthwhile opting for any other allowances, pensions that don't have to be taxed in UK like a standard state pension to be taxed in Portugal, you still receive your max UK Personal Allowances so reduce your UK tax liability, it's something that needs to be checked but worthwhile if sums add up


----------



## Yolandahana

_My National Health Service pension is taxed at source so I am assuming it has to be taxed in the UK. I need to check whether or not it can be transferred untaxed under the Portuguese taxation system. I am not yet eligible for State pension but will check this and other allowances, too. It would be easier to deal with one place only. Can one defer tax returns in Portugal?_


----------



## canoeman

Generally NHS pensions can only be taxed in UK, if you where opted out then you can elect UK or Portugal.
I know it sounds complicated but really depends on the value of the NHS pension and whether it's financially better for you pay UK tax on the portion that must be taxed in UK and possible tax on other allowances, pensions here, either way you still have to make a return here. 

No deferrals, if we presume your a resident at Jan 2013 then tax year runs Jan to Dec, IRS filed March to April 2014 late filing attract fines


----------



## Yolandahana

Thanks Canoeman. You are a wealth of information. I will try to sift through all this. I am sure I will panic again tomorrow and come back to whine. Until then, Thanks again


----------



## canoeman

You need to do another post, I can then send you an article that explains the possible benefit in declaring the parts of your UK pension that can be taxed in Portugal


----------



## Yolandahana

Good morning Canoeman. I have been in Portugal since last spring. I am not certain if I need to declare my income now(March/April 2013) or next year (March/April 2014). I would really appreciate more information on declaring my income here. Regards


----------



## canoeman

Officially Financas could therefore consider you a Resident for tax purposes, as you've now decided to stay then I would register your Residence here, get the S1 form from Newcastle, register that with your regional Social Services and then register with the Health Service and declare taxes for tax year 2013 from your date of residence in March/April 2014.
I'll send a PM


----------



## BrunellaSheen

fromhereonout said:


> ... I need to speak with someone there, an accountant or lawyer, that knows more than me about this stuff, but we would be self-employed. I recently started a business online and our income would be coming from that. Anyway, not 100% sure about which income taxes fall under that tax holiday or not, but since we are still so young we don't really have any other income or pensions or retirement or inheritance, etc. Appreciate any feedback or knowledge you guys have, and I hope things are going well over there!
> 
> Preston


Hi Preston, I was just wondering if you had any luck researching the tax rules regarding your internet business, and if you can recommend a professional to talk to in Portugal (hopefully Lisbon area). I too own an internet business and was wondering if keeping it registered in the US is the best and simplest way to handle it from a taxation perspective or if I should shift it offshore.

Cheers, Bru.


----------



## canoeman

Where it is doesn't really matter although its sensible to locate in the most advantageous place, as a Portuguese Resident you are bound to make a yearly IRS declaration part of which is reporting Worldwide income as is common to most countries, so location of the internet business should really be in a country that has a Dual Tax Treaty with Portugal otherwise you'll get taxed twice on same income of if you place in an "offshore" a higher rate of tax, Portugal also has disclosure agreements with a lot of "offshore" countries so beware


----------



## BrunellaSheen

Thanks Canoeman, that was my conclusion as well, but thought it was worth asking about in case there were other considerations. By the way, I don't suppose you could recommend a reliable English speaking tax specialist near Lisbon or the Silver Coast could you...?

-- Bru.


----------



## canoeman

Sorry not my area, you could PM Rob and ask him


----------



## Goldeneye

canoeman said:


> Inheritance issues for non Portuguese are beneficial as Portugal accepts the inheritance laws of your country of birth, so if your American you can leave your estate as American Law dictates, there is no inheritance tax to spouse, *your *children, parents, legacies to others Stamp Duty of 10% of* taxable* value.
> 
> As a resident you should make a yearly IRS return declaring world wide income, Portugal has dual treaty with USA so you don't get taxed on same money twice, but you need to research the tax implications for your own specific case, whether you comply 10 yr scheme or whether it would suit you etc, before you decide whether you'd like to live here or start the Residence application process





harryw said:


> Thank you. This is a much better situation than Spain. Would you be able to suggest any cities that have charm, but a reasonable cost of living? Spent most of my time looking in Spain and now I am writing it off



Spain is kicking itself in the foot .. ... I am still trying to get a definitive answer to this .. as I too would love to move to Spain, however, future Inheritance from parents would play a part in this decision.. 
I think it would feel like dishonouring their hard work and memory if we were to move to Spain and later any inheritance be taxed (as income on our tax return) by a Spanish Government when the money was earned and they paid their taxes in a different country..
If this is indeed the case we will not become fiscal residents of Spain.. Such a shame they don't adopt a policy where they honour IHT laws of the country and Citizenship of the beneficiary... They would have more people choosing to live there and they would benefit by the fact that those people would buy houses and choose to use the goods and services of the country...
..
..
..


