So I tried to update my address from the US to my Madeira house on the finances portal by uploading my deed and GV application, which has the Lisbon address of my lawyer. But they replied and said I need to have the correct address at Sef. But getting an appointment to change Sef address is difficult.
Hi Chris,
Do you know if rental income in portugal from a portugeuse property has any benefits under the NHR regime? Do you know if the NHR can help lower taxes from selling a portugeuse property? Does anyone know howCapital Gains tax works in portugal and if NHR status could affect the amount one pays?
Thank you!
Aylin
There have been a few references online and in this forum thread that the Portuguese government will debate the end of the NHR scheme at the end of October and again at the end of November. There is apparently an expectation that foreigners with outstanding SEF applications will be grandfathered into the being eligible for the NHR scheme after it is axed in 2024. This, clearly, would be a welcome amendment as it would take the pressure off trying to fix this mess with our tax lawyers and accountants in the last two months of 2023.
Has anyone found any new references to this debate yet? I think this is a crucial amendment that will be welcomed by most people in this forum.
I am trying to work through this with our immigration lawyers but they appear of course motivated by the generation of additional fees rather than minimising my additional costs.
Gains made within PT are not impacted by NHR, however if you benefit from NHR there is no Portuguese capital gains tax on foreign gains (ie made outside PT in a white listed jurisdiction) when otherwise these would be taxed by PT too (if you reside in PT)
I am looking into this with tax advisors right now because the advice is all over the place. Based on the advice Iâve received so far, this is how I understand it â but I am looking for professional validation or correction:
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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.
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Once we apply for tax residency, our world-wide wages are taxed in PT, irrespective of where earned. Other types of income are a mix, but wages are taxed (including US wages, irrespective of where we live). This was a surprise.
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Once we obtain NHR, our tax rates for various categories of earnings are capped and either low or exempt.
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However, irrespective of NHR, wages earned in US are âfullyâ taxed. This could be an issue for me for 2024.
a. If I qualify as a âhigh value occupationâ, my wages would be taxed at a flat rate of 20%.
b. If I am not a âhigh value occupationâ, my wages are taxed along PTâs progressive marginal rate scale (capping at 48% for wages over ~âŹ78,500)
The upshot appears to be this:
If I qualify as high value AND we get NHR, then my US wages, together with our other earnings, will be taxed in PT at a max of 20%. This might be OK once the PT-US tax treaty is applied ( but I am awaiting professional help). If I DONâT qualify as high value, then Iâm going to pay much more tax in PT, and only able to offset the US taxes to the extent of the US taxes â so I probably net pay much more in taxes.
Happy to hear what others are seeing and advice they are getting.
Someone more knowledgeable can correct me if Iâm wrong, however my understanding is that your overseas wages are only taxed if they would not be taxed in the country where theyâre earned, as long as there is a double taxation agreement in place between the two countries. And I also understand that this is if they âcouldâ be taxed, not if they actually are taxed. For example, Iâm aware there are lots of UK based pilots on NHR living in PT. They earn wages in the UK that could be taxed in UK, but they are only partly taxed in UK as they are not tax resident in the UK - they keep their days spent in the UK below the threshold and commute back and forth to PT. So they only pay tax in the UK on the days theyâre actually at work there. But because their UK wages could be taxed in UK, itâs not taxed again in PT.
Of course I may have got this wrong, someone please correct me if so.
If they were able to keep their UK employment contract as a non-UK resident, resulting in being only taxed at source in the UK for the days physically present in the UK (I presume <90 days), well⊠thatâs good on them.
I have heard of another example someone having a highly paid UK job, moving out to another country (not PT), but keeping their UK-based employment contract just the same. What I donât know is how they will be taxed if not living in the UK anymore. Or maybe they will spend 91 days in the UK so will keep themselves as âresidentâ.
Must confess I have not studied the US/PT DTAA.
But if itâs 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 donât think this is going to happen.
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The UK taxes employment income based on your residency in the UK. So you only pay tax on it if youâre tax resident in the UK. The rules are a bit more complex for air crew I think, as they can be not UK tax resident so not taxed on their whole income, but they will pay tax in respect of the time spent in UK air space. But the result is a much lower tax bill than if they were UK resident, and is why there are lots of British pilots living in PT with NHR.
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
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Itâs a bit more complexâŠ
In the UK can you can spend less than 90 days in the UK and be non-resident for tax ( subject to a test of the number of other ties to the UK) however if you also work in the UK and you spend over 40 working days in the UK (a work day is one where you spend more than 3 hours undertaking your normal employment) then you are tax resident for the whole tax year.
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I think you are describing what usually happens under a Double Taxation Treaty where there is no benefit from NHR. When you obtain NHR the rate of PT tax is reduced to Zero for all the income / gains that is able to benefit from NHR.
At least thatâs my understanding
I think itâs a bit more complex than that, not 40 days all or nothing but it depends on your number of ties. My understanding is that more than 40 days working in the UK is what creates a work tie. So adding this to the other ties you have determines how many days you can spend in the UK before becoming fully tax resident.
(Someone close to me did this for a few years so got used to counting midnights, always staying somewhere different or in a hotel when in UK etc so as not to create an accommodation tie.)
Yes, you are correct. I can spend 90 days but not more than 40 work days because of my other ties
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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.
Forgot to add if source of income is US and taxed deducted at source already
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Hi Mike. An additional point of clarification. If I have US Income, earned in the US, and I pay (for example) 20% on it, Portugal will not levy an additional tax, even if (again for example), the Portuguese rate is 30% (i.e., PT would not levy a tax equal to 30% - 20% = 10%). This is irrespective of NHR or no NHR, correct?
Were you able to figure out how to make an appointment with SEF in Funchal to change the address? My lawyer was told the same thing - we must go in person to the SEF office here in Funchal and change the address on our residence permit first.
If you are talking about the deed for your property, it should have your property address and not your lawyers office address.
That is not correct. I tried to respond back via email but it doesnât seem to go through. If that response does not get posted here in a couple of hours please PM me and I can explain. If you think itâs ok you can provide me with your US number and I can call explain too. In brief if you are a tax resident of Portugal and do NOT HAVE NHR you will end up paying the Portuguese (30%, in your example) rate on your worldwide income. You will not pay any taxes in the US as you will claim the 30% paid in Portugal as a credit. If however you have the NHR status your US sources income will be exempt for Portugal taxes. Again this is my experience and opinion. I am not a legal tax adviser. You can further clarify from a tax expert in Portugal. This is what I experienced for my 2022 tax returns both in Portugal and the US