I’m surprised this hasn’t come up as more of a thing in AFIP. It’s a pretty glaring painful thing.
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Agree. I guess the number of US citizens who are considering Portuguese tax residency and regularly sell US stocks is minimal, so it didn’t raise much attention. I didn’t know about the issue until I asked a Big 4 accountant for advice. We nixed plans to move to Portugal largely because we couldn’t find a way to resolve the issue without taking the AT to court each year. The DTT is not going to be renegotiated so it seems it will come down to Portuguese courts issuing a binding ruling on the AT, not just case by case, which they don’t seem in any rush to do.
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Other blogs that are focused on expat taxes talk about this all the time. I read Fresh Portugal’s one on FB. Portugal is not a tax haven and given that according to Financias 90% of Portuguese earn less than €2000 a month, they need revenue from somewhere. Refusing to honor the DTT should be the way though.
My family’s plan is to go through the GV process until we have passport and move to a more favorable tax situation for us. We have the assets that this is important. We have too much money in Roth and standard IRAs which do not get taxed in say France.
That said Portugal is a beautiful country with great people, nice weather, a lower cost of living and speaks English. It is a great option for many but not all.
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Thanks for the Fresh Portugal recommendation.
That’s also our situation and our plan, although we active investments that would impacted now. Hopefully the issue is resolved at some point. Until then we’re < 6 mths per year in Portugal.
Not that my opinion matters to AT, but I don’t think the ‘we need revenue’ justification is compelling. Portuguese judges agree. Portugal signed the DTT and that is a standard treatment of CGT. If they want to renegotiate the DTT, that would at least make the situation clearer. As it is, AT is just creating unnecessary bureaucratic churn for themselves, for taxpayers, and the courts.
And I’d add, it sets a very bad precedent for ordinary Portuguese if the tax office thinks it can unilaterally decide to raise tax above legislated rates, counting on the fact that few people will bother to take them to court.
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wow. That sucks.
I really didn’t mind the idea of paying 28% on CG/int/div. Sure it’s not ideal but it’s not horrendous. I don’t expect to get off for free, someone has to pay the GNR’s salary etc. Costa Rica’s something like 25%. But the idea of having to pay it on top of US tax rates or having to have a continual lawsuit running with the attendant court fees… that’s just stupid/insane.
Hell, what did I expect though?
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You expected a functioning country that follows its own laws / agreements?
Personally? No. I expect a country that has mostly-respected-but-vague laws that are mired in bureaucracy and require a fair bit of maneuvering to deal with sometimes.
Of course for me there’s a bit of BTDT, which makes it easier. Keep your expectations low and you won’t be disappointed.
Having to sue the tax agency annually is a bit more than a “fair bit of maneuvering” IMO!
Then again…if the US was fair and stopped taxing people when they left the country, we wouldn’t have this problem.
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FWIW I asked my accountant in PT, he’s very used to handling US expats. He didn’t elaborate on specifics, but said that while the necessity to sue was previously true, accountants have access to a way to file from 2023 onwards that doesn’t require paying the tax up front and then claiming a refund with Finanças. I would recommend anyone in this case get good tax representation in Portugal.
Edit: but remember this loophole is specifically on US-sourced capital gains. If you have gains from any other country you will pay the 28% in Portugal.
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Could you post or PM me your accountant’s info? Thanks!
Oh that’s great news. I haven’t spoken to an accountant about it for a while. I’ll check in with mine again.
If you don’t mind sharing the accountant’s contact info, please DM me. Thank you!
You are the only person that touched on the topic of Roth IRAs and regular IRAs and you mentioned that they do not get taxed in France. Are you certain of this?
Secondly, if you don’t maintain tax residency in Portugal do you think that the Portuguese govt will still give you citizenship, hence eligibility for a passport?
I am just wondering if they will look at the fact that you’re there <183 days and view unfavorably.
thoughts?
To apply for citizenship, you need to have maintained valid residency for 5 years. On a GV you can achieve that with only 7 days a year in Portugal. You don’t need to have established tax residency.
I do understand that. I am just wondering out aloud, given the general the general tone of things even if the GV gives you eligibility with just 7 days there a year. It will be a little difficult to make a case that you have enough ties to the country to warrant giving you citizenship. Mere speculation on my part.
On its own, probably not. But there is also a broadly interpreted ‘ties to the Portuguese community’ component. My lawyers told me that for GV applicants those ties can be proven with the minimum required travel to the country (35 days/5 years), investments held in Portugal over 5 years (whether a fund or real estate), keeping bank accounts in the country, passing the language test etc. They have already taken people through to successful citizenship applications with only 35 days in the country (they are a reputable legal firm, not just a GV advisory). Of course, as we know those rules could all change at any time …
That is very good to know. thank you for sharing that
Here is one of the main articles about Roth IRAs and French taxation. Retire Early in France - Without All The Tax - The Frugal Vagabond
I believe there are other countries too, but not sure which ones.
As for the path to Portuguese citizenship, it depends on your visit. For a D7, you will need to spend so much time in PT that you will need to be a tax resident. For the Golden Visa, you need to spend a week a year and will not become a tax resident. Hope this helps.
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There is no longer a broadly-interpreted ‘ties to the Portuguese community’ component for an adult applying for naturalisation. The only requirements are those specifically listed in the Nationality Act - 5 years legal residence, clean(ish) criminal record, language test and the absence of a threat to national security.
There used to be a general ‘ties’ component, but this was dropped from legislation in 2006. And there is a ‘ties’ test for naturalisation by act of will, which largely relates to minors.
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That is great information, thanks for posting. I’ll have to check with my lawyer on that. I must have completely misunderstood what he was saying 