EU citizen retiring to Portugal - tax implications

At the moment, the status of non-habitual resident (with tax benefits) is suspended. It's not yet clear what will happen with this, as there will be elections in March 2024 and tax policies may change. Currently, when you become a tax resident  (i.e living in Portugal 6 months + 1 day) , the tax rates would be the same as for Portuguese citizens.

As there is an agreement to avoid double taxation, taxes paid in Canada will not be paid in Portugal, but income and taxes paid in Canada must be declared in Portugal on your annual tax statement.

@JohnnyPT

Thank you so much! You are a gem, thank you for taking the time to reply.

So, to make sure I understand correctly: once I become a permanent resident and have, say, €20k taxable income in Canada, taxed at 12% there - which scenario applies 👇🏻

• If the €20k is taxed at 15% in Portugal - do I pay the extra 3% not paid in Canada? Or -
• If the €20k is taxed at 10% in Portugal - do I get 5% back from the Portuguese government? Or -
• Do I pay no tax in Portugal because I already paid it in Canada, and the Portuguese taxation % does not matter?

Would you happen to know? Or can you recommend a tax guru who could help?

Again, huge thanks! I really appreciate your help and time.

Once you are tax resident in Portugal, your State Pension is taxable only in Portugal at the scale rates of income tax. For 2023 income this starts at 14.5% for income up to €7,479 and rises to 48% for income over €78,834. You benefit from a deduction of up to €4,104.

Pension lump sums

This is one tax trap many Britons moving to Portugal fall into. The UK rules allow you to take a 25% ‘pension commencement lump sum’ tax free. But if you take this lump sum after becoming resident in Portugal, it is taxed here in the same way as other pension income.

@ApogeeDuet

Thank you for the detailed insight - this is very helpful and highly appreciated.

So, with Canada (as I am not/will not be entitled to a Portuguese pension) - I will pay whatever nonresident tax in Canada. Do I then attach a copy of my Canadian tax return to the Portuguese tax return when I report his foreign income in Portugal? Just trying to understand how I would be providing the Canadian details to the Portuguese tax man...

You should ask a lawyer in Canada (or perhaps first send an email to a Canadian consulate in Portugal) if there is some special tax treaty between Portugal and Canada that will allow you to avoid double taxation (in Canada as a non-resident and in Portugal as a resident).

If there is no such treaty you will have to pay taxes in both countries.

@ApogeeDuet

There is, as far as I know (and @JohnnyPT confirmed in his response above).

Yes, the next step is a lawyer and a tax accountant - just to get everything confirmed before I start packing. 😉

Thank you again!

@FrauSchlau,

Portugal has convention with Canada to avoid double taxation:

https://info.portaldasfinancas.gov.pt/p … ncoes.aspx

(Select Canada, PDF doc, written in portuguese, english and french)