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I am currently living in Spain with permanent residency and considering moving to Portugal wef 1st January 2024 on a D7 visa.
I understand the requirements of the D7 and also the preferential 10% tax rate on UK state pension and Sipp drawdown plus the taxation in the UK of my military pension.
However, I cannot find the answer to a few questions.
1/ Are assets held in the UK for over 365 days i.e shares, unit trusts, investment trusts subject to Portuguese CGT if disposed of whilst living in Portugal on a temporary residency via a D7.
2/ are gains made via Sipp investment assets in UK shares subject to Portuguese CGT
3/ are all the aforementioned pension abd share investments subject to Portuguese wealth tax if held in the UK i.e investments in share accounts and Sipp drawdown
Thanks in anticipation
Hi Richard and welcome to the forums. I will let some more experienced UK members address your specific UK situation. We are from the US and had to research similar situations for our tax advice. Do check out some of the professionals here https://expatsportugal.com/business-directory-category/taxation-fiscal-consulting-portugal/ We are using AFM after consulting with them last year and felt it prudent to use a Portugal specific tax accountant for our first-year return and advice going forward.
Hi Rickyroo and welcome to the forum from me.
Couple of things that spring to my mind in the absence of any expert opinion so far.
Maybe just loose phrasing but I assume you know that in addition to whatever formalities you need to comply with in respect of residence, if the special tax provisions are of benefit you'll need to make a separate application for that to the tax office - it's not automatic.
On No 3 : there is no wealth tax in Portugal.
Your No 1 I can't answer with any degree of certainty because I'm not sure what your understanding of temporary residency via D7 is. You get a D7, which allows you to enter the country for a period of 4 months, during which you must seek authorisation to reside. That authorisation is initially granted for a period of 2 years. I'm not entirely sure, assuming the application is granted, from what date you'd be considered tax resident.
However, on the asumption that you are tax resident and you dispose of financial assets resulting in a capital gain (as per your No 1), CGT would be due in Portugal (as per Article 13 of the Double Taxation Treaty). This would not be exempt under NHR.
Your No 2 is beyond me, I'm afraid. I don't know how a SIPP operates or where that fits in with regard to the PT tax system.
@x-camone Once you attend your SEF appointment and are approved for your temporary residence you have 60 days to update your NIF to your Portugal address. The day you do that is the day you become a Portugal tax resident.
We just went through that and made sure we structured all income we could prior to becoming a tax resident. AFM from the business directory has been advising us and is doing our Portugal taxes which will be a split year for the period after we became tax residents in 2022.
@jonesdn2020 I assume, in that case, that you must have remained tax resident in your former country of former residence up to the day you became tax resident in PT, despite the physical relocation?
@x-camone Forgot to mention I am a US citizen and always a tax resident of the US regardless of where I reside.
@jonesdn2020 i thought @oldbloke had advised that wasn't correct and they could/would consider you tax resident from the day you arrived if your intention is to stay permanently and your Portuguese home is considered your main residence.
@blaze451 For us non EU folk we don’t have the right to reside here regardless of intention until granted residence.
Ricardo from AFM told us there is no possible way in Portugal to file a tax return for us until we updated our NIF to Portugal.
I am not a Portugal tax expert so I hired one and consulted many others.
For us non EU folk we don’t have the right to reside here regardless of intention until granted residence.
The AT can class anyone as a tax resident of Portugal without that person having any right to physical residence. At least that's my take on Article 16 of the Código do Imposto sobre o Rendimento das Pessoas Singulares.
@old-bloke That was my impression too, although I didn't want to stick my neck out on account of some of the issues surrounding issuance of residence docs and the obtaining of a NIF / changing address to PT if in possession of one as a non resident.
Administrative obligations are a complete nightmare at the moment, what with some things having to be done in person, by appointment, but with no appointment slots available.