----------



## canoeman

Then you might need to wait until the EU make new proposals on Succession Law across EU that follow Portugals recognition of country of birth as applicable law and UK's non forced heir inheritance, but it might be a couple of years yet until it happens and I believe that countries could still opt out so there's no guarantee that Spain will or would change current Law.

Current situation is that you moving to any country and becoming a Resident you must abide by that Countries Laws, if Succession and Inheritance is a major issue to you there are very few Continental Countries that follow Portugals and as you say
" When you travel, remember that a foreign country is not designed to make you comfortable. It is designed to make its own people comfortable ~ Clifton Fadiman"


----------



## Goldeneye

Thanks for your response.. 
So am I correct in thinking that when it comes to IHT Portugal respects the rules of its residents country of birth?

I have no problem filing tax returns in Portugal, I just shook my head reading some of the British ex-pats get their nose outta joint when Spain started asking for information and for their fiscal residents to declare all 'worldwide' income and property... This in my opinion was getting in line with what other countries requirements have been for years ( In Canada we have to declare worldwide assets )

After hubby had a series of health scares I found myself feeling increasingly isolated from Family and friends in the UK.. Hence the need to be closer to 'home'

Now... My next question will be on Healthcare, I'll post a separate thread for that one.

...


----------



## canoeman

Yes it does, so your Will can reflect your Nationality and must be legal in that country but still comes under Portuguese Probate and Tax Law. The Will is only and should only cover Portuguese assets.

Portuguese Tax Returns yes you have to declare Worldwide *income* but not assets as is now the case with some EU countries a *very different thing*, equally Portuguese IHT? there is no Inheritance Tax in Portugal. it's been replaced by IS Imposto Selo (Stamp Duty) and certain relations inherit certain things "free" of IS.

Your flag says your both British? in which case you would not reguire private medical insurance for health care but as Portuguese Residents can enroll in State NHS


----------



## Goldeneye

canoeman said:


> Your flag says your both British? in which case you would not reguire private medical insurance for health care but as Portuguese Residents can enroll in State NHS


Yes, we are both British, although we moved to Canada 24 years ago.. In Spain I don't think we would be entitled to healthcare as we would not be coming from UK but from Canada and haven't paid a UK stamp for 24 years.. I assumed in Portugal it would be the same situation..
My husband is going to be in the UK visiting his Mum and is going to stop in at 'A place in the Sun' event in Olympia.. This is the question I have written for him to ask the Spanish panel...

My wife and I are both under retirement age and although British we have spent the past 24 years living in Canada.
In the past I have had a series of health issues which although recovered from would make private insurance out of the question, it would be too expensive. We would like to move to the Costa Blanca, what are the options for us with regard to Medical coverage.
In Canada each Province has monthly fee ‘resident based’ healthcare, in British Columbia this is known as The B.C. Medical Services Plan … We pay a set monthly premium which is not based on past illness or pre-existing conditions. 
We were given to understand that a ‘pay in’ system may now be an option available in different autonomous regions of Spain? 
We would like to move to The Costa Blanca Is something similar available?

Canoeman, It is looking increasingly unlikely that Spain will work, so we are now also considering Portugal..

Cheers


----------



## canoeman

As your British by birth and therefore EU Citizens you have the right to live in any EU Country, Portugals NHS service registration is based on your Resident Status the Nationalities that reguire Private Medical Insurance in Portugal are those where a Portuguese National would have to pay for Health cover in that country like the USA, don't know whether Portugal and Canada have a reciprocal Health agreement but either way you sidestep this requirement by being British.

You should add to the question "in light of new tougher legislation" as I believe that Healthcare for Expats has changed recently


----------



## rezafazeli

*Tax 2013 report for income from abroad*

Hi everyone,
I was working for the University of Iceland while, I was in Portugal.
I was told to filled out the Annex J, but I faced two errors:

J199 : O preenchimento dos campos 403, 404, 405 ou 406 sobre o montante da renda , a entrega do anexo B ou no anexo C.

J018 : Campo 403 relativa aos rendimentos e opções sobre Globbing da Tabela 4 , Anexo J , não pode ser concluída na 1 ª fase do IRS.

Any guidance is highly appreciated

Reza


----------



## canoeman

What exactly was your employment status? you say employed by University of Iceland but how? affects how and which Anexo you file or need to file
J199 is referring you to sections on Anexo B&C which suggests you might have entered some value in the wrong places 
J018 is telling you can't complete this employment payments at this time i.e. pre end April

For what a Portuguese Accountant charges think you'd be better getting some professional advice


----------



## rezafazeli

thanks for the message,
it was a research project directed by the university of Iceland, therefore I filled out the section 403, independent work, is it wrong?
so, according to J018, should I wait until the end of April?


