Portugal tax system - do we must declare all our assets in the world?

While you have to declare all your wolrdwide income, I am certain that many peole simply don't do it. Portugal might be lenient, but other countries even buy illegally obtained data to track down those people evading taxes. Maybe you should talk to an international Tax Advisor like BDO or EY.

Though foreign bank and brokerage accounts are declarable - balances are not reportable (as yet)

Portugal offers tax breaks to foreigners settling in Portugal - read up on 'non habitual tax'

nz7521137 wrote:

While you have to declare all your wolrdwide income, I am certain that many peole simply don't do it. Portugal might be lenient, but other countries even buy illegally obtained data to track down those people evading taxes. Maybe you should talk to an international Tax Advisor like BDO or EY.

Can I ask what makes you certain?

If your goal is to stay in Portugal for a long time, which includes being a citizen, wouldn't this bite you in the ass eventually?

TonyJ1 wrote:

Though foreign bank and brokerage accounts are declarable - balances are not reportable (as yet)

Portugal offers tax breaks to foreigners settling in Portugal - read up on 'non habitual tax'

So Portugal is okay with not knowing how much money you have in total? Are we sure about this?

About NHR: As far as I know tax breaks are useless if you have active income or if you invest in equities. At best active income is at taxed at 20%. Capital tax is 30%. If you are self employed, even with a company overseas, you are taxed at about roughly 40% including social contribution.

Not sure I totally understand that or your point regarding NHR .
I am UK citizen but resident in Portugal from 01/01/19 under NHR.
I have UK bank balances, a UK Private Pension payment, a UK employee pension payment and I have multiple equity/share investments in UK.
All are declared both in UK and Portugal.
I declare all of these and pay zero Portuguese tax on any of them.
I have a couple of private properties I rent out in UK and these are my only taxa be me items - albeit by HMRC rather than Finances.  That said, these are offset against my UK personal income tax allowances which reduces my UK tax to almost zero also.
Now, I do understand that NHR has become less advantageous in past couple of years (10% v 0%) but the savings and advantages are hardly insignificant for a large number of NHR recipients.


Once again,. (I am an ex licensed Independent Financial Adviser in UK) .. and would strongly suggest purchasing the "Living in Portugal" paperback from Blevin Frank's website which has incredibly worthwhile and accurate information on tax and finance.
Reasonably priced, accurate, pertinent, updated, international, easily understood.
Worth its weight in gold IMHO ...and I have zero connection through the company or employees.
Worth spending €10 to potentially save €10,000's.

Personally, I find it morally questionable when people decide to migrate to a new country and then don't follow tax or other rules. While at the same time taking advantage of the infrastructure provided (and in the case of Portugal, enjoying good healthcare benefits). I understand that nobody loves paying income or any other tax (me included). I am sure there are legal ways to reduce that 'burden', best to talk to a qualified accountant/tax advisor. Not declaring in the hope of not getting caught or hoping for a lenient tax authority? Many countries do practice automatic exchange of information, not declaring might not always be the best idea.

Hi whgwhg001
I agree with you we moved over here 3yrs ago neither of us work as retired but we still pay taxes here would never dream of not declaring as Like  you say countries talk to each other so cant see the point as a heavy penalty for not declaring would i presume be higher that just paying what you have to pay.
Jean

Is there any other alternative countries that are safe to migrate as retiree from US??? 10% tax plus VAT of 20 plus % on most items you buys for day to day living?? is way too much even compare to US standard. My wife and I income is 90 based on our Social security pension, which is also tax by most states US. Gross annual income we last year $57k from SS pension and $4k from dividend and IRA withdrawal. We are considered in low income bracket here in California/ based on federal tax rate , so we did not pay any income tax and even get few hundred dollars refund. So paying $5700 NHR tax and 23% VAT is just going to be enough reason to find alternative . How about Panama, Spain, Greece , Cyprus? Well back on the drawing board. good luck to all!!!

conradmilpitas wrote:

Is there any other alternative countries that are safe to migrate as retiree from US??? 10% tax plus VAT of 20 plus % on most items you buys for day to day living?? is way too much even compare to US standard. My wife and I income is 90 based on our Social security pension, which is also tax by most states US. Gross annual income we last year $57k from SS pension and $4k from dividend and IRA withdrawal. We are considered in low income bracket here in California/ based on federal tax rate , so we did not pay any income tax and even get few hundred dollars refund. So paying $5700 NHR tax and 23% VAT is just going to be enough reason to find alternative . How about Panama, Spain, Greece , Cyprus? Well back on the drawing board. good luck to all!!!