@old-bloke would you agree with my assessment that I don't need to submit a tax return for 2022. I arrived June 2022 and only have a private pension for income that paid me 7k up to end of 2022. Based on being less that 8500 I assume I don't need to submit for 2022-
Who is exempted from submitting the IRS return
In the year to which the tax relates, citizens who have only received the following, whether separately or concurrently, are exempted from submitting the IRS return:
- employment income or pensions (total value up to EUR 8 500; for maintenance allowances, the limit is EUR 4 104)
@old-bloke would you agree with my assessment that I don't need to submit a tax return for 2022. I arrived June 2022 and only have a private pension for income that paid me 7k up to end of 2022. Based on being less that 8500 I assume I don't need to submit for 2022-
Who is exempted from submitting the IRS return
In the year to which the tax relates, citizens who have only received the following, whether separately or concurrently, are exempted from submitting the IRS return:
- employment income or pensions (total value up to EUR 8 500; for maintenance allowances, the limit is EUR 4 104)
I wouldn't agree with your assessment although I could be wrong.
I saw that many years ago, and as it would encompass my wife's small pension I delved a bit deeper. Whilst Article 58 of the CIRS does say that, sub-paragraph 5 of that Article has the following text;
5 - Nos casos em que os sujeitos passivos optem pela não entrega da declaração por reunirem as condições enumeradas nos números anteriores, a Autoridade Tributária e Aduaneira certifica, a pedido do sujeito passivo, sem qualquer encargo para este, o montante e a natureza dos rendimentos que lhe foram comunicados em cada ano, bem como o valor do imposto suportado relativamente aos mesmos.
So my thoughts were, how can the PT tax authority issue such a certificate to my wife when my wife's UK pension provider is under no obligation to inform them of the pension payments they have made to her.
Obviously a PT based pension provider/employer does have to notify the PT tax authority of any such payments so such a certificate could be issued by the PT tax authority. Because of that I formed the opinion that the exemption only applied to PT sourced income or pension that has already been reported to the tax authority by the provider.
After a few years of her submitting tax returns my tax liabilities got a bit complicated so we went to see a tax accountant, during that meeting and discussing my wife's tax liabilities the accountant agreed that the Article 58 exemption only applied to PT sourced income, however I have also been told by friends that their tax accountant said it applied to all income below €8500 no matter that it comes from a non PT source.
Ultimately the decision whether or not to submit a tax return is one you have to make for yourself as the professionals we should be able to rely on give out contradictory advice.
Example - A friend on a UK military pension was advised that he didn't have to submit a PT tax return as such pensions weren't taxable in PT under the UK/PT tax treaty. A few years later he got fined €1600 for failing to submit tax returns.
@old-bloke lol shot down in flames again. Guess I'll just do a return then as I wont be due anything anyway after deducting allowances...unless your going to tell me there's a clause that anyone with my surname can't claim any allowances 😆 Prob better to work on the basis that giving them it even if they don't want it is better than not giving them it when they do want it.
@old-bloke That process would have to include them changing your NIF to a tax resident?
@jonesdn2020 would there not be people who (until the recent change) had tax reps on their NIF but were tax liable due to owning property (renting it) or for some other taxable income. They have not changed their NIF (which you believe triggers the date they would be considered tax resident/liable) yet they are still on the hook for Portuguese tax. So would you not be considered tax liable from the date of entry to Portugal even though you hadn't yet changed your NIF?. Now you have changed your NIF AFM can now submit a tax return, but it would surely be from your entry date not the date of the NIF change.?
@blaze451 Yea, I have no clue about other situations than our own. We don't have any of those situations and are just following along with what we are told in regard to our own circumstances which align with what he covered here: https://expatsportugal.com/community/youtube-content-discussions/lets-discuss-income-tax-in-portugal-with-ricardo-chaves-from-afm-15-10-2022/
If we had those other situations, we certainly would be using the tax rep for our tax accounting and advice.
@old-bloke That process would have to include them changing your NIF to a tax resident?
I think you're falling into the oft repeated statement on the interweb that you're not a PT tax resident unless/until you have a Portuguese address registered with Finanças. If that was true nobody would inform Finanças that they live in Portugal as the cost of a fiscal rep is probably a lot less than what tax they would be liable for pay each year.
Article 16 of the Income Tax Law (CIRS) defines when people are deemed to be tax resident in Portugal (and it doesn't include having a PT address registered at Finanças). Article 19 of the General Tax Law requires NIF holders to update Finanças with their HABITUAL address within 60 days.
Due to the delays immigrants have been experiencing with SEF it is highly likely that many have become tax residents under the CIRS by having spent more than 183 days in PT before they were even issued their resident's permit and therefore able to change their habitual residence to their PT address.
