Moving out of Portugal

Hello everyone! I noticed that a lot of people are really excited about moving to Portugal (for the Gold Visa and what have you), so I thought it would be interesting to present you with my tax concern, which is in reverse.

I am a Portuguese citizen (born and raised) looking into options such as perpetual traveling with no tax residency as well as establishing a territorial tax residency that does not tax foreign income - which is not the case of my home country. As a Portuguese national, I also would not be eligible for the NHR program, of course.

Even though my case is specific to Portugal, I am sure it applies to most countries that tax income based on your physical presence in the country when you live there for more than 183 days, but I guess there is discretional enforcement for everyone’s case.

I am a freelance translator and my habitual client is based in Ireland, I left Portugal on the 24th of June (resided there for less than 183 days), I own no property in the country and none of my income is sourced there either. Also, I have no significant personal ties that would warrant a return to the country, nor do I have any intention of doing so except perhaps for a short occasional visit some time in the future. However…

I was not able, within the 183-day window, to inform the tax authorities (Autoridade Tributária e Aduaneira) and Citizenship services that I had left and provide a foreign address (one has to be registered as the citizen’s address).

Am I automatically not liable for taxation having left before the 183 days elapsed? If they bother me, does it even make sense to provide traveling documentation to support the fact that I left before July, 1st in an age when they pretty much know everywhere you go by the crossing of information?

What would you do in my stance?

Thank you for your interest and thanks in advance for any help you may provide!

PS - Actually, there will be tax returns due to capital gains from the sale of inherited property, but this was all resolved in the first half of the year and what concerns me here is being taxed on habitual income.

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I’m curious to hear how this turns out; keep us posted.

You are right, governments and technology companies collect a lot of data about us. Perhaps I am cynical: I think they only use it for their own self-serving benefit, never for our advantage.

Also, be glad you aren’t an American citizen. Americans can’t escape nasty tax obligations by moving overseas. Americans have to declare their assets and pay taxes on their worldwide income no matter where they go. There is no escape.

And all Argentinian citizens worldwide just got socked with a “one time” wealth tax, and it isn’t possible to renounce Argentinian citizenship at all. Of course unlike the USA, the Argentinan government doesn’t have its tentacles inserted into every bank and agency in the world, so they may not get every peso they want.

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You ask: “Am I automatically not liable for taxation having left before the 183 days elapsed?” Not quite.
You need to make a clean break from Portugal to become non-resident and one way to do that is to establish residence elsewhere. See this link for an introduction to the relevant legislation: https://www.oecd.org/tax/automatic-exchange/crs-implementation-and-assistance/tax-residency/Portugal-Tax%20Residency.pdf
You are automatically resident if you spend more than 183 days in Portugal. You could be automatically non-resident in Portugal if you stayed under 183 days and became resident in a country which has a tax treaty with Portugal. See this link for a list. International Tax Treaties
Portugal has treaties with some territorial tax countries (eg Georgia) and countries which have lower income tax than Portugal (eg UAE).
Good luck and let us know how you get on.

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About data collection, I spoke to a solicitor and it turns out I should not worry too much about proving the I left on said date. There is cross of information and they know all they need to know about those matters.

Yes, I know about citizenship-based taxation if you’re a US citizen. Ouch… that’s a nasty one. As someone said on this thread, the citizenship renunciation count is on the rise. I am not surprised.

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Yes, I will check with a qualified accountant, thanks for the tip. In fact, it’s the second time someone mentions that and I cannot believe I missed that one.

You speak of a moral dilemma regarding a citizen’s duty to contribute with his taxes. I can accept that to an extent, but where do you draw the line of what is a fair amount and what borders extortion? In a community, you are more than happy to help out and give (you benefit from your giving as well), but the demand is higher than what you perceive as a fair share, there is a good chance that you will no longer want to be a part of it at some point.

Thank you for your comment.

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Thanks for the input, AdAm!

Actually, I received feedback from the Tax Office today and they say one requirement to becoming a non-resident is to delegate/nominate a tax representative in the country (if leaving the EU). They didn’t actually say that made me a non-resident in their view, though, but considering the emphasis they place on this requirement, which exempts you from filing tax returns(?), I suppose that it should be enough assuming you meet the 183-day requirement.