----------



## canoeman

It goes a bit deeper than that, where you employed directly and received a salary after deductions or self employed, did you* register *as self employed, I'd say again I think you have issues here that it will be cheaper to get professional advice than file an incorrect return


----------



## rezafazeli

Actually, I tried to contact a few people in tax authority in Porto, but as i am in Iceland now, they didn't replied back to me!
I received my salary after issuing an invoice with my Portuguese tax number and I didn't pay the tax in Iceland after receiving the note from Tax authority of Portugal confirming my exemption from paying the tax in Iceland as a result of double taxation agreement between Portugal and Iceland!
I am totally lost with the tax forms (module 3, annex B and J)
Please help


----------



## canoeman

It would sound as if you should have registered as Self Employed and under the Simplified Tax Regime as you got paid on Invoiced amount and also with Social Security

Basically you can't complete forms because it seems as if you didn't register correctly in first place, so every time you try to complete they'll show errors

Sorry but the only way to rectify or get a course of action is via an accountant


----------



## Melissa58275

*10-year scheme- US citizen?*

I have just read over this thread and looked at some other outside information on Portugal's 10-year tax foreign pension scheme, including the US/Portugal tax treaty. Unfortunately, I can't tell what most of the legal mumbo-jumbo means. 

So, Ihoping someone can clarify the situation for me...not all the ins and outs, of course. I will consult an attorney familiar with both US and Portuguese tax laws. But maybe to the point of clarifying that no, it does not mean that my pension would likely be free of both Portuguese and US income taxes. Or yes, it very well might be tax free. 

I am a US citizen, contemplating retirement in Portugal. I will be receiving a pension from my private employer in the US. Is it correct that if I qualify as a non-habitual resident in Portugal, under the terms of Port.'s 10-year tax free scheme and the US-Portugal tax treaty, my pension income would also be free of US income tax? Wow...what a benefit that would be. 

It seems like SUCH a good deal that I can't really believe it.

Thanks for any help you can provide.


----------



## canoeman

Personally I think you're misreading the NHR scheme, yes it's been clarified that pension income is included but re foreign earnings i.e "pensions" or any other earnings it also clearly states that
tax must have been paid in country of source so in certain conditions would be exempt from Portuguese Tax for 10 years.

The Dual Tax treaty should allow you (not familiar with USA one) to either recover tax from USA Tax authorities on USA income/pensions which will be taxed in Portugal or opt to be 100% taxed in Portugal

You need advice but you also need to check the cost of setting up the NHRS against any Portuguese savings and equally opting to just pay all your tax here as a Rresident


----------



## Melissa58275

*Too good to be true*



canoeman said:


> Personally I think you're misreading the NHR scheme, yes it's been clarified that pension income is included but re foreign earnings i.e "pensions" or any other earnings it also clearly states that
> tax must have been paid in country of source so in certain conditions would be exempt from Portuguese Tax for 10 years.
> 
> The Dual Tax treaty should allow you (not familiar with USA one) to either recover tax from USA Tax authorities on USA income/pensions which will be taxed in Portugal or opt to be 100% taxed in Portugal
> 
> You need advice but you also need to check the cost of setting up the NHRS against any Portuguese savings and equally opting to just pay all your tax here as a Rresident


Thanks canoeman. I thought it was just too good to be true! Googling the 10 year tax holiday got me a bunch of stuff put out by various tax accountancy/law firms, which simply said an "occupational" pension from a foreign source would qualify for the holiday and that under most tax treaties it would also be free from tax in the originating country. The US Portugal tax treaty under pension income seems to say that private pensions ( ie other than social security or civil service government pensions) are taxed in the country where the person is resident. 

Thus it seemed to confirm what the accountancy/ tax flacks were touting... That is, my pension would be taxed in Portugal and since it would be tax free in Portugal, I wouldn't owe taxes on it in the US. That of course directly contradicts everything else I've read that makes it clear that Uncle Sam gets his dollar no matter where you earn it or receive it, but a girl can dream, right? Guess it is more complicated that the news reports and info from the likes of Deloitte Touche let on. Thanks for taking the time to answer.


