I’m trying to align my investment plan regarding to migration to Portugal in future, and its tax consequences
By searching all over the resource and a lot of others, I’ve found out this simple tax scheme:
Income on dividends from foreign source
a) 0% from non-laundry countries while on NHR
b) 28% after that
Cap gain income - 28% at any time.
Could anyone confirm it’s correct?
What confuses me is:
1a) - is it really 0%? If I own ETFs domicilated in Ireland (with 0% withholding tax), then dividends are completely tax-free for me?
28% for investment income - I couldn’t find any progressive tax levels, only flat rate. Is it really so?
Hi,
actually it is not that simple. The NHR tax regime grants a relief in Portugal only if based on the double taxtation treaty between Portugal and the source country, the source country has the possibility to tax the income.
So the first element to check is if exists a DTT between Portgual and the source country and then check if the source country can tax the income. If this conditions are met and the source country does not apply WHT then the dividend is tax free. For example dividends coming from Malta are tax exempt under this condition. But be very careful because it may vary from every country and also from the income qualification (es. interest).
If the dividend comes from a portuguese entity it will be taxed at 28% rate.
Regarding the capital gain, in general they are always taxated in the source state. So you will be exempt in Portugal even without the NHR regime.
If capital gains are originated in portugal 28% rate may apply. There is no progressive tax on capital incomes.
International taxation is a very complex matter and you should be advised by a professional.
Definitely asking a professional advice seems a very good point - for approving a positive answer. However, if I can get a negative answer, it saves me some amount
I was considering Ireland as a source of income (ETFs dividends and sale, to be specific)
As you wrote, and I’ve found this statement in other sources, income tax is exempt if the source country can tax it. Indeed, Ireland has a DTT with Portugal, so it can be taxed. But, it is not taxed. So, what in this case Portuguese IRS do?
Any practical experience from those Portuguese NHR residents having Irish funds?
The same stuff for cap gain, I’ve realized it’d be taxed in PT , thanks for the confirmation of the flat rate
In that case you will be exempt from the income in Portugal and therefore if Ireland does not tax, the income is tax free.
Be also aware that you will be already effectively registrated in Portugal as NHR at the moment you receive the income. There are some risks of double residence during the year of the relocation.
We have experience with NHR clients with investments in Ireland but any case is unique.
I agree it’s complex but the info and advise is often contradictory. I have been looking at how to plan after the 10 year NHR period as if you love the country and want to stay there you wouldn’t really want to suddenly face massive tax bills. I understand there is a tax efficient Portuguese compliant bond which is very tax efficient after 8 years however the big downside is that you only seem to be able to access it via advisors and fees are high which eats a lot of return. Bear in the “bond” is simply a wrapper. So the fees are there even if you simply hold a vanilla ETF tracker portfolio. I don’t mind paying the wrapper fee but paying for advice to buy a product I know I’d like to invest in a portfolio I already have seems a tad bonkers. Does anyone have any info about this, way to access directly please and/or suggestions of other legal tax efficient way to plan your affairs for post NHR. Thank you
it is a more clear cut issue with stocks and or etf domiciled in UK, and one can find some confirmations.eu regards to IE domiciled capital investments, what is sure is IE doesnt tax non residents for the dividends, but no where i can find a clear confirmaiton like the one below for PT NHR : “if you receive dividends or royalties from a UK company, such income may be subject to tax in the UK under the UK/Portugal agreement. As a consequence, although in practice it will not be taxed in the UK, it will not be taxed in Portugal either if you benefit from “non-habitual resident” status.”
Hello,
I have is there anybody with NHR that receives dividends from Irish ETFs that can confirm dividends are tax free under NHR?
Would be happy to hear any experience. I will share mine after I submit my tax declaration for 2023 and will finally clarify this topic.
Dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.
However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident and according to the laws of that State, but if the recipient is the beneficial owner of the dividends the tax so charged shall not exceed 15 percent of the gross amount of the dividends.
Hence it should not be taxed in Portugal under NHR.
Would also love to know the definitive answer to this question…
Are Irish-domiciled distributing ETF fund dividends taxed in Portugal for NHR holders?
This came from my tax lawyer at a reputable firm:
as a rule, distributions of Irish-based ETF should be subject to
personal income tax at a flat 28% rate, meaning no NHR exemption should
apply.
However, if the ETF qualifies as a “resident” for double tax treaty
purposes (subject to confirmation on a case-by-case basis with each of the
ETF managers) the NHR exemptions could apply.
Not really understanding if large ETF funds like those by Vanguard, Blackrock, etc. are “resident” in Ireland. Other advisors have told me that it depends on the composition of the fund and the holdings.
No clear answer yet, does anyone who lives in Portugal have experience with declaring this type of income under the NHR and if it was exempt?