Yes, I came across the this line previously: “An individual is qualified as a resident of Portugal if he is a Portuguese national who moves his residence for tax purposes to a country, territory or region subject to a clearly more favourable tax regime included in a list approved by Ministerial Order of the member of Government responsible for the tax area, unless he proves that the change is for a valid reason”.

… But there is no shortage of laws and regulations that are not enforced, and perpetual travellers do not necessarily have to establish residence elsewhere. I intend to set residence at some stage, though, and I am looking at my options (thanks for the list!), but for now, not being taxed on this year’s income would do just fine.
In practice, a solicitor I discussed this matter with today said that, considering my particular case (no Portuguese income, no property, etc.), it should probably be enough to be a resident for less than 183 days. “Probably” does not remove my concern, though.

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I’m afraid that if you don’t establish residence anywhere the Portuguese Inland Revenue will consider you as still resident in Portugal. In Italy one needs to register as non-resident with the registry of residents abroad (AIRE), and the registration is only completed when the Italian Consulate sees the residence visa on the applicant’s passport.

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For far, what I’ve been able to ascertain is that I need to change my address and then appoint a legal representative in the country for tax purposes. I believe that should make me a non-resident officially.

Thanks for sharing.

Have you considered becoming a tax resident of Republic of Georgia? As far as I know you can get a tax cert pretty easily and still not be liable for out-of-country freelance work.

Hi Dmitry. Yes, Georgia is an option I am considering, but I am currently more focussed on resolving my tax situation in Portugal, so I haven’t made any decisions about that yet.

The thing with Georgia is that if I set up a company there, I am still liable for taxation (it won’t be foreign income), even if it’s pretty low, while there are tax free options. I’ll take it over the Portuguese tax regime, though, which seems to be pretty appealing to non-residents with no Portuguese citizenship, but has nothing to offer me personally.

Changing the registered address has been a frustrating experience so far.

When my current ID card was issued, they asked me straightaway if I wanted to register the new address (abroad) right then, no questions asked, but I thought: how hard can it be to do it when I actually leave the country and am actually living in X or Y? Well, no consulate so far is willing to change my address to their country without some form of proof of residency (which I do not have because I live in hotels and AirBNBs) and the last thing I want to do is travel across the world to change an address. It’s absurd.

Welcome to the Hotel California…

Also, Georgia is 14 or 15%. For that, I’d rather choose Bulgaria, which is a part of the EU and levies 10%.

In Georgia it’s 1% on turnover for small businesses if turnover is less than GEL 500,000 ($158223.50) or 3% if the turnover is above that. Am I missing something?

I don’t know what you are missing, but I asked a solicitor about the 1% tax rate (which I heard about too), and was told that it does not apply in my case. A business cannot get any smaller than mine, I am a freelance translator with no partners and a single client. I did not ask for the details, I simply moved on to my other options.

…but I was given another piece of advice from the same solicitor that already got contradicted by a couple of other solicitors, so I guess you must be right about this. Currently I am looking at incorporating for $2300 (company+bank account) in Panama with 0% tax, but I suppose 1% would be an equally interesting proposition and I will look more into it. Thanks for that, Dmitry! :slight_smile:

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With Panama incorporation, how are you planning to get paid personally? And how would that solve the tax puzzle? I assume you’re also becoming a tax resident there? I’m genuinely curious and wondering if Portugal would accept such paperwork as a reason to exPat you.

In fact this is an important question that would potentially be asked by lots of post-NHR nomads.

Good luck, please don’t take my words without a grain of salt though!

Yes, I am also looking into becoming a tax resident there or in another country with a territorial tax regime. Incorporating and getting a bank account would help the residency process in Panama, but I am also looking at my other options. Georgia seems to be easy from what I’ve just read, but I’m not crazy about living there. Costa Rica would be interesting for residency, but the process takes too long. I am still shopping around.

I don’t know if post-NHR would be in the same shoes, but as a Portuguese citizen, the first step is to change my registered address and assigning a tax representative (in this case, it will be a family member). Unfortunately, I left the country before providing a new address and COVID has made my life harder with closed consulates, but I hope to get that part resolved this month or December at the latest.

Thanks, I’ll put some salt in the mix!

Point of clarification: Any tax treaty that Portugal may have signed with Georgia, or any other country, no longer has any relevance when the former citizen/resident makes a “clean break” from Portugal.

How about Guatemala? It’s territorial tax, too.