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Portugal / Canada tax questions

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Posts: 21
VIP Member
Topic starter
(@snowbuddy)
Eminent Member
Joined: 7 years ago

Hello: I am considering options for retirement in next couple of years. I am hoping someone - perhaps a fellow Canadian can weigh in on a Portugal tax question. I have a fairly good grasp on the tax situation, but there are some areas I cannot find information on – so am hoping someone here has been through this before.

I will be funding retirement partially through RRSP or RRIF withdrawals. Canada will withhold 15% at source, as I would intend to be a Portugal resident NHR. I don’t think Portugal will tax withdrawals further.

First question – The passive income generated by funds remaining inside the RRIF or RRSP are sheltered in Canada – is this income taxable in Portugal? For example, the US and UK do not recognize the tax deferred nature of these plans, and the resulting interest/capital gains/ dividend income must be reported yearly and I believe is taxable in those countries.

I realize that I will need to hire a taxation specialist – one with both Portugal and Canada tax expertise, but am hoping someone here is already dealing with this.

36 Replies




Posts: 502
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(@madeira)
Honorable Member
Joined: 10 years ago

Hello snowbuddy - although not for much longer?

My husband and I are Canadian, retired to Madeira, Portugal.

I am not a tax expert, but since the income is earned inside your RRIF, it would be taxed at the 15% for RRIF withdrawals once you take it out - and not until then. Once you withdraw the RRIF payment and it earns tax outside the RRIF, it would be taxed as any income. Since the RRIF stays in Canada, it is subject to Canadian tax laws. You cannot transfer it to Portugal as a RRIF (nor would that be recommended given the current financial situation in Portugal)

I have found the international experts at the Canadian CRA very helpful.

Something else worth noting, if you haven't already - your OAS eligibility is frozen once you become a non-resident. So if there is any possibility that your RRIF withdrawal will cause a clawback in your OAS, it is worth becoming a non-resident in Canada before your first RRIF withdrawal.

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1 Reply
 PAC
Community Member
(@pac)
Joined: 4 months ago

New Member
Posts: 1

@madeira

Could you please clarify what you mean by "...your OAS eligibility is frozen when you become a non-resident.".

Thank you for your assistance in this matter.

 

Paul

 

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Posts: 21
VIP Member
Topic starter
(@snowbuddy)
Eminent Member
Joined: 7 years ago

Hello Madeira - thank you for the response. The OAS pointer is interesting - I had not thought about that.

I would not consider moving the RRIF from Canada to Portugal for the reasons you mentioned. My concern is that as a resident of Portugal I would be taxed on worldwide income - and although in Canada's view RRIF is taxed on withdrawal, other countries may not see it that way. I think what I will need is an accounting firm in Portugal that has asked the PT tax authorities how they view the RRIF specifically, and if there is any published policy. In the case of the US, it views a RRIF not as taxed on withdrawal, but taxed as the an unsheltered investment trust. This can have a big impact on total tax.

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Posts: 502
VIP Member
(@madeira)
Honorable Member
Joined: 10 years ago

I'm hoping Anna (another Canadian living in Portugal who has sorted all these issues) will comment on this, as she may have direct experience on it.

Where are you in Canada and where are you looking in Portugal? Not as far off the thread as it looks :-), as that will determine where to look for an accountant.

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Posts: 21
VIP Member
Topic starter
(@snowbuddy)
Eminent Member
Joined: 7 years ago

Hello Madeira: I am in Toronto. Where do I want to be in Portugal? Not sure. I am a couple of years away from retiring and still working on country options. What is important? - a favourable tax climate followed by: nice weather, culture, community, positive economy- business outlook, cost of living, low crime rate, golf, food and language.
My short list is Portugal, the US and Mexico. A pretty diverse group to be sure.

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