Taxation

https://www.pwc.pt/pt/fiscalidade/2017/ … idents.pdf

Try using google.

Basically, the nhr is a tax incentive that applies for 10 years. The basic requirement is that the tax payer was not tax resident in Portugal for the previous 5 tax years (same as calendar years). The incentive applies to some (not all) income streams from abroad but, in respect of some income streams, it excludes income where the source is in the Portuguese black list (published)
in respect of pensions, there is no restriction as long as the pensions are from abroad and the pensions were not deducted for Portuguese tax purposes - very rarely applies in pensions from abroad
State pensions (not civil service type) are in the nature of private pensions. In terms of the Portuguese / Ireland double tax treaty (presuming the pension is Irish, though similar rules apply to UK pensions) (available on the internet), the taxing right to the pensions is given to Portugal (if resident in Portugal). Therefore the pensions will be tax free for the 10 year period. Will have to request the Irish fund provider to pay pensions gross - have normally to submit paperwork (fiscal Residency Certificates) signed off by the Portuguese tax authority.

The nhr status has to be requested on or before the 31 March of the year after taking tax residence, under the penalty of it being rejected

Thank you very much for your reply regarding tax treatment of non Portugal pensions
It was very helpful
Kind regards
Rob

If I pay tax on my income in the US, do I also have to pay income tax on the same income in Portugal?

ExpatOne wrote:

If I pay tax on my income in the US, do I also have to pay income tax on the same income in Portugal?

I do not understand your question.    If you are NHR (NON-HABITUAL RESIDENT) in Portugal,  you will have a tax status granted by Portugal in order to benefit from a special tax rate. In this case, you will not have to pay any tax in the US.

Update 30/01/2020 : Portuguese government has decided to tax foreign pension income at 10%. This will apply only for new NHR beneficiairies in 2021. People who arrive in 2020 can still request current NHR status with 0% IRS tax.

Beyond that, US citizens who are NHR in Portugal, will have to pay the following taxes for Dividends (5% up to 15%), Yields (10%) and Royalties (10%). This taxes changes according to your citizenship country.

Please check this at the Official Finance Website of the Portuguese Government:

https://info.portaldasfinancas.gov.pt/p … -5623.aspx

There select link "Quadro Resumo das Convenções"
Then select link "Quadro Resumo das Convenções 2019",
Then open PDF file, and select in the table, USA/"Estados Unidos da América".

I am a US citizen with US assets.  Are you saying that with an NHR, the US would not require me to pay income tax?

I think so, since there is an international double taxation treaty (CDT - convenção para evitar a dupla tributação internacional) between Portugal and USA.

If you search on net by "NHR Portugal", you will find many sites describing the non-habitual tax regime in Portugal.

These are 3 of many (updated at 2020):

https://www.lisbob.net/en/blog/nhr-stat … -tax-guidehttps://www.globalcitizensolutions.com/ … ax-regime/https://www.nonhabitualtaxresident.com/faq/

This post is not entirely correct. If a taxpayer became resident before 1 April 2020, then the 'old' rules apply, though they have until 31 March 2021 to request the nhr status. If they becametax resident on or after 1 April 2020 (until 31 December 2020), then they have until 31 March 2021 to request the nhr status, but the status applicable will be under the new rules.

You will need to read the double tax treaty with extra care - read the article on pensions

TonyJ1 wrote:

This post is not entirely correct. If a taxpayer became resident before 1 April 2020, then the 'old' rules apply, though they have until 31 March 2021 to request the nhr status. If they becametax resident on or after 1 April 2020 (until 31 December 2020), then they have until 31 March 2021 to request the nhr status, but the status applicable will be under the new rules.

Links 1 and 3 are updated.

In fact, Link 2 is not updated concerning the new tax foreign pension income at 10% introduced for new NHR in 2021. Basically this was a response to some european countries that had already signaled intentions to change double tax treaties with Portugal (Finland and Sweden) and some buzz that was happening in France and Italy about this matter.

--
Link 1:
A person who qualifies for non-habitual resident NHR status in Portugal must file the complete application until 31 March of the year following the year of registration as a resident.

Update 30/01/2020 : Portuguese government has decided to tax foreign pension income at 10%. This will apply only for new NHR beneficiairies in 2021. People who arrive in 2020 can still request current NHR status with 0% IRS tax.


