This is a tax question but in a way unique to Portugal. A GV holder can acquire citizenship after 5 years and some hurdles. We’re thinking of that. We were originally offered NHR but didn’t take it, and, in fact, 10 years is almost up. Our goal is to stay in our Portuguese home for a long period of time but less than 183 days and not become tax residents. Everybody says as long as we aren’t tax residents we wouldn’t pay Portuguese tax on our worldwide income. Everybody, that is, except our accountant. He says, technically all Portuguese owe tax on ww income. It’s just that IRS.pt isn’t connected to the other (in our case, US) tax systems. But they could. It seems like a gamble. If they do, then, besides the US tax on US income, we’d have to pay the difference, or about 10% to Portugal. Plus I shudder to think of the added complications of filling 2 sets of tax forms. The alternative to acquiring citizenship is to keep renewing our Golden Visa. That’s not only very expensive, but a big headache and probably requires a lawyer and it’s never clear if we can do it. Anyone facing a similar situation or with insight?
This seems unlikely to me. The USA is widely known to be the only country (except Eritrea) that taxes citizens who are resident elsewhere.
This is seen even in the USA’s tax treaties with other countries which all contain something called a “Savings Clause” which specifies that regardless of the treaty, the USA reserves the right to tax citizens and green card holders on worldwide income.
No other country does this. If you look at the USA-PT tax treaty, there is a Savings Clause for the USA, but not for PT. So if you are resident in the USA, PT will not tax you on income sourced outside PT.
Thanks for your feedback. I hope you’re right, and don’t know enough to say you’re wrong. It just seems like easy money for Portugal.
You don’t say what you will be doing during the remaining half of the year?
If you’re going to be, let say on holiday travelling to many different countries and have no other home than in PT. Then your accountant may believe you fall under this term of the tax code:
“Regardless of spending less than 183 days in Portugal, maintains a residence (i.e. a habitual residence) in Portugal during any day of the period referred above, with the intention to use it and keep it as one’s primary residence.”
It seems this is the case whether you are a citizen of PT or not.
You’re right. I’m aware that we have to have a different tax residence which is in the US. Otherwise we would be considered tax residents of Portugal, even if we didn’t live there more than 183 days.
Looking at the tax treaty, citizenship can be used as a “tie breaker” but only if other factors (e.g. “permanent home”, “center of vital interests”, “habitual abode”) are all tied:
- 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.
I’m no expert but it seems like if you own a home in the USA but only use AirBnBs in Portugal (and don’t spend more than 179 days there) you’re probably fairly safe?
Yes, I’d agree too.
The outcome could be different if AirB&B’s were used in USA and a purchased (investment) home used in PT
Thank you. I’m pretty clear on how to make the US my tax domicile.