# Portugal, IRA & Roth IRA: My conclusions



## dancebert

I've read several several sources using the tax treaty to determine how Portugal will/should tax 2 types of US pensions: IRA and Roth IRA. But such analysis rests on the assumed meaning of 'pension'. American posters keep using that word. In Portugal, I don't think it means what they think it means.

One obvious intent of the NHR was to attract people with 'High Added Value' skills (HAVers). Portugal has 6 categories of income. Cat A (employment) and B (self employment) are income generated by the HAVers doing their HAV skills. And only when doing their HAV skills. Those same conditions apply to income in cats E, F and G. 

Non-HAVers, i.e., pensioners, can not use any of the special tax rates for income in cats A,B,E,F,G. They can only use cat H (pension) and 'Other income'. NHR has no effect on how Other is taxed.

Above explained in Article 81 of the CIRS (CIRS_01-2015.pdf) and the oft cited NHR document (IRS_RNH_EN.pdf). No links. Google the texts in parentheses.

About them pensions. I believe Portugal doesn't consider either IRA or Roth IRAs as pensions because all of the following pension type descriptions bear little resemblance to either IRA type. Evidence includes:

- Pension definitions in Portuguese tax law (CIRS Article 11) 

- Pension definitions in a Portuguese law, economics and accounting dictionary (Dicionário de Direito, Economia e Contabilidade Inglês-Português/Português-Inglês Marcilio Moreira de Castro)

- Pension definitions in the OECD Treaty Model (35 country organization that developed the source for double taxation treaties. Porgugal and the US were among the founding members. (OECD 'Revised Taxonomy for Pension Plans, Pension Funds and Pension Entities'), 

- OECD categorizes US pensions by their characteristics. Both IRA types have characteristics that don't exist in Portuguese pensions (OECD Pension Country Profile: United States)

- I've found one Portuguese tax firm that mentioned US retirement plans by name: _"Private pensions paid in the USA - occupational pensions, IRAs, 401ks, annuities, etc. - now become solely taxable in your country of residence (Portugal). These rules allow you to take advantage of beneficial elements of Portuguese fiscal legislation such as the NonHabitual Residency regime 10-tax holiday or appreciable exclusions routinely available on many forms of private pension income."_ Those exclusions exempt 85% of pension distributions from taxes. But they didn't say which forms of pensions. The silence is deafening. (Eurofinesco document S82A - Taxation of Pensions for US Citizens resident in Portugal) Occupational pensions exist in Portugal. Brit tax firms state clearly such pensions are exempt under NHR. 

- Nobody has responded to IRA discussions or my requests for such information with a 'My tax adviser/preparer, [insert name here] said a IRA / Roth IRA was exempt under NHR'. The silence is deafening.


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## Bevdeforges

I think you'll find that IRAs, 401Ks and other similar "self saving" types of pensions are generally claimed by the US as being taxable by the US IRS first and foremost. In a few tax treaties, these types of pensions are actually named specifically, but not in all treaties.

What you may have to look to are Portugal's tax laws on claiming tax relief for foreign taxes paid on these sorts of sources of income. Chances are, they aren't exempt from Portuguese taxation, but there may be some allowance for the taxes paid to the US.
Cheers,
Bev


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## Tortuga Torta

dancebert said:


> One obvious intent of the NHR was to attract people with 'High Added Value' skills (HAVers). Portugal has 6 categories of income. Cat A (employment) and B (self employment) are income generated by the HAVers doing their HAV skills. And only when doing their HAV skills. Those same conditions apply to income in cats E, F and G.
> 
> Non-HAVers, i.e., pensioners, can not use any of the special tax rates for income in cats A,B,E,F,G. They can only use cat H (pension) and 'Other income'.


I am looking through this:

http://info.portaldasfinancas.gov.p...olhetos_informativos/Documents/IRS_RNH_EN.pdf

and not sure I agree with your assessment. Note this:



> 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:


I read that as saying that if you are self-employed, in order to be exempt from taxation, you have to be self-employed as a HAV person. But, for those whose money comes from other means--E, F, and G, as long as it is obtained abroad--it's also exempt. 