I can't answer those questions, but maybe ask how someone living on 61 k USD can make do in Portugal? Your retirement pension is more than my working income in Canada. I know California is expensive. There are lots of reasons for living in a particular place, and affordability is certainly one of them

When you migrate and live there full time you support the economy without them manufacturing product to export to balance the trade of what they import. It's just like having money flowing in as like 100% profit. It's just like foreign workers remitting funds to support their family back home. That's why Mexico, Philippines , India love their foreign workers because of the in flow of money for not exporting anything except human workers/ which we call modern day slaves.
   Creating taxes without any clear purpose is just abusive taxations. I'm sure a lot of potential retirees will be wondering if they'll impose or create more tax increase every few years. i grew up in 3rd world countries where tax law are created so all the government agencies can divert majority of the fund into their pockets and pension funds. Nothing goes for infrastructure and social services , money just disappear. Portugal is not a 3rd class world country and hopefully they have plan to put the funds to good use. Just remember IMF and European union have to bail out few of the member countries and if i'm not mistaken Portugal, Greece and Spain are some of the countries that were help. We here in the US we just print paper money non stop 24/7 and spread it all over the world. I think we're in the top 10 of biggest debtor to the tune of close to $30 trillion dollars.
I wish Portugal success in their initiative of encouraging more retirees to migrate, it's beautiful country and one of the safest are big asset. good luck all . I'm still planning to visit once all the covid  travel issues simmer down and safer..

gerado990 wrote:

TonyJ1 wrote:

Though foreign bank and brokerage accounts are declarable - balances are not reportable (as yet)

Portugal offers tax breaks to foreigners settling in Portugal - read up on 'non habitual tax'

So Portugal is okay with not knowing how much money you have in total? Are we sure about this?

About NHR: As far as I know tax breaks are useless if you have active income or if you invest in equities. At best active income is at taxed at 20%. Capital tax is 30%. If you are self employed, even with a company overseas, you are taxed at about roughly 40% including social contribution.

Depends - Social security, if self employed, is 21.4% on 70% of invoiced amount - effectively 15%. I don't see how an overseas company will help if you are self employed - should be either one or the other. Dividends from companies abroad, with the exception of 'black listed countries' will be tax free in Portugal under the nhr - though technically there is a risk that such structures will be void / ignored due to the management and control rules - though this 'depends' - what is the business, how it is run / managed.

In terms of reporting assets - yes I am sure - but as account numbers are reported etc - they will have access to such information in any event. If accounts not disclosed, likely to be picked up under the exchange of information agreements, though a taxpayer could for example have a property in a foreign country, and unless there is rental income, there is no requirement to report such assets.

TonyJ1 wrote:

gerado990 wrote:

TonyJ1 wrote:

Though foreign bank and brokerage accounts are declarable - balances are not reportable (as yet)

Portugal offers tax breaks to foreigners settling in Portugal - read up on 'non habitual tax'

So Portugal is okay with not knowing how much money you have in total? Are we sure about this?

About NHR: As far as I know tax breaks are useless if you have active income or if you invest in equities. At best active income is at taxed at 20%. Capital tax is 30%. If you are self employed, even with a company overseas, you are taxed at about roughly 40% including social contribution.

Depends - Social security, if self employed, is 21.4% on 70% of invoiced amount - effectively 15%. I don't see how an overseas company will help if you are self employed - should be either one or the other. Dividends from companies abroad, with the exception of 'black listed countries' will be tax free in Portugal under the nhr - though technically there is a risk that such structures will be void / ignored due to the management and control rules - though this 'depends' - what is the business, how it is run / managed.

In terms of reporting assets - yes I am sure - but as account numbers are reported etc - they will have access to such information in any event. If accounts not disclosed, likely to be picked up under the exchange of information agreements, though a taxpayer could for example have a property in a foreign country, and unless there is rental income, there is no requirement to report such assets.

You are sure that balances are not required to be reported, but account numbers are? Then we can assume they have access to history of your accounts overseas. So they can see what's inside your brokerage account. They can see the transactions. They can see when and what you bought or sold. They can see the amount of capital gains, year over year. Correct? Even on NHR, they require you to pay 28% tax on capital gains. Not sure why you skipped the part about capital gains in your response. This is the biggest problem.
On top of that, 20% tax on income at minimum.
On top of that, 15% social security.
On top of that, 20% VAT.

This is crazy high. Do they actually expect people to move to their country and pay these extremely high taxes, while there are other more friendly countries?

gerado990 wrote:

TonyJ1 wrote:

gerado990 wrote:

So Portugal is okay with not knowing how much money you have in total? Are we sure about this?

