University of California pension - is it taxed in Portugal?

Yes. If you plan on D7 visa that was always your sole qualification, a passive income but not investments. Tax is very low for first 10 yrs under the "non-habitual resident (NHR)" scheme But after that you are at regular Portugal income tax rates. However, there are stong indications that NHR will go away in '24 and D7 visa holders will pay much higher rates going forward. If you were planning on retiring there in Ju r you shouldv'e started the process 6 months ago. And you must have a rental agreement for 1 yr (but you can't live in country) for the 6-8mos 6 your visa app takes. You  need to engage an immigration lawyer and tax accountant now.

John

However, there are stong indications that NHR will go away in '24
    -@JohnNAnya

https://www.expat.com/forum/viewtopic.p … 11#5818260

(Post #3)

Thanks, JohnNanya - it seems that if I am taxed at a higher rate of 48% (I'm assuming that I will have a pension of about $5000 a month), then moving to Portugal may not be the best move?

Hi @sfaznpinoy,

I don't believe your entire income will be taxes at 48%.  I came across

greenbacktaxservices.com/country-guide/portugal-taxes-for-expats/

that explains it (look at the section under Resident Income Tax Rate in Portugal).  Its basically says that for your annual income of $60,0000 (€54,600), you fall in the €36,968 - €80,882 bracket, which means paying the base tax amount for that bracket (€5,974) plus 45% of what you make over €36,968, or:

5974 + (54600 - 36968) *  0.45 = €13,908.40

This is about 25.5% of your income.

Also, it's my understanding that for a married couple filing jointly, their total income is divided by two and each one is responsible for half of it.  This means that each one of you would be in a lower (€25,076 - €36,967) bracket, with a lower tax rate:

3017 + (54600/2 - 25076) * 0.37 = €3,840 (for each) * 2 = €7,680

This is about 14% of your total income!

Again, this is my understanding of how the tax is calculated.  I'm hoping other members with more knowledge would chime in and correct me if I'm mistaken.

I have heard, now I know this needs to be substantiated, but I've heard that State government pensions are not taxed in Portugal.  Unlike U.S. Social Security benefits, Stat government pensions are considered "government pensions" and are tax exempt in Portugal.  But check this out.  Talk to the people over at Fresh Portugal, Zeev Fischer is a tax attorney.

I don't believe your entire income will be taxes at 48%.  I came across greenbacktaxservices.com/country-guide/portugal-taxes-for-expats/ that explains it (look at the section under Resident Income Tax Rate in Portugal).  Its basically says that for your annual income of $60,0000 (€54,600), you fall in the €36,968 - €80,882 bracket, which means paying the base tax amount for that bracket (€5,974) plus 45% of what you make over €36,968, or:5974 + (54600 - 36968) *  0.45 = €13,908.40This is about 25.5% of your income.

Digging a bit deeper into the numbers, I don't think the method of calculation explained in the website above is correct.  According to them, the tax on an income of €8,000 a year is less than that on an income of €7,000 a year!

tax on €7,000 = 7000 * 0.145 = €1,015

tax on €8,000 = 604.54 + (8000 - 7112) * 0.23 = €809.24

That just doesn't make sense!  I believe the correct method is to multiply the income by its tax bracket rate and then subtract the base tax (it's actually abatement) from it.  For example, for an income of €54,600, it would be:

54600 * 0.45 - 5974 = €18,596  (or effective tax rate of 34%)

But for a married couple, if the income is divided by two (€27,300) and each is responsible for half, then:

27300 * 0.37 - 3017 = €7,084 (each) * 2 = €14,168 (or effective tax rate of 26%)

@bill85lisa Did you get confirmation on this? Is UC retirement pension recognized in Portugal as a state pension?