----------



## canoeman

It doesn't hurt to double check


----------



## TonyJ1

canoeman said:


> Personally I think you're misreading the NHR scheme, yes it's been clarified that pension income is included but re foreign earnings i.e "pensions" or any other earnings it also clearly states that
> tax must have been paid in country of source so in certain conditions would be exempt from Portuguese Tax for 10 years.
> 
> The Dual Tax treaty should allow you (not familiar with USA one) to either recover tax from USA Tax authorities on USA income/pensions which will be taxed in Portugal or opt to be 100% taxed in Portugal
> 
> You need advice but you also need to check the cost of setting up the NHRS against any Portuguese savings and equally opting to just pay all your tax here as a Rresident


Under the NHRS rules, tax does not have to be paid in the country paying the pension (though if tax is paid, that is usually the end of the story), but there are some conditions (e.g. the pension cannot result from a deduction claimed on previous Portuguese tax returns, etc). However if you have not had a previous or current link to Portugal (already have a Portuguese tax number, or current residency - there are time rules), the exemption should be relatively straight forward. However you should take proper advice before settling in Portugal, because if the right paperwork is not correctly and timeously submitted, there is no possibility for late applications.

Essentially the rules are designed to prevent previous Portuguese tax payers from taking advantage of these rules, though with some planning and depending on circumstances, returning emigrants arealso able to benefit from this scheme.


----------



## Melissa58275

Ok, so I am heartened but confused. I have no previous connection to Portugal. I am planning to retire in jan 2015 in the U.S. I have a pension coming to me from the private company I have been employed with for the past 30 years. In addition I have retirement savings in 401(k) and IRA accounts that I plan to draw on. If I stayed in the u.s., my income from the pension would be taxed as ordinary income. if I move to Europe and become a resident there, I would expect to be taxed by the US on my pension income, subject only to the double taxation rules of the treaty the US has with whatever country I land in....in other words I will pay tax to my country of residence, and if that is less than I would owe to the US, I will pay the difference to the US. It seems that Tony is saying that under the 10 year scheme I may in fact be off the hook for the US tax. Again Thai seems to good to be true. Perhaps someone can suggest a tax expert I could consult?


----------



## TonyJ1

I am no expert on USA taxes, but it appears you are able to have your pension payments paid without withholding taxes (excludes public pensions and social security pensions which in the case of the US/Portuguese DTA - the paying country has the rights to tax) paid gross in Portugal. You would still be liable to submit a US return as a US citizen. You maybe subject to US taxes, but you should obtain specific US tax advice.


----------



## canoeman

You really need to go to one of the big firms like PWC who are international accountants, their fees reflect their size afraid my reading of the Scheme is different to TonyJ1

http://www.pwc.pt/pt/fiscalidade/imagens/pwc_europe_best_kept_secret.pdf

see Page 6


----------



## Melissa58275

Canoeman and Tony: Thanks for the info. At this point, I'm pretty certain that my pension would still be subject to tax in the US. Uncle Sam doesn't give up his hold lightly. Still, it apparently would mean that I wouldn't owe any additional taxes to Portugal. Don't know if that would have been the case anyway....depends on what Portuguese tax rates vs. US are.

Portugal still seems an extremely attractive option for retirement. Looking forward to doing a reconnaissance visit early next year.


----------



## canoeman

Portugals tax rates are progressive pension fractionally different to income, lot of useful information on PWC site http://www.pwc.pt/pt/fiscalidade/imagens/pwc_europe_best_kept_secret.pdf


----------



## TonyJ1

canoeman said:


> You really need to go to one of the big firms like PWC who are international accountants, their fees reflect their size afraid my reading of the Scheme is different to TonyJ1
> 
> http://www.pwc.pt/pt/fiscalidade/imagens/pwc_europe_best_kept_secret.pdf
> 
> see Page 6


Precisely - If there is double tax treaty, and in terms thereof the pension is subject to tax in the paying country *or*no deduction was made in Portuguese tax returns then the pension is tax free in Portugal see original legislation Article 81 paragraph 5 of the Portuguese Individual Tax Code - applied to my clients who are on the NHRS - no problem


----------



## Foradarede

Hello

I have had a sift through this forum and I don't see anyone who seems to be in my position.

I am from the UK and I have been in Portugal for over a year now. I have a lump sum in a bank in Spain, and I am planning to use about a quarter of that to buy cheap land and set up a small home here.

I do not have income whatsoever from anywhere.

I am not retired. The last time I worked was in the UK in April 2013.

I have no clue what I am supposed to be doing with regards to taxes, or what benefits I am entitled to, such as healthcare.

I am not here with the intention of receiving benefits just because I am not working. My plan is to set up a home and then maybe do a bit of self-employed work - selling my home-made creations at market or via some shops and via the internet. I will be living modestly, off-grid, growing my own foods and not running a car. I will have sufficient funds to keep me going for a few years, after which I should have managed to set up a little business.

I would be grateful if anyone can tell me whether I should be doing something like declaring my situation or filling in tax returns or whatever?

A Portuguese friend tells me that when he fills in his tax return he can include what he pays for food etc., but then he is on benefits, so I don't know anything about keeping receipts for daily items or whether I could benefit from this as well, if I am supposed to be filling in such forms myself.

