State Pension - United States

The 10% tax applies to all foreign pensions for individuals residing in Portugal regardless of citizenship.  There is a double taxation treaty between the US and Portugal though.  Whatever you pay the US IRS can be deducted from the tax you owe Portugal.

Up until earlier this year, under NHR and Golden Visa, there was zero taxation on UK Private and Employee Private Sector Pensions - but not Public Service Pensions - for 10 years.
Not sure if this helps for US pensions , however it may be if assistance to know state and private pensions are dealt with very differently .
I used to be an IFA in UK and researched this quite deeply before moving to Portugal.
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Hi Dennis,

Just a quick comment, not all pensions qualify, there are many where withholding is at source (such as where you worked for your government) that fall outside the remit...it's a finer point but affects many civil servants.

Usually a typical combination for a US citizen is D7 visa with a rental, NHR at 10% via Portuguese tax return, and then US tax return using the Foreign Earnings Exemption for non-US generated income, or the double-tax treaty for avoiding double-taxation.

Key points: US taxes citizens on worldwide income regardless of where they are living
Portugal taxes residents on worldwide income

The general rules in respect of so called 'civil pensions' is the country of source has sole taxing rights in most (if not all ) double tax treaties. The Portugal US treaty follows this reasoning - see article 21 of the Portugal / US double tax treaty.

However, under 21 - 2 b) provides that if the tax payer is a citizen of the country of residence, then the country of residence has sole taxing rights - in other words the US gives up the taxing rights, and Portugal has sole taxing rights.

The NHR will ameliorate the situation in that Portugal will tax only at 10%, rather then general tax rates which likely work out to be greater - but this is only for 10 years. The treaty can be easily sourced by an interned search

dennislg wrote:

The 10% tax applies to all foreign pensions for individuals residing in Portugal regardless of citizenship.  There is a double taxation treaty between the US and Portugal though.  Whatever you pay the US IRS can be deducted from the tax you owe Portugal.

The rules are a lot more complicated than this - have to look at the specific wording of the treaty. In the case of US Portugal dual citizens, the treaty provides that the country of residence has sole taxing rights in the case of citizens (article 21 2 b) even in the case of government type pensions. If the taxpayer was not a Portuguese citizen (not the case in question) then the US would have sole taxing rights to government type pensions - the nhr is part of ordinary internal law. The double tax treaty superimposes over internal law - at least in the case of Portugal - in the US, there are nuances to this general rule.

npc8219 wrote:

Hi,

Would any other taxes apply?

If you do have any other income, there would be no other taxes, but you would be subject to consumption taxes, property taxes, car taxes, etc

Here is the exact text regarding Double Taxation between the US and Portugal at the IRS website.  See Article 25 titled "Relief from Double Taxation".

2. In the case of an individual who is a citizen of the United States and a resident of Portugal, income that may be taxed by the United States solely by reason of citizenship shall be deemed to arise in Portugal to the extent necessary to avoid double taxation, provided that the tax paid to the United States will not be less than the tax that would be paid under the Articles of this Convention if the individual were not a citizen of the United States.

3. In the case of Portugal:
(a) Where a resident of Portugal derives income that, in accordance with the provisions of this Convention may be taxed in the United States (other than solely by reason of citizenship), Portugal shall allow as a deduction from the tax on the income of that resident an amount equal to the income tax paid in the United States. Such deduction shall not, however, exceed that part of the income tax, as computed before the deduction is given, that is attributable to the income that may be taxed in the United States;

As far as implementation, some countries provide allowances.  For example, the U.S. only taxes income generated in the other country (assuming the person resides in that other country) that is over $110k with additional deductions (e.g. cost of housing, etc.).

You have to look at the specific lines in the double tax agreement, before invoking article 25