I’m planning to apply for NHR in December (Deadline i guess to apply). What are the practical implications you faced:
Do you have to pay capital gains tax on your International equities? I’m sure most of us invest in US index funds and tech stocks, e.t.c. Are we required to pay capital gains on those? Since they are held in online brokerage accounts, i’m assuming they fall under international assets?
I have some positions in Crypto. Do Portuguese tax authorities usually give a hard time with crypto
What about any rental properties abroad? They are already taxed where they are located of course.
If you know a good tax specialist / accountant - Some referrals would be lovely
One PT tax expert we work with is https://oncorporate.com You will need a firm like that to sort out complex income streams. Capital gains are an area debated a lot and may be in a flux. Passive income is straightforward.
Capital gains from “movable assets” are generally taxed in Portugal, even with NHR status, due to the other country not having the right to tax according to most DTAs. Exceptions for US citizens/persons since the US has the right to tax. I believe the Portugal-Brazil treaty is another exception.
Hard time in which way? The rules for taxation are relatively straightforward. Holding for a year or more means there are not taxes due, and I believe exchanging between various crypto currencies (including stablecoins) does not reset that clock. However, if you actively trade it could be classified and taxed as regular Portuguese-sourced income.
Capital gains from immovable assets are generally not taxed in Portugal since the source country has the right to tax according to the DTA.
#1 is a little more complicated for US citizens as to US source assets. CG taxed in PT unless NHR; this was in doubt but now seems to be observed. Without NHR, taxed in PT and in the US, with the US giving a credit on a passive category resourced basis for the PT taxes. Foreign source CG would be regular passive category FTC. At least that’s how I think it works.
It seems that CG question is resolved under NHR if tax paid in US on US brokerage account. I assume same will apply if CG are taken by LLC and reported as pass-through income. I’m sure many in this group have LLCs in US for practical / tax purposes.
Not necessarily unless the LLC is a disregarded entity. If it is a PT-managed LLC taxed in the US as a partnership you may end up in a different place.
Entities I had in mind will be US registered LLC with 3-4 members filing tax as partnerships. Am I correct that for as long as they are passively owned (receive gains and royalties) they will not be taxed in PT under NHR?
Current practice is that a multi-member LLC is treated as a corporation by Portugal. If you have NHR and the LLC is seen as not operating in/managed from Portugal, distributions will be tax free under NHR.
Note that it’s only seen and reported as a distribution when the money is paid to the member, not when it is earned by the LLC.
Is there a way to avoid capital gains tax in a clean way? Structuring the assets in trust / LLC corp, e.t.c. If so, would you recommend any good tax lawyers to structure this setup?
Depending on the type and size of the potential gains there may be ways around it, although it would of course also come at a cost. For any type of corporation you’d need substance outside Portugal, but in certain cases it can definitely be worth it.
I’d talk to Fresh Portugal about your specific situation. They have a pretty unique international perspective on this. It might cost a bit up front, but it could be one of the best investments you ever make.