Sorry if I am being vague - that's because I have no clue!

Thank you for your help!


----------



## canoeman

If your a registered resident which you are then you can register with the Health Service and receive same treatment and costs as a Portuguese Citizen.
How difficult or easy to register will depend on your Centro de Saude as they all vary.

As you don't contribute to the Social Security system you are not entitled to any benefits

As a Registered Resident your primary responsibility for declaring any income, interest, earnings and paying any tax is to Portugal.

As your currently not earning or receiving a Pension then your tax responsibility is declaring interest earned on the money you have in Spain and should Portugal tax you on 100% of interest to then recover the tax element your entitled to from Spain, or move funds to Portugal.

If you start self employment, internet selling then whether you ignore the requirement to register as self employed and possibly pay Social Security is your decision but officially you should.

To not pay Social Security your earnings must be less than 2,725 or 2,275ish get confused on this one


----------



## Foradarede

Great Canoeman, that's very helpful, thank you.

The only bit I am not clear on is the bit about taxing the interest earned on the money in Spain. It's not a lot each month, but are you saying Portugal taxes 100% on the interest? Sorry I am not sure what you mean.

The other thing is that the money in Spain is not just in my name, but in my sister's as well. She is still in the UK. Does that make a difference?

Thanks.


----------



## Foradarede

Also - do I have to start filling in tax returns, even if just to say I am not on any income? 

If so, where do I go to start this process please? 

Thanks


----------



## canoeman

As Portugal is your country of residence then it is to Portugal you owe any tax, Dual Tax treaties say you should only be taxed on the same income once but under EU savings directives then Spain is entitled to a max of 10% of any taxation on interest Portugal the rest.

Portugal seems to be now taxing any interest at a rate of 28% from outside Portugal at 100% which you must pay, then it's up to you to recover the difference less the 10% Spain's entitled too so you are effectively only being taxed once on same income.
Don't know Spanish tax on interest but you are bound by Portugals Tax Law on reporting and percentages.

Value of interest is not the issue it's procedure

Yes joint ownership of it does complicate life as your sister should follow same procedure with HMRC and you'll need to prove to Portugal that only 50%?? of savings/interest is yours.

It would be far easier to divide money if that is possible so each of your are solely responsible for your percentage especially as 3 countries are involved

Whether you start filling returns in is up to you, I am* unsure* if the minimum earnings/pension of below 293€ pm for* NOT* reporting also applies to interest


----------



## Foradarede

Thanks for clarifying, Canoeman.

I will do some calculations to see how much taxing of our small interest payment comes to, chat with my sister, and then decide what is worth doing. The amount of interest we get is very small as the bank is an ethical one, and that total amount in the bank is not that great.

I will double-check whether I need to start filling in tax returns - sounds like I won't have to. Do you know where I have to go to do this?

Many thanks again.


----------



## canoeman

Portugal Tax Year is January to December, IRS returns are filed the year after exact month varies depending on how income is earned

So for Tax Year Jan - Dec 2014 the return is made March to May 2015, interest only would be May


----------



## Foradarede

So if I have been here since July 2013, I should think about doing a tax return now to cover 2013?

Where do I get hold of a form please?

Thank you again for all your help!


----------



## canoeman

I wouldn't as your too late and therefore draw attention to yourself and face a possible fine, better to get yourself organized for next year and double check whether you should/must make a return, be warned lots of accountants still say or your not Portuguese don't bother, lots has changed with Financas over the last couple of years and expats are targeted far more


----------



## Foradarede

Okay - thought you might say something like this.

I will get things checked out discreetly and be prepared to fill out a tax return for 2014, in 2015.

Thank you very much, Canoeman!

Warmest wishes


----------



## MensAgitatMolem

Foradarede said:


> So if I have been here since July 2013, I should think about doing a tax return now to cover 2013?
> 
> Where do I get hold of a form please?
> 
> Thank you again for all your help!


Actually, it may be possible that under Portuguese Law you are not a tax resident in Portugal for fiscal year 2013. Seek advice.


----------



## canoeman

If you are a Registered Resident then you are a Tax Resident
If you spend more than 183 days per tax year consecutive or not you are considered a Tax Resident
If you own a property at end of December considered to be your Primary home whether you've spent 183 days or not you are considered a Tax Resident
If you are a Non Resident who earns any income in Portugal you are liable for Tax on that income

Whether you need to actually file a return depends on income and minimum value


----------



## MensAgitatMolem

canoeman said:


> If you are a Registered Resident then you are a Tax Resident
> If you spend more than 183 days per tax year consecutive or not you are considered a Tax Resident
> If you own a property at end of December considered to be your Primary home whether you've spent 183 days or not you are considered a Tax Resident
> If you are a Non Resident who earns any income in Portugal you are liable for Tax on that income
> 
> Whether you need to actually file a return depends on income and minimum value


Yes, and its source. Non resident, no Portuguese income, no tax return.