So, when you go on to write:



> Non-HAVers, i.e., pensioners, can not use any of the special tax rates for income in cats A,B,E,F,G. They can only use cat H (pension) and 'Other income'.


It seems to me that a non-HAVer could, for example, have capital gains from stock holdings in the U.S. and have that be exempt. 

If you could point me to other language in the Portuguese law, maybe you can disprove this or we can try to either disprove what I'm saying or corroborate it. Thanks.


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## dancebert

Tortuga Torta said:


> If you could point me to other language in the Portuguese law, maybe you can disprove this or we can try to either disprove what I'm saying or corroborate it. Thanks.


Article 81 of the CIRS (CIRS_01-2015.pdf) It's in Portuguese, so search the document for Artigo 81. Or read the google translate of the relevant item 5, parsed for ease of reading and comparing to the NHR document you quoted:

5 - To non-habitual residents in Portuguese territory who obtain income abroad from the category B, 
received in activities of provision of services of high added value, 
with scientific, artistic or technical character, 
to be defined in the order of the member of the Government responsible for area of ​​finance, 
or from intellectual or industrial property, 
or information on experience gained in the industrial, commercial or scientific categories E, F and G, the exemption method applies,
following conditions:

I neither read Portuguese or the law, so it's unclear to me if E,F and G exemptions apply only to the HAVers, but the financial management firm euroFinesco says it's only the HAVers. I summarized their position when I wrote:



dancebert said:


> One obvious intent of the NHR was to attract people with 'High Added Value' skills (HAVers). Portugal has 6 categories of income. Cat A (employment) and B (self employment) are income generated by the HAVers doing their HAV skills. And only when doing their HAV skills. Those same conditions apply to income in cats E, F and G.


euroFinesco claims their interpretation is supported both by case law and the intent of the law. They discuss this in 2 free publications (must register first): s28a - NHR - our interpretation and s44a - NHR quandray. I probably modified those document names for my purposes, though I'm certain I didn't change the number codes. You can find them at https://www.eurofinesco.com/en/our-publications


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## Tortuga Torta

dancebert said:


> Article 81 of the CIRS (CIRS_01-2015.pdf) It's in Portuguese, so search the document for Artigo 81. Or read the google translate of the relevant item 5, parsed for ease of reading and comparing to the NHR document you quoted:
> 
> 5 - To non-habitual residents in Portuguese territory who obtain income abroad from the category B,
> received in activities of provision of services of high added value,
> with scientific, artistic or technical character,
> to be defined in the order of the member of the Government responsible for area of ​​finance,
> or from intellectual or industrial property,
> or information on experience gained in the industrial, commercial or scientific categories E, F and G, the exemption method applies,
> following conditions:
> 
> I neither read Portuguese or the law, so it's unclear to me if E,F and G exemptions apply only to the HAVers,


Yeah, I, too, neither read Portuguese (though Spanish, some, so I might be able half puzzle it out but law is tricky) nor law, and, as written in English above, that paragraph doesn't make sense to me. I mean, what does "experience gained in the industrial, commercial or scientific categories E, F and G" mean? What would it mean for one's capital gains from selling stock be providing "experience", or to have a scientific category for one's capital gains? I wonder if this translation is a little off?




> but the financial management firm euroFinesco says it's only the HAVers. I summarized their position when I wrote:
> 
> euroFinesco claims their interpretation is supported both by case law and the intent of the law. They discuss this in 2 free publications (must register first): s28a - NHR - our interpretation and s44a - NHR quandray. I probably modified those document names for my purposes, though I'm certain I didn't change the number codes. You can find them at https://www.eurofinesco.com/en/our-publications


I may try to get their publications. Is registration with them a hassle? Do they come after you via email trying to sell you their consulting services?

Also, I just found this:

How to pay zero income tax with non habitual residence in Portugal | Nomad Capitalist

and this blogger has this highly interesting fact in his post:



> It is important to note that capital gains from the sale of securities will be taxed,


What?! I'm assuming that "securities" here means stocks and bonds (what else could it mean?) So, then, what is the point of listing "capital gains" as one of the things that are exempt from Portuguese taxation under this plan...and then you actually do have to pay Portuguese tax for selling stock? 

