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Tax advantages on foreign pensions

Legislation on Tax Advantages & Pensions from Foreign Sources (Reformed in Portugal)
Legislation on Tax Advantages & Pensions from Foreign Sources (Reformed in Portugal)



The Regime of non-habitual residents, allows preferential tax treatment for qualifying income earned from a Portuguese source for non-habitual residents.
Under this scheme, eligible individuals as non-habitual residents are eligible for special tax rates apply to income derived from Portuguese sources and can benefit from tax exemptions on income from foreign sources.

Who can be considered "Not Ordinarily Resident"?

An individual is considered resident unusual, when you become a tax resident in Portugal and that has not been taxed as such in the last five years before qualifying as a tax resident Portuguese. Individuals who meet the requirements below are eligible to register as unusual and residents have the right to be taxed as such for a period of 10 consecutive years and may be renewed.

DETAILS "No Ordinary Resident":

  • Became a resident for tax purposes in Portugal, according to the rules of the IRS Code, the year in which the usual rules of non-resident is intended to begin to be applied;
  • It was not regarded as resident in Portuguese territory for tax purposes in any of five years preceding the year for which the regime of non-habitual resident intended to be put into effect, confirmed by the presentation of a statement of the taxpayer;
  • Application for registration of a not ordinarily resident after registration as a resident in Portugal for tax purposes, or until March 31 of the following year;

The Portuguese Tax Authority recognizes submitting additional documentation (certificate of tax residence in another country within the previous five years) is only necessary if there is reasonable doubt about the veracity of information provided by the expatriate.

TAXATION OF INCOME OBTAINED by "Not Ordinarily Resident"

The tax regime for non-habitual residents applies differently to passive income and active income, explained below as follows:

Passive Income

A Passive Income (Which includes dividends, interest, capital gains, income from units and real estate leases) obtained in Portugal for non-habitual residents, is subject to the same general requirements of the IRS, arrangements for regular resident individuals.

However, passive income earned abroad is exempt from IRS as:

The "Passive Income" under the provisions of tax treaties signed by Portugal, may be taxed by the state, or
If no treaty applies, such income would have been taxed by the state, under the Model Tax Convention of the OECD (Organization for Economic Cooperation and Development) and is not coming from a jurisdiction considered Blacklist.

Therefore, the Passiv Incomethe obtained abroad will not be taxed in Portugal, since this income has been taxed in the source state under international tax rules. Note that it is not necessary that income is effectively taxed in the source state.

Foreign Pensions origins

Pensions from foreign professionals benefit from a tax exemption if they are subject to tax in the country of origin, in accordance with the provisions of a tax treaty or is deemed not to be derived in Portugal, according to Portuguese standards of supply, or is not paid by a Portuguese resident entity or tax attributable to a permanent establishment of a non-Portuguese resident. Occupational Pensions foreign origin can also benefit from a potential double non-taxation, the applicable tax treaty prevents the country of origin of taxing pension. (Note that the taxing rights on pensions of retired civil servants and other government employees in general are taxed by the state, regardless of the state of residence of the recipient).

Active income

Sob's regulations, the Active income (Such as wages and income from personal services) activities with high added value obtained in Portugal is subject to IRS, the fixed rate of 20%.
Active income obtained abroad is exempt from income tax, provided that:

  • In case of salaries and wages, if such income has been effectively taxed in the source state, or
  • In case of income high-value-added professional services:
  • Under the provisions of the applicable tax treaty this income would have been taxed in the source state, or
  • If no tax treaty applies, the state could be taxed as income under the OECD Model Tax Convention (Organization for Economic Cooperation and Development).

Who can qualify the "Not Ordinarily Resident" in Portugal?

Qualifying as Not Ordinarily Resident also depends on the exercise of scientific and technical professions of high value. Ordinance 12/2010, of January 7, listed the activities that, for purposes of these rules are considered to be high-value activities. Inclu:

  • architects,
  • engineers
  • similar technical;
  • artists,
  • actors and musicians;
  • Accountants;
  • doctors and dentists;
  • teachers;
  • psychologists;
  • professions,
  • technicians and the like;
  • investors
  • directors & nbsp;
  • managers;

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