My understanding is that āmaintainingā a āhabitual residenceā in Portugal would trigger tax residencyā¦but Iām not convinced that having a āproperty leaseā but not using the accommodation more than 7 days pa qualifies.
One usually confirms a āhabitual residenceā by applying for NHR, without doing that I donāt know that coming on āvacation while maintaining a residence elsewhereā, would necessarily trigger residence? It will be interesting to see.
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The US-Portugal tax treaty seems to specifically have rules to prevent you from being taxed as a resident of both states. You have to pick one based on:
- Where by reason of the provisions of paragraph 1, an individual is a resident of both Contracting States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident of the State in which he has a permanent home available to him: if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests);
(b) if the State in which he has his center of vital interests cannot be determined, or if he does not have a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has an habitual abode;
(c) if he has an habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national;
(d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement
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It seems NHR require physically presence in Portugal for 183 days to qualify?
if the new D2 visa imply a tax residency thatās a BIG no. Even if it qualify for NHR, it still complicates matter greatly, like use up 5 year of the 10 year NHR, tax treaty implication, extra legal cost, etc
Just for reference, Iāll drop in here some recent articles published around the GV:
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To join the National Health Service, you need to get a SNS card from the health centre near your residence. You have to show that you are living in Portugal and give proof of residence, which would be a lease agreement.
My lawyer has said that the SNS card can be issued only when you move to live in Portugal.
Also you will need the NIF number for each of the family members to get their SNS cards.
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Thatās not my understanding - you need only be in PT for a day to āqualifyā for NHR, but you must also have the intent and ability to maintain an habitual residence in PT, usually this is confirmed by applying for NHR.
(Nb. If you had been resident in any of the previous 5 years, but did not apply for NHR, you can still be tax resident but āloseā the ability to qualify for NHR (I think you can appeal if itās a genuine error))
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This is my point. You donāt get to the treaty until you are first a tax resident of both states. And if you are retired and have a permanent abode you own or lease, are covered by health insurance in both countries, and a citizen of both countries, look how fast you drop into the never-never land of the last bucket.
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It is strange that no journalists are talking about the conversion to an entrepreneur visa in any depth.
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āMy lawyer has said that the SNS card can be issued only when you move to live in Portugalā¦ā
You are correct but in the detail in terms of āliving in Portugalā my solicitor advises that:
āyou can register with your local health centre and get a nĆŗmero de utente even though you will not be spending more than 183 days here as you will be legally residentāā¦
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Ernest,
The laws of taxation in Portugal, which our accountant at Deloitte, who was very very high up in the Portugal Tax Authority said that, as long as we spend 183 days in the US and our income is coming from the US, we are considered US tax residents because of the test in Portugal, which follows the Tax Treaty. She went on to say we would only be taxed by Portugal on income earned in Portugal through investments, rental or working - (which starts to open the door for change of tax residence). You will need to report the income in the US and may be taxed on this income earned in Portugal, ONLY if the tax you paid in Portugal is lower than what you paid in the US. I know this from having also bought a house in Portugal and ensuring I would not become a tax resident after spending 4-5 months a year in Portugal and the rest in the US. The Tax Authority said, no I would not have the accountant double checked.
She went on to say that in working on the creation of the NHR, you must be a tax residence, i.e. living in Portugal 183 days a year, have declared Portugal to be your primary domicile and ideally have moved much of your income generating assets to Portugal. The reason for the latter, is you must apply for NHR passed on your situation and then the Tax Authority determines if you qualify through the test of tax domicile which is essentially the dual tax treaty. In reading the NHR code, it is clear that if you move to Portugal, live in Portugal full-time, but obtain no income from Portugal rather from the US via investments, then depending on how long you have lived in Portugal and how much income you are obtaining and whether any is Social Security income from the US you may or may not be allowed into the NHR program. NHR is not a given and you need to employ a professional to assess what needs to be done to ensure you qualify and whether it make sense in the end, because trying to get to NHR status could incur immediate taxation on sale of assets to move them to Portugal to try and obtain what could be or could not be a lower tax than in your home country. Also, if you do not give up your US citizenship, you will still be required to fill and pay taxes in the US, because the US taxes all income worldwide, no matter where it is derived. The dual tax treaty may mean you do not end up paying the US anything because you paid equal or more in the other taxing country or countries, but you may pay some because according to the US tax laws you did not pay enough.
As you can see throwing NHR and tax determination around is not something anyone should do lightly because each personās case is different and the taxation test of Portugal and the home country will have different outcomes. IMHO, it is best to consult an accountant who has lots of experience with international taxation to get the answers and do the analysis.
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Agreed. For Article 45 applications, I am seeing very little. One of the news articles @cj807 posted said that PAIIR who supported the petition on Peticao Publica was still going to file with the parliament in an effort to get the wording cleaned up and cited the agencies that will evaluate real estate investments. None are qualified to do it.
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Hmmmā¦ the devil might be in the definition of āmaintains a residenceā - itās a bit vagueā¦
A better definition might be the following:
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That is right, a habitual residence, having a house or apartment in Portugal does not make you a habitual residence and subject to Portuguese tax laws.
From the EU web-site whose rules govern habitual residence because being a habitual residence means you can also claim benefits not just in Portugal but in the EU.
The term āhabitual residentā means that you must have your ācentre of interestsā in Portugal. It also refers to permanence: a person who has been in Portugal for some time and intends to stay here for the foreseeable future. Using it as a vacation destination for a period of time each year and have all of your income, mail, bills as well as your family and long-time friends that you spend time with more than 183 days a year in the US, means you center of interest is in the US. Therefore you are not a habitual resident. Deloitte went through the entire scenario and spending up to almost 6 months a year in Portual with all of your income, benefits, affairs, family, long-time friends in the US means you do not need to pay taxes in Portugal on US derived income. On Portuguese derived income you must pay tax and report it to the US and may have to also pay tax on. The tax authority gave the opinion in my case, so I know what I am going to experience.
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Exactly, my permanent residence was, is and will continue to be at the same address in the same city in the same state in the USA for as long as I have the vacation residence in Portugal for part of the 5 months a year I spend in Portugal with no intent to make permanent because it does not make financial sense to move my permanent residence to Portugal. As I noted, each individual case is different, and they must be dealt with individually or bad decisions will be made.
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My situation is the same as yoursā¦ & accordingly was really worried from a tax POV when the first draft of the new law came out.
I can see why PWC have put it the way they haveā¦
Yes, part marketing, part CYA.
hi guys,
thank for the helpful posts.
do we know something about the spouses/dependents with the new proposed law?
i am invested through a fund and waiting for pre-approval, but my spouse hasnāt applied yet and will not make it on time till the end of GV.
do you have any suggestions for how to proceed?
thanks!!!
Same situation here. My understanding is that spouse will apply under family unification route, and this route is preserved per latest draft legislation.
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