I had been considering moving to Portugal to take advantage of this program, funding our life with yearly stock returns (in the form of long term capital gains) or Roth IRA distributions (both of which would be entirely tax free if I were living in the U.S., up to a generous exemption point for the LTCG), but now I'm not sure either of these will actually exempt in Portugal. 

For their neighbor, Spain, it seems (fairly?) clear to me that they do indeed tax all LTCG at 19-24%, and I believe they also tax retirement plan distributions (though I'm still looking into the U.S./Spain tax treaty on that one to see what they do about Roth, if anything. It's not even clear to me if they would tax a Roth _conversion_).


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## dancebert

Tortuga Torta said:


> Yeah, I, too, neither read Portuguese (though Spanish, some, so I might be able half puzzle it out but law is tricky) nor law, and, as written in English above, that paragraph doesn't make sense to me. I mean, what does "experience gained in the industrial, commercial or scientific categories E, F and G" mean? What would it mean for one's capital gains from selling stock be providing "experience", or to have a scientific category for one's capital gains? I wonder if this translation is a little off?


Yes it's off. I see now I assumed you were familiar with the frustrating results of AI translation and knew the 2 ways to improve it. First, break it down. Both Google and Bing translators make more sense* when fed small bits, like a sentence or a phrase instead of a paragraph or page. Second is compare the output of Google and Bing translators. 

*Just because it makes more sense in English doesn't mean it's a more accurate translation. Usually that doesn't matter to me, but were dealing with laws and taxes here.

>what does "experience gained in the industrial, commercial or scientific categories E, F and G" mean?

My understanding was reached by removing some of the clauses, leaving:

_non-habitual residents in Portuguese territory who obtain income abroad from information on experience gained in the industrial, commercial or scientific categories E, F and G_,

In other words, they sell their knowledge? I can't see how 'industrial, commercial or scientific' is connected to the 3 income categories.

Most descriptions of the income categories I found on the net were short and broad. KPMG defines them as:

_According to the Portuguese tax rules, there are six types of categories of personal income subject to PIT.

Category A: Employment income (that is wages, salaries, remunerations, commissions, percentages, and other fringe benefits).
Category B: Self-employment income, for example, the ones derived from carrying out any commercial, industrial, or agricultural activity.
Category E: Investment income (that is, all profits and other economic advantages arising directly or indirectly from patrimonial elements, assets, or rights of a movable nature).
Category F: Rental income (that is, amounts paid or placed at the disposal of the respective beneficiary derived from the rental of urban and non-urban immovable property).
Category G: Capital gains, for example, that are not taxed as gains of other classes of income (B, E, or F), including those arising from the onerous sale of immovable property or shares and signs of wealth.
Category H: Pensions, for example, amounts due as old age, retirement, invalidity, widowers or alimony pensions.
_
https://home.kpmg.com/xx/en/home/insights/2011/12/portugal-income-tax.html


>Is registration with them a hassle? Do they come after you via email trying to sell you their consulting services?

No and No. There is a box to tick if you want more info from them. FWIW, the President of the company is an American.

>What?! I'm assuming that "securities" here means stocks and bonds (what else could it mean?) So, then, what is the point of listing "capital gains" as one of the things that are exempt from Portuguese taxation under this plan...and then you actually do have to pay Portuguese tax for selling stock? 

Securities aren't the only source of capital gains. Selling a house or business or an artwork at a profit produces them. Yep, you pay tax on cap gains. I've only read a 3 line summary (in a euroFinesco doc) of the following, so don't bet on it: In exchange for not requiring tedious record keeping, Portugal assumes 15% of the value of sold shares is taxable.

> I believe they also tax retirement plan distributions (though I'm still looking into the U.S./Spain tax treaty on that one to see what they do about Roth, if anything. It's not even clear to me if they would tax a Roth _conversion_).