Link 2:
You must apply for the NHR regime before March 31 of the tax year during which you became a tax resident in Portugal.


Link 3:
Entrants in the regime that became Portuguese tax resident as from 1 April 2020 are liable to a 10% tax rate on pension income, instead of the previous exemption.

An application must be submitted until March 31st of the tax year following that in which Portuguese tax residence is acquired.

ExpatOne wrote:

I am a US citizen with US assets.  Are you saying that with an NHR, the US would not require me to pay income tax?

Double Taxation Agreement (DTA) signed by Portugal/USA in 1995 written at the Portuguese Official Laws Journal (Diário da República)

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

Choose Double Taxation Agreements (DTAs) Documents
Choose country (USA)
Open PDF
Pages   1 to 13: DTA Portugal-USA written in portuguese
Pages 13 to 26: DTA Portugal-USA written in english

Choose the articles according to your assets:
  6 Income from Real Property
  7 Business Profits
  8 Shipping and air transportation enterprises Profits
  9 Associated enterprises Profits
10 Dividends
11 Interests
12 Branch Tax
13 Royalties
14 Capital Gains
15 Independent Profissional Services
16 Dependent Profissional Services
17 Limitation on benefits
18 Director's fees
19 Artists and sportsmen
20 Pensions, annuities, alimony and child support
21 Government service
22 Teachers and researchers
23 Students and trainnees
24 Other income
25 Relief for Double Taxation

Portugal currently has signed Double-Taxation Agreements with 79 countries and the OECD model tax convention may be used in the absence of a DTA.

https://ec.europa.eu/taxation_customs/i … -states_en

Link 2:
You must apply for the NHR regime before March 31 of the tax year during which you became a tax resident in Portugal.

Should read
You must apply for the NHR regime before March 31 of the tax year of the following the year which you became a tax resident in Portugal.

The double tax treaty between the US and Portugal provide stipulation that both sides can collect.  You'll see text like "However, such interest may also be taxed in the Contracting State in which it arises".  You can read this at the IRS website.  The US will always tax you for income, gains, etc. derived in the US no matter where you are.  It may partially tax you for income in the other country you are residing.  What the double tax treaty does, in principle, is to prevent you from being tax the full amount for both states.

It is true what you say - the double tax treaty is a mechanism on how to split the cake. In respect of dividends, the country of source may tax up to 15% and in the case of interest 10%. The country of residence may tax (or not) its residents whatever it likes subject to its internal laws (which cannot discriminate on the basis of nationality - also in the treaty)ie the country of residence has unlimited power to tax where the country of source, this is limited. The general rule, and this is the case with the US treaty, credit is given to the tax withheld in the other state (where subject to tax in the country of residence) - the mechanics, that is another matter. Though the US may tax its residents on a worldwide basis, the terms of double tax treaties are generally respected. For example the treaty grants the taxation rights to the country of residence in the case gains on financial instruments - in this case, these gains are not taxable by the US in case of a Portuguese resident, even if a US citizen.

@JohnnyPT

I read your reply and I did follow the link regarding taxation on income for US citizens staying in Portugal.  Pension income (private, personal or state) are all treated the same , collectively in Portugal and effective after 2020 it has been and the Convenio of 2022 still states a 10% on this income for  the first 10 years in Portugal as a fiscal resident.   I however have not read anything about the US NOT taxing the pension income as part of the double taxation agreement.    I need to get this answer form my CPA here and post the answer to share with other retired US citizens interested in moving to Portugal.   Thanks for your input.

Michael

Important thread!

@mpsmithobrien I am interested in this same question if you get it clarified. Thanks!

WEBINAR on U.S/Portugal Taxes for Expats

Common Questions Involving Portugal and U.S. Tax

https://www.eventbrite.sg/e/livestream- … erelexpmlt

Wed, October 5, 2022

6:00 PM – 7:00 PM WEST

Submit questions in advance: Hanna@AdvancedAmericanTax.com

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Income tax on Social Security benefits earned in USA:

Thread about this subject:

https://www.expat.com/forum/viewtopic.php?id=906785

@mpsmithobrien

State pension is a government pension (as would be municipal or other government organisations) - in terms of the double tax treaty only the US may tax such pension