----------



## canoeman

MensAgitatMolem said:


> Yes, and its source. Non resident, no Portuguese income, no tax return.


Not strictly true as a someone Non Resident (spends less than 183 days per tax year) married or co-habiting to a Tax Resident in Portugal can have to prove that their earned income outside Portugal is not subject to Portuguese Tax so that partner is not reguired to file a joint return

In this case if you read Foradarede other posts then I believe he registered his Residence in Portugal early enough in 2013 to be considered a Tax Resident


----------



## Foradarede

Hello!

I don't have a permanent home of my own yet (am still looking), and so used my friends address to get my certificate of residency.

The interest on the money we have in the bank is so little it might not be taxed as I have no other source of income, and I would be allowed at least a few grand tax-free, so I am not too worried about tax returns at this stage.

The Spanish bank asks for proof of our address every two years (not that's it's really proof - we just have to go to a Spanish consulate and they just take our word for it), so I would have thought the Spanish govt. would have contacted us regarding interest accrued? Maybe not - somehow people are supposed to know the laws and all matters of money without anyone telling them.

???


----------



## canoeman

Whether you have a permanent home or not is immaterial, it's your residence status that defines where your tax responsibilities lie. Whether you have to make a return depends on your income, under EU directives any interest is taxed at source unless you've opted out so you and your sister might well be paying tax in Spain unnecessarily.

Persons individual responsibility to be aware of many things afraid no country I'm aware off gives you a you must do this guide and I've known Financas say to expats on two occasions ignorance of the tax law is no defence


----------



## Foradarede

Oh! Will have to check things out then. Don't want to be paying the Spanish govt. money if it's not due them!

Thanks for your help Canoeman!


----------



## Spineytoad

Trying to get my head around this aspect. As the law stands now, if I were to retire to Portugal, live in Portugal all year, but derive my income from a UK pension would I be liable to pay tax on that income to Portugal or the UK? If it is to Portugal do I have to apply for a UK exemption so that I am not taxed in the UK as well?


----------



## Foradarede

Hi Spineytoad,

Someone will correct me if I'm wrong, but I think your pension is exempt from tax in Portugal for the first 10 years of your stay here.

But please check this - as it's just something I heard or read a few months ago.


----------



## TonyJ1

There are administrative processes involved and if not timeously done, then the benefits are lost. Taxpayers are still required to submit annual tax returns and ensure that they are correctly completed - if not, then bills may still arrive through the post.


----------



## canoeman

The basic of NHRS is that tax on pensions are taxed at source so your UK pension/s are still UK taxable, it's only Portuguese earnings that are subject to lower taxation for a period of currently 10 years
This scheme is not for everyone and advice from a major accountancy firm should be sought


----------



## Spineytoad

Thanks Canoeman, so the UK will still tax the pension and only anything I earn in Portugal - assuming I do any work for which I receive an income in Portugal - will be listed on a tax return. So if I have no Portuguese income do I still have to complete a tax return declaring 'no income'?


----------



## TonyJ1

canoeman said:


> The basic of NHRS is that tax on pensions are taxed at source so your UK pension/s are still UK taxable, it's only Portuguese earnings that are subject to lower taxation for a period of currently 10 years
> This scheme is not for everyone and advice from a major accountancy firm should be sought


What you say about Pensions being taxed in the UK is correct, however, there are mechanisms to get non civil service pensions paid gross (Certificate of Fiscal Residency). The scheme is open to anyone who fulfills the conditions specified in the legislation, but what happens is that people take advice too late and prejudice getting on to the scheme.


----------



## Spineytoad

Will take advice re husbands private pension prior to the move and see if we qualify then, thanks for all the advice.


----------



## canoeman

Any expatiate from most countries should register as NON TAX PAYERS OF THEIR COUNTRY OF PREVIOUS RESIDENCE as a matter of changing Residence if they don't then there complicating their tax issues in both countries regardless of vif their entitled to NHRS


----------



## No1steveb

Spineytoad said:


> .... So if I have no Portuguese income do I still have to complete a tax return declaring 'no income'?


Not sure if this has been answered .. but would be grateful to know what it is..

with thanks..


----------



## TonyJ1

No1steveb said:


> Not sure if this has been answered .. but would be grateful to know what it is..
> 
> with thanks..


Only if you have no income - if your are resident in Portugal, you are taxed on your worldwide income - the law (including double tax treaties) may provide for exemptions / credits etc - but any income is declarable.


----------



## No1steveb

Thanks Tony, appreciate that.

