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Tax Question On Capital Gains (stock sale) & Dividends


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(@recursivefantasy)
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Hi! I know tax questions are always complicated, and I will reach out to the appropriate source, but I need some general guidance because the answer affects the timing of our plans. Under the NHR status how are capital gains taxed in Portugal when selling stocks? How about dividends from said stocks? 

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(@jordan_zimmerman)
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Standard caveat: you must speak with a Portuguese tax professional...

Are you a US Citizen? Knowing your home country is very important here. If you are a US Citizen you should know that you are taxed on your worldwide income. While you can avoid a large portion of "earned" (wages, tips, salaries) income, you cannot avoid US taxes on passive income (everything else). As I understand it, passive income that is sourced outside of Portugal is covered by the NHR and, thus, is not taxed by Portugal (though you still must report it). 

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(@recursivefantasy)
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@jordan_zimmerman Hi Jordan. Thank you for your response. I am indeed a US citizen and I do understand that even when living in Portugal the US will still want its share from any and all income.

Before I was under the impression that capital gains and dividends would not be taxed under the NHR, but recently I ran into this article which seems to imply that dividends (income from financial assets) are not taxed due to the DTA but that capital gains from the disposal of securities are taxed at 28%. Am I misreading something there?

https://www.globalcitizensolutions.com/nhr-portugal-tax-regime/

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