I've been country shopping. Spain was my first choice. While researching tax issues, I found a blogger describing Spanish taxes on IRA/Roth/401k, and using foreign tax credits that ran counter to all other sources - except the US IRS and the Joint US / Spain Protocol amending their double taxation treaty.
- Start here: https://www.expatforum.com/expats/e...sh-taxation-ira-withdrawals.html#post11483994
- Then: https://www.expatforum.com/expats/s...-united-states-retirement-6.html#post11508874
- I also posted a correction but after looking at it for 10 minutes, I don't see how it was relevant: https://www.expatforum.com/expats/s...-united-states-retirement-6.html#post11508922


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## Tortuga Torta

dancebert said:


> Securities aren't the only source of capital gains. Selling a house or business or an artwork at a profit produces them. Yep, you pay tax on cap gains. I've only read a 3 line summary (in a euroFinesco doc) of the following, so don't bet on it: In exchange for not requiring tedious record keeping, Portugal assumes 15% of the value of sold shares is taxable.


I know securities are not the only kinds of capital gains; selling real estate is one of the other most common sorts of capital gains, of course. But I was just expressing my great surprise at the idea that NHR program taxed capital gains _if they were securities_. I need to lock down this issue, because that's not acceptable to me.

For your summary quote above, does that mean that let's say you made 100k worth of stock returns in one year (unrealistically high for me, but just to make the math easy), then you'd have pay capital gains tax on 15% of that, or $15,000 (well, the Euro equivalent)? Then the rate would be 19-24% on that. If so, 21% of 15k is $3,150. So the effective tax on that 100k is actually only 3.15%. Not _that_ bad. But given for a married couple in 2018, $77k of capital gains (if that is all the money you made that year aside from Roth distributions) is tax-free, it's not great, either.

We should really 100.0% lock down if NHR people get securities profits taxed. Where does it say that in the Portuguese code for the NHR program? (Because all I've seen on their page in English is that capital gains are exempt, period.)



> I've been country shopping. Spain was my first choice. While researching tax issues, I found a blogger describing Spanish taxes on IRA/Roth/401k, and using foreign tax credits that ran counter to all other sources - except the US IRS and the Joint US / Spain Protocol amending their double taxation treaty.
> - Start here: https://www.expatforum.com/expats/e...sh-taxation-ira-withdrawals.html#post11483994
> - Then: https://www.expatforum.com/expats/s...-united-states-retirement-6.html#post11508874
> - I also posted a correction but after looking at it for 10 minutes, I don't see how it was relevant: https://www.expatforum.com/expats/s...-united-states-retirement-6.html#post11508922


So, yeah, looks like Spain flat-out taxes the damn Roth. That's really a shame, because the whole point of the Roth is you have _already_ paid your taxes on that money when it went in (or you were fortunate enough to be able to do some of a tax-deferred retirement plan to Roth conversion in a year when you made very little money). So now you're getting double taxed on Roth. You wouldn't get double taxed on traditional IRA, though your tax rate would definitely be higher in Spain than in the U.S.

Spain is my first choice, too, by a mile (for personal/family reasons with my wife). But I was even thinking of maybe living on the eastern edge of Portugal for this program and making it over to Madrid here and there throughout the year. But maybe it's just as good to live in Lisbon and take the express flight, an hour or so. We have (Spanish) friends who do just that.


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## Tortuga Torta

dancebert said:


> In exchange for not requiring tedious record keeping, Portugal assumes 15% of the value of sold shares is taxable.


I was looking into it further and just found this (from here):



> While capital gains from the alienation of real estate may under the double taxation treaty be taxed in the country in which the property is located and will therefore be exempt in Portugal, capital gains from the alienation of other types of property (notably securities) are taxable only in the beneficiary's country of residence. As such, *capital gains from the sale of securities will be subject to tax in Portugal, currently at a flat rate of 28%.*


Ugh! 

So, for me, that basically puts 100% of the onus on Roth IRA distributions--if they don't tax those (and you're contending that they might). But I currently have precisely _zero_ dollars in Roth vehicles, and can only make tax-free contributions into Roth by doing Roth conversions, but that is only possible in years in which I stay within the "0% tax bracket" (meaning years in which income-other-than-long-term-capital-gains is well less than $24k). Which isn't 2018 or 2019. And there is talk of ending the NHR program or bringing it to a 5-10% tax next year anyway. So Portugal, at least for a few years, is no better than Spain for us.

