PT taxes on your non-PT wages if you have NHR 1.x

[PTbound (A L)]

Hi - my searching of these forums gets me two very different opinions (sources below) on the following question…

If I have ‘old’ NHR 1.x and PT tax residency + tax residency in another country with a PT Double Taxation Treaty, does PT tax my taxed-at-source non-PT wages?

1. no, in ALL cases
2. no, but ONLY if your non-PT wages are from a ‘high-value occupation’ as per old NHR (e.g. scientific, artistic, or technical professions)
3. yes, PT will tax your non-PT wages for the percent that they are HIGHER than the source country (e.g. UK source taxes at 40%, PT taxes at 48%, so after foreign tax credit you pay PT 8%)

I’m specifically interested in UK-source/taxed income, and if PT will be expecting a cut too.

@tommigun (researched the UK/PT DTAA) and @mikemuks62 (actual PT filing experience with US-sourced income) say no, but I’m not sure if they meant (1) in all cases, or (2) only for ‘high-value occupations’

@edandmegan’s tax advice was a bit of (2) and (3), while garrett figured it was (3)

I lean towards @mikemuks62’s actual experience, but if you’re around Mike could you please clarify the high-value occupation question?

Also anybody else have actual experience filing PT taxes with non-PT wages?

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No, PT does not tax already taxed-at-source non-PT wages:

The End of Portugal's Non-Habitual Residence (NHR) Program Announced

Must confess I have not studied the US/PT DTAA. But if it’s not dissimilar from the UK/PT DTAA, then PT is not going to tax the US wages if they were already taxed in the US (at source or otherwise). If the person performs their work physically in PT, then they must be taxed in PT, but if they are already taxed in the US, then how are they going to be untaxed in the US and retaxed in PT? I don’t think this is going to happen.

The End of Portugal's Non-Habitual Residence (NHR) Program Announced

Lot of discussion and misunderstanding. I have two responses for the questions being asked here. Both are with my experience in filing taxes in Portugal as a NHR being a US Citizen Rental income earned in Portugal is taxed at a flat rate of 28% after eligible cost deductions. This is irrespective of whether you have NHR or not. Wages earned in the US from an US source is not taxed in Portugal if you have your NHR status. I filed my taxes both in the US and Portugal for 2022 earnings in 2023.

…or Yes, PT will tax you on any higher difference?

The End of Portugal's Non-Habitual Residence (NHR) Program Announced

I am looking into this with tax advisors right now because the advice is all over the place. Based on the advice I’ve received so far, this is how I understand it – but I am looking for professional validation or correction: To obtain tax residency, we must enter into a 1-year lease or purchase real estate before 12/31. We are looking into cost-effective options here. Once we apply for tax residency, our world-wide wages are taxed in PT, irrespective of where earned. Other types of incom…

The End of Portugal's Non-Habitual Residence (NHR) Program Announced

I though the idea was that you got taxed in PT for any value above what it was taxed in the source country and below the PT tax rate So say the PT tax rate is 30% and source country is 20%, you pay the 10% to PT regardless of what happens back in the other country

[tkrunning (Thomas K. Running)]

Where is the work performed, UK or Portugal?

[mikemuks62 (Mike)]

Hi I am still around as still waiting for final approval for my GV. The first test is are you in Portugal for more than 185/6 months in a year? That is one of the major tests on how your wages are taxed. Initially I had unknowingly set myself as tax resident in Portugal even though I was not living in Portugal. However, only my rental income in Portugal was taxed (and taxable) in Portugal. None of my US earnings was taxed in Portugal as I was paying taxes here and did not live in Portugal for more than 6 months. Although, I had to show them my worldwide income, salary, interest etc. etc. I did not have to show any of the “high value stuff……”.
Because of my tax residency situation I had the NHR. Therefore, the first question is where are you physically residing and earning. Once that is determined we can answer the other questions.
Hope that helps

[tommigun (Tommy Gunn)]

The answer to your scenario is very simply #1

Your non-PT employment income is exempt from PT taxation under NHR if it is already taxed at source. ‘High-value occupation’ criteria is for your PT-based income.

(And yes, I did file my tax declaration earlier this year in PT.)

[tommigun (Tommy Gunn)]

@mikemuks62

The first test is are you in Portugal for more than 185/6 months in a year?

Mike, it makes no difference to the scenario above, as we are on NHR remember? NHR does not care if you live in PT one day or 365 days a year.

[PTbound (A L)]

Thanks @mikemuks62, @tommigun and @tkrunning - real-life experience is what I hoped to hear, as there’s some very confusing stuff out there!

My work is done old-style, in an office in London (UK). Due to Brexit and no GV yet, I am still in the UK more than half the time. Things hopefully will change next year.

[tkrunning (Thomas K. Running)]

As long as the work is performed in the UK there won’t be any tax at all in Portugal with NHR.

[mikemuks62 (Mike)]

Then you are truly a tax resident of the UK. Like my case in 2022 and 2023. Then I changed my tax residency back to the US as GV delayed.
As mentioned, while I showed as tax resident in Portugal, I had show worldwide income in my Portugal tax returns but only taxed in my rental income as I lived more than 6 months outside Portugal.