I have no income in Portugal but still pay a company c. 220 euros p.a to register that fact on my Return.

That said they do pay/arrange my "land Tax" on my behalf as well.

Is the process easy enough for me to undertake this action myself ? I am a complete imbecile when it comes to tax matters so have to be led by the hand...but don't like to be taken for a ride..


----------



## siobhanwf

Your "land tax" can be paid online.

You can take control of all your tax payments by registering on the Finanças site

http://www.portaldasfinancas.gov.pt/pt/adesaoForm.action


----------



## siobhanwf

THE PORTUGUESE TAX SYSTEM explained on the site in ENGLISH

Portal das Finanças - Notícias Portuguese Tax System


----------



## JohnBoy

siobhanwf said:


> THE PORTUGUESE TAX SYSTEM explained on the site in ENGLISH
> 
> Portal das Finanças - Notícias Portuguese Tax System


Apologies for the slight thread drift Siobhan but do you have a similar link for Social Security please? I'm trying to locate the page with the form for applying for a Social Security number.


----------



## Juca

Portugal offers various incentives for new residents. You have to apply for the status it is not automatically given. Non habitual tax scheme and the golden visa scheme are two of the most popular schemes. Portugal does not have inheritance tax. 
I strongly recommend that you get expert opinion and help from a reputable law firm.


----------



## Foradarede

*I don't have to fill in a tax return, here's why*

In spring this year, I went along with a Portuguese friend to Finanças, in order to ask how I should go about filling in a tax return.

The lady at the desk there said that because I did not own a property in Portugal, I was not a taxable resident.



My situation is that I have been here over two years, have my certificate of residency but via using a friend's address, and no income to speak of. And yes, I don't own any property anywhere yet either. (Still looking!).

I just thought I would mention this here in case anyone else on this forum is in a similar position to me.


----------



## bigjohn051

*ex pat tax.*

Am thinking of retiring to Portugal. Would the tax holiday apply from the date of taking up residencia in Portugal.


----------



## TonyJ1

Foradarede said:


> In spring this year, I went along with a Portuguese friend to Finanças, in order to ask how I should go about filling in a tax return.
> 
> The lady at the desk there said that because I did not own a property in Portugal, I was not a taxable resident.
> 
> 
> 
> My situation is that I have been here over two years, have my certificate of residency but via using a friend's address, and no income to speak of. And yes, I don't own any property anywhere yet either. (Still looking!).
> 
> I just thought I would mention this here in case anyone else on this forum is in a similar position to me.


With respect to the lady at the counter - ownership of a house does not make you a resident and conversely not owning one, if you are resident, exempt you from your tax obligations -though off course you can live your whole life 'under the radar' so to speak. I would suggest the tax lady read article 16 of the Portuguese Income Tax Code - She obviously has not.


----------



## bigjohn051

*tax exemption*

Does the income tax eexemption apply from the date of taking up residency or is it backdated to 2009 when it was first annoubced. Thank you.


----------



## TonyJ1

bigjohn051 said:


> Am thinking of retiring to Portugal. Would the tax holiday apply from the date of taking up residencia in Portugal.


Article 16 of the Portuguese tax code in a rough summary:

Spent 183 days (when continuous or not) in a tax year (tax year=calendar year

Have a home which ordinarily you can consider as your permanent home (even if for 1 day) - i.e. habitual rsidence

Ordinarily if you register with the 'camara' or with SEF (Serviços de Estrangeiros e Fronteiras - Border Police Authority on the case of non EU citizens) as a resident, then the tax consequences would follow as well.


----------



## TonyJ1

bigjohn051 said:


> Am thinking of retiring to Portugal. Would the tax holiday apply from the date of taking up residencia in Portugal.


Article 16 of the Portuguese tax code in a rough summary:

Spent 183 days (when continuous or not) in a tax year (tax year=calendar year

Have a home which ordinarily you can consider as your permanent home (even if for 1 day) - i.e. habitual rsidence

Ordinarily if you register with the 'camara' or with SEF (Serviços de Estrangeiros e Fronteiras - Border Police Authority on the case of non EU citizens) as a resident, then the tax consequences would follow as well.


----------



## TonyJ1

bigjohn051 said:


> Does the income tax eexemption apply from the date of taking up residency or is it backdated to 2009 when it was first annoubced. Thank you.


If you become resident this year (2015) you have until 31 March 2016 to submit your application. No late applications whatsoever are condoned. If you became resident in 2009, your request will be rejected.

Briefly the conditions to get on this scheme:

Not a tax resident in the previous 5 years
Request submitted at the very latest by 31 March of year of taking up residence.


----------



## bigjohn051

Thank was helpful you- your response


----------



## bigjohn051

Thank you- that was helpful


----------



## Ai-ai

Does ny filipino here in lisbon portugal im new here i wanna meet any filipino.