Next stop, looking into how Belgium doesn't tax long term capital gains.... Time to brush up my French?


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## dancebert

Tortuga Torta said:


> We should really 100.0% lock down if NHR people get securities profits taxed. Where does it say that in the Portuguese code for the NHR program? (Because all I've seen on their page in English is that capital gains are exempt, period.)


Artigo 81 of Decreto-Lei n.º 249/2009 
https://dre.pt/pesquisa/-/search/490420/details/maximized

Don't know if you've seen it in the NHR documents, but income exempt from taxes is used to determine the tax rate on all other income. For example, you have 20k exempt and 30k taxable. The taxable will be taxed as if your total taxable income was 50k




Tortuga Torta said:


> Spain is my first choice, too, by a mile (for personal/family reasons with my wife). But I was even thinking of maybe living on the eastern edge of Portugal for this program and making it over to Madrid here and there throughout the year. But maybe it's just as good to live in Lisbon and take the express flight, an hour or so. We have (Spanish) friends who do just that.


Are you aware that until you are a permanent resident, the amount of time outside the country per duration of permit (eg., 1 year temporary residence permit, or 2 yr residence permit) is limited?


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## Tortuga Torta

This is just getting better and better. I'm hoping that eventually it will come to light that Portugal also requires you to sign over your eternal soul. I'll address the particulars:



dancebert said:


> Artigo 81 of Decreto-Lei n.º 249/2009
> https://dre.pt/pesquisa/-/search/490420/details/maximized
> 
> Don't know if you've seen it in the NHR documents, but income exempt from taxes is used to determine the tax rate on all other income. For example, you have 20k exempt and 30k taxable. The taxable will be taxed as if your total taxable income was 50k.


<sarcasm> Sure, of course, in for a penny, in for a pound. I was thinking of just taking whatever tax I'd owe them and just doubling it each year, just to be sure. 
</sarcasm>



> Are you aware that until you are a permanent resident, the amount of time outside the country per duration of permit (eg., 1 year temporary residence permit, or 2 yr residence permit) is limited?


No, I wasn't. This is for Portugal, specifically? Or is it also true for Spain? Do you know what those limits are?

Frankly, if you see my previous reply, the one with "Ugh!" in it, I've already written off Portugal at this point unless I can figure out some clever way to work the Roth angle and they don't tax the Roth distributions. It seems NHR only really benefits a rather specific set of people, of which I am not a member.

Starting to wonder if a 3-month Shengen visit to Spain, renting a cottage in the off season, 1-2x a year (and otherwise just living in the U.S.) might just be enough. Probably won't sit well with my wife. Even the idea of applying for a resident visa in Spain for a <183 stay (or maybe almost a year, if you arrive and leave in early July), and the fees and waiting and paperwork, makes my blood run cold.


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## dancebert

Tortuga Torta said:


> This is just getting better and better. I'm hoping that eventually it will come to light that Portugal also requires you to sign over your eternal soul. I'll address the particulars:


Well, Social Democracies don't fund themselves. Somebody has to get milked. Drained. Blood let. Used up and tossed - oh you get the picture.




Tortuga Torta said:


> No, I wasn't. This is for Portugal, specifically? Or is it also true for Spain? Do you know what those limits are?


Portugal. Wouldn't surprise me if it was common in other EU countries.


The limits:
https://sites.google.com/site/leximigratoria/artigo-85-o-cancelamento-da-autorizacao-de-residencia

2 - Without prejudice to the application of special provisions, the residence permit may also be canceled when the person concerned, without reasonable grounds, is absent from the Country:

(a ) holding a temporary residence permit , six consecutive months or eight months interpolated, within the total period of validity of the authorization;

b ) Holding a permanent residence permit , 24 consecutive months or, within a period of three years, 30 interpolated months.




Tortuga Torta said:


> Starting to wonder if a 3-month Shengen visit to Spain, renting a cottage in the off season, 1-2x a year (and otherwise just living in the U.S.) might just be enough. Probably won't sit well with my wife. Even the idea of applying for a resident visa in Spain for a <183 stay (or maybe almost a year, if you arrive and leave in early July), and the fees and waiting and paperwork, makes my blood run cold.