About NHR: As far as I know tax breaks are useless if you have active income or if you invest in equities. At best active income is at taxed at 20%. Capital tax is 30%. If you are self employed, even with a company overseas, you are taxed at about roughly 40% including social contribution.

Depends - Social security, if self employed, is 21.4% on 70% of invoiced amount - effectively 15%. I don't see how an overseas company will help if you are self employed - should be either one or the other. Dividends from companies abroad, with the exception of 'black listed countries' will be tax free in Portugal under the nhr - though technically there is a risk that such structures will be void / ignored due to the management and control rules - though this 'depends' - what is the business, how it is run / managed.

In terms of reporting assets - yes I am sure - but as account numbers are reported etc - they will have access to such information in any event. If accounts not disclosed, likely to be picked up under the exchange of information agreements, though a taxpayer could for example have a property in a foreign country, and unless there is rental income, there is no requirement to report such assets.

You are sure that balances are not required to be reported, but account numbers are? Then we can assume they have access to history of your accounts overseas. So they can see what's inside your brokerage account. They can see the transactions. They can see when and what you bought or sold. They can see the amount of capital gains, year over year. Correct? Even on NHR, they require you to pay 28% tax on capital gains. Not sure why you skipped the part about capital gains in your response. This is the biggest problem.
On top of that, 20% tax on income at minimum.
On top of that, 15% social security.
On top of that, 20% VAT.

This is crazy high. Do they actually expect people to move to their country and pay these extremely high taxes, while there are other more friendly countries?

I am extremely sorry that I have not done a full analysis of the ins and outs of the Portuguese income tax system, including the NHR provisions. On some of your observations:

Yes - there is a capital gains tax at 28% on realised gains, and there are some allowances for inflation
The 20% tax is for qualifying activities - others are taxed as per the tax tables (if multiple activities, the qualifying activities will be taken into account)
The social security is payable - though there is a contributory maximum (about 5300 per month - adjusted annually). No contribution in first 12 months
Actually VAT is higher 23%, there are also fuel taxes, booze and tobacco taxes, stamp duty, property transfer duty, fees for public services, toll gates, etc
The 20% tax on income and social security is not in addition to the 28% capital gains charge. If the capital gains are from 'black listed' countries, then the rate goes up to 35%.
Of course you are right - indirectly they will have access to bank and other date - I answered a specific question - are you required to report bank account balances.

In short, if you live of capital gains, Portugal is probably not the answer for you (unless you are prepared to pay the 28% capital gains, and vat, and other expense related levies). Portugal is a very high tax country and incomers should be aware of the plusses and minusses - there are quite a few countries that do not have these sort of taxes, and they might be the solution for someone living of capital gains

Please note:
If your answer refers to the last post, you DO NOT NEED to quote the whole previous answer. As you just did, it creates needless junk in the thread.

And if you want to direct your answer to a person, you can simply write that person's name, like @Gerado990, @Tonyj,...


@Gerado990,

Some remarks:

1. There are 3 VAT brackets 6%, 13% and 23%.

2. Portugal does not have a Double Taxation Agreement with Zimbabwe (see link below (a)), therefore, in this case, the OECD Model Convention will be applied (b):

By selecting:
(a) Quadro resumo das convenções 2020
https://info.portaldasfinancas.gov.pt/p … belas.aspx


(b) Convenção modelo de OCDE
https://info.portaldasfinancas.gov.pt/p … fault.aspx


3. Regarding direct taxes (on income, assets and capital) as well as indirect taxes (VAT, special taxes,...)... within the EU you will not find the tax haven you are looking for... https://www.europarl.europa.eu/news/en/ … -avoidance

(See taxation in the EU)

@TonyJ1 thanks a lot for clarifying in detail, I appreciate it!

Maybe I should look into structuring?
Like, paying myself from a company owned by trust. Company & trust set up in my home country.
Hiring myself as a remote contractor or employee of the company.
Only paying myself spending money. Rest going to the trust.
Renting through the company to keep the expenses low.

Could this help? I'm not super familiar with structuring.

@JohnnyPT "within the EU you will not find the tax haven you are looking for"
Switzerland has zero capital gains tax.
I'm not looking for a tax heaven. I'm not sure why you are misinterpreting the main point I was refering to. I'm simply looking for a country that's not so greedy.
Even your misinterpreted reference was incorrect since Switzerland has zero capital gains tax. Obviously cost of living is higher in Switzerland but its more friendly than Portugal taxwise. It is a thing. Its not fair to make generalizations and misdirect people.

Nobody here is misguiding you. And about that, maybe you are talking to the wrong person...

Even your misinterpreted reference was incorrect since Switzerland is not part of the EU... So your answer is not in line with my previous post.