Tax implications of US/Portuguese dual citizenship

To be honest, I am not sure I am following your logical path hereā€¦
The citizenship (nationality) is the last criterion in the order of testing under Article 4 of US-PT DTT.

I am going to quote the official source (DTT) here, and letā€™s leave it at that :sunglasses:

(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.

You will be paying US taxes regardlessā€¦they always get their taste.

Frankly Iā€™m amazed only the USA does this. Seems like the only reasonable way to do taxes and prevent tax dodging/etc. Though I assume thatā€™ll be unpopular here :slight_smile:

I think it is silly to tax people who donā€™t live in the country. Oregon doesnā€™t continue to tax you if you move to Californiaā€¦

Talk about getting something for nothing!

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The benefits of US citizenship are pretty big! And you canā€™t run a state without money.

But thatā€™s a big topic for another time I think, perhaps over drinks em Lisboa if you decide to join us

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Perhaps one day SEF will process my application and we can debate it :slight_smile:

(For example: whether the tax money is being wisely spent, and/or if a high earner is really seeing any ROI as the country swirls down the drain.)

Taxing all citizens regardless of residency would be a great way for Portugal to reduce demand for Golden Visas (and also seriously annoy all Portuguese expats)!

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Looking at the tax treaty, it seems dividends, interest and capital gains are in certain situations taxable in both countries. Question is, could the combined tax imposed ever exceed the rate of the country with the higher tax rate?

I was an accountant before I retired to Portugal so I had set up my brokerage accounts before hand. Your brokerage cash canā€™t be money market based after residency as US money markets are only a North American vehicle. Dividends are not subject to dual taxation but all capital gains are subject to EU rates which are much higher than US rates. Pensions after NHR are taxable but Social Security is not subject to Portugal tax. Since I believe this is a GV thread I advise you discuss all your portfolio with a tax accountant because PT can claw back repatriated assets upon leaving the EU zone. My goals are different than most here as I will get dual citizenship as I intend PT to be my final destination.

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@chinbawambi,

Thank you for a very informative response.

I was wondering how does EU treats the other U.S. financial vehicles like DSTs when they are ā€œrolled intoā€ other DSTs under 1031 Exchange and from QOZ investments where all gains are exempt from U.S. Cap Gains taxes? Does EU still come after their slice of the pie?

Pensions after NHR are taxable but Social Security is not subject to Portugal tax.

It is my understanding that pensions are taxed now at 10% rate in Portugal after the latest changes to GV in 2021. Do you have any knowledge about this? Interesting that Social Security payments are not taxable - I truly hope you are right. :slight_smile:

As PT is also my final destination (and I already live there), I would be interested to learn of your experiences in your new home.

Thanks @chinbawambi,

I assume by ā€œresidentā€ you are saying ā€œtax-residentā€.

Your brokerage cash canā€™t be money market based after residency as US money markets are only a North American vehicle. Dividends are not subject to dual taxation but all capital gains are subject to EU rates which are much higher than US rates.
All this is only after you become a tax resident, correct? Before which one wouldn't be taxed, and during NHR status would only be taxed at 10% on pensions (including ROTH IRAs)?
PT can claw back repatriated assets upon leaving the EU zone.
Not sure what you mean by this. You mean if PT leaves EU zone? Or if I leave EU zone?

Does anyone know of an accountant well versed in PT/US dual citizenship tax implications for a US citizen?

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So far life is wonderful here. SEF and finanƧias have deserved bad reputations but not for reasons commonly expressed. They dont have enough staff at windows and we dont know enough portuguese is the short answer. Spend the money and the time at a local university to learn portuguese and your retirement life will be enriched tenfold. If you have enough assets for GV pay a tax accountant to avoid extra taxation and pay a lawyer to get past SEF. The difference in having a local lawyer in immigration is dramatic. If you move back to US or anywhere out of schengen zone schengen countries usually have a right to tax your assets upon repatriation as if you sold them. It is clearly stated in US/PT tax treaty and if ur tax attorney tells you otherwise they are selling you the brooklyn bridge.

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Think basis of us real estate plus appreciated value. The paper profit is taxable to portugal when you leave eurozone. At my asset level not a big deal at yours probably a VERY big deal. Pay for the accountant.

Did anyone ever give you a recommendation on this?