I've come to the same conclusion. Spend the high season in Thailand, Spring and Fall in wherever. If I find I don't like that, maybe by then there will have been enough Americans audited so the rulings and case law makes clear just what the fracking NHR benefits are for us. Of course, by then there may be no more NHR...


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## Tortuga Torta

dancebert said:


> Well, Social Democracies don't fund themselves. Somebody has to get milked. Drained. Blood let. Used up and tossed - oh you get the picture.


I was a fan of _The Strain_ TV show, so do get the picture.



> (a ) holding a temporary residence permit , six consecutive months or eight months interpolated, within the total period of validity of the authorization;
> 
> b ) Holding a permanent residence permit , 24 consecutive months or, within a period of three years, 30 interpolated months.


That's actually not that bad, though it's moot if I wouldn't be moving to Portugal anyway.



> I've come to the same conclusion. Spend the high season in Thailand, Spring and Fall in wherever.


Where do you live now?

Also, what's your take on the idea that one could live in Spain and just pay the taxes, but with two compensating facts: 

1) That one could later return to the U.S. with some Foreign Tax Credits, and apply those to whatever taxes in the U.S. (within 5 years, I think) one wants...of course, if one is in a pure Roth/LTCG income, there would be no taxes to pay anyway). I haven't yet been able to understand how the Foreign Tax Credit works and if it would apply in the case in which I paid Spanish income tax on long term capital gains from the U.S. stock market. 

and, 

2) that life there might be generally cheaper than in the U.S., such that although one would pay significantly more in income taxes, one saves that same amount, roughly, in property taxes, fruits and vegetables, eating out, etc. I have not at all done the math of this, but I have noticed that produce seems mostly almost half the cost where I look around Madrid. Gasoline is so high, though. Property taxes are very low.


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## dancebert

Tortuga Torta said:


> Where do you live now?


Hua Hin, Thailand



Tortuga Torta said:


> Also, what's your take on the idea that one could live in Spain and just pay the taxes, but with two compensating facts:


All I know about foreign tax credit as it applies to me was from the links to the blogger I posted. And it's been too long since I read that to remember anything other than it is/maybe a way to reduce taxes while living in Spain.

Cost of living? My rough estimates put much cheaper than the US but it's been a long time since I lived there (2008), and I didn't consider costs of owning property. I do remember that electricity is eye-popping expensive. Kinda remember that the rate for a month goes up with usage, i.e., the total kWh used determines the rate for every kWh used in the month.


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## Tortuga Torta

Thanks for all your help/info.


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## dancebert

Tortuga Torta said:


> Thanks for all your help/info.


de nada


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## Ruhzh3

*IRA exempt under NHR?*



dancebert said:


> I've read several several sources using the tax treaty to determine how Portugal will/should tax 2 types of US pensions: IRA and Roth IRA. But such analysis rests on the assumed meaning of 'pension'. American posters keep using that word. In Portugal, I don't think it means what they think it means.
> 
> One obvious intent of the NHR was to attract people with 'High Added Value' skills (HAVers). Portugal has 6 categories of income. Cat A (employment) and B (self employment) are income generated by the HAVers doing their HAV skills. And only when doing their HAV skills. Those same conditions apply to income in cats E, F and G.
> 
> Non-HAVers, i.e., pensioners, can not use any of the special tax rates for income in cats A,B,E,F,G. They can only use cat H (pension) and 'Other income'. NHR has no effect on how Other is taxed.
> 
> Above explained in Article 81 of the CIRS (CIRS_01-2015.pdf) and the oft cited NHR document (IRS_RNH_EN.pdf). No links. Google the texts in parentheses.
> 
> About them pensions. I believe Portugal doesn't consider either IRA or Roth IRAs as pensions because all of the following pension type descriptions bear little resemblance to either IRA type. Evidence includes:
> 
> - Pension definitions in Portuguese tax law (CIRS Article 11)
> 
> - Pension definitions in a Portuguese law, economics and accounting dictionary (Dicionário de Direito, Economia e Contabilidade Inglês-Português/Português-Inglês Marcilio Moreira de Castro)
> 
> - Pension definitions in the OECD Treaty Model (35 country organization that developed the source for double taxation treaties. Porgugal and the US were among the founding members. (OECD 'Revised Taxonomy for Pension Plans, Pension Funds and Pension Entities'),
> 
> - OECD categorizes US pensions by their characteristics. Both IRA types have characteristics that don't exist in Portuguese pensions (OECD Pension Country Profile: United States)
> 
> - I've found one Portuguese tax firm that mentioned US retirement plans by name: _"Private pensions paid in the USA - occupational pensions, IRAs, 401ks, annuities, etc. - now become solely taxable in your country of residence (Portugal). These rules allow you to take advantage of beneficial elements of Portuguese fiscal legislation such as the NonHabitual Residency regime 10-tax holiday or appreciable exclusions routinely available on many forms of private pension income."_ Those exclusions exempt 85% of pension distributions from taxes. But they didn't say which forms of pensions. The silence is deafening. (Eurofinesco document S82A - Taxation of Pensions for US Citizens resident in Portugal) Occupational pensions exist in Portugal. Brit tax firms state clearly such pensions are exempt under NHR.
> 
> - Nobody has responded to IRA discussions or my requests for such information with a 'My tax adviser/preparer, [insert name here] said a IRA / Roth IRA was exempt under NHR'. The silence is deafening.



Hello,

I am an US Citizen and plan to move to Portugal in December. We plan to apply Portugal residency and NHR status. Can anyone tell me if Tradition IRA distribution is exempt from Portugal tax if you have NHR status?

I read many articles. It is not clear on this subject.

Thanks


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## Bevdeforges

I'm not familiar with the US- Portugal tax treaty, but that's pretty much where you'll have to look.

How does that treaty handle US Social Security benefits? Some tax treaties provide that US Social Security is only taxable in the taxpayer's country of residence, while in other treaties, the US reserves its right to tax US Social Security benefits, in which case your country of residence (Portugal) has some provision for crediting or exempting those benefits from local income tax.

A traditional IRA is (arguably, but specifically in some of the US tax treaties) the equivalent of a "national pension plan" for the US. I would expect that a traditional IRA would fall under the same treatment as US Social Security benefits. If Portugal reserves the right to tax US SS, then I would expect them to also tax IRA distributions. Or, if US SS are taxed by the US, then I would assume it works that way, too, for the IRA.


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## TonyJ1

Bevdeforges said:


> I think you'll find that IRAs, 401Ks and other similar "self saving" types of pensions are generally claimed by the US as being taxable by the US IRS first and foremost. In a few tax treaties, these types of pensions are actually named specifically, but not in all treaties.
> 
> What you may have to look to are Portugal's tax laws on claiming tax relief for foreign taxes paid on these sorts of sources of income. Chances are, they aren't exempt from Portuguese taxation, but there may be some allowance for the taxes paid to the US.
> Cheers,
> Bev


If the saving is made by the taxpayer - ie no outside contributions, then the proceeds qualify for the deduction under article 54 of the Portuguese tax code - ie 85% deduction - 15% subject to tax. The interntion is basically to tax the growth and the return of capital to be tax free. There is an option - instead of the 15%, to opt for the actual return if the number is available (obviously would only use this option if the return was less then 15%)


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## TonyJ1

Tortuga Torta said:


> I know securities are not the only kinds of capital gains; selling real estate is one of the other most common sorts of capital gains, of course. But I was just expressing my great surprise at the idea that NHR program taxed capital gains _if they were securities_. I need to lock down this issue, because that's not acceptable to me.


The way it works is that the article 81 exemption for capital gains (similar to rents, interest, dividend) 'exempts' from Portuguese taxation if the 'other' country has the right to tax such income in terms of the double tax treaty (if there is one) or the OECD model tax treaty, if there is no treaty. 

What happens is that most double tax treaties provide that the source country has the right to tax interest, dividends, royalties, and capital gains on fixed property - in the case of financial instruments it is usually reserved for the country of residence - I am aware of only one exception to this - Canada in respect of persons previously resident in Canada and citizens


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