----------



## Transcend

*NHR Passive Income*

I have been researching Portugal's non-habitual resident (NHR) regime, and hope to benefit from it. My scenario is as follows:

Early retiree. Drawing no pension yet.
Income from share-based investments (listed shares, unit trusts, etc.) held outside Portugal, for example in a UK share ISA. Income would be in the form of dividends and sales of shares/units.
Small amount of bank interest from non-Portuguese banks.
I am therefore interested only in the NHR rules on Passive Income obtained from abroad. These rules are as follows:

_Passive Income (dividends, interest, capital gains, income from fund units and real property rents) obtained abroad is exempt provided:


this income, under the provisions of the applicable tax treaties signed by Portugal, may be taxed by the source state; or
if no treaty applies, such income could have been taxed by the source state under the provisions of the OECD Model tax Convention and is not sourced in a black-listed jurisdiction.
Therefore, passive income obtained abroad will not be taxed in Portugal provided that this income could have been taxed in the source state under international tax rules. 

Note: it is not required that the income has effectively been taxed at the source state. _

The problem for me is interpreting the phrases “may be taxed” and “could have been taxed”. This appears to introduce some uncertainty. 

My income would be in the form of dividend payments and capital gains from sales of holdings from the following:


UK Share ISA, comprising listed UK shares and Luxembourg-domiciled ETFs.
OEIC and SICAV funds domiciled in the UK and Luxembourg, and held via stockbrokers in those countries.
NB: Neither the UK or Luxembourg are black-listed jurisdictions.

I need to determine if this income would be taxable in Portugal under the NHR regime. I would welcome comments from anyone with knowledge of NHR Passive Income tax rules, specifically relating to dividend payments and capital gains from shares and funds.

Many thanks for any assistance.


----------



## advolex

*NHR and passive foreign income*

Transcend: As you have received no reply, I will give you some comments, for what it's worth. As I'm not sure that I qualify for someone you'd like to receive an answer from, so you should get advice from a well-established Portuguese tax lawyer. But the advice I've received from the tax authority in PT has always been correct.

You say "The problem for me is interpreting the phrases “may be taxed” and “could have been taxed”. This appears to introduce some uncertainty."

I think the info you quote from is correct. It says that the the applicable tax treaty between Portugal and the other state (possibly UK in your case) decides if the passive income could at all be taxed in PT. As there exists a tax treaty between the UK and PT, the second paragraph quoted should not apply. If the income in question shall be taxed in the UK (according to the treaty), then it will not be taxed in PT (as the income is exempt). So, you must consult the relevant tax treaty. All PT tax treaties are available on the PT tax authority's web site, where you found the info you quoted from.

If your uncertainty is based on whether LU, where some of your income emanates from, is "the other state" in this context, then I think it is not (unless you were a taxable resident (domiciled there even) of LU when the income was earned). You would then have paid taxes on said income in your domicile. This question is possibly trickier than the first, so my reservations apply twofold.

Sorry that my attempt to clarify might have obscured your view further. The bottom line is: Check the relevant tax treaties first, then check the national tax laws whether the tax treaties should be applied in your situation. I hope that the info you gather will convince you to take the step over, it's a good and beautiful place to live.:welcome:


----------



## Transcend

advolex said:


> Transcend: As you have received no reply, I will give you some comments, for what it's worth.


Many thanks for responding to my post, and for your assurance that Portugal is a great place to live. You make some very valuable suggestions about both studying the relevant tax treaties and seeking further advice from a Portuguese tax expert. I had always intended to speak to an expert, but thought I might be able to gain some basic information from this forum.

I hate to see words like "could" and "may". I would much rather see "will" and "won't". Hopefully the tax expert will be able to make things clear. Before speaking to any expert though, I will follow your advice and consult the tax treaties.

I'm looking forward to coming to Portugal - my plan is to first spend a couple of months looking around and see what areas would suit me best.


----------



## advolex

*The Tax Code, nooo!*



Transcend said:


> ...
> 
> I hate to see words like "could" and "may". I would much rather see "will" and "won't". Hopefully the tax expert will be able to make things clear. Before speaking to any expert though, I will follow your advice and consult the tax treaties.
> 
> I'm looking forward to coming to Portugal - my plan is to first spend a couple of months looking around and see what areas would suit me best.


Enjoy your studies. I'm confident that you will find the tax treaties to be more enjoyable and worthwhile reading than the tax code. I found that to be so, and easier to follow also. 

I'm in the northern part of the country, Norte, and love the coast line here. Maybe partly because everyone praises the imminent beauty of the South or the Silver Coast. But I find it's sufficient to go there sometimes, I don't have to live there. But maybe that will change some day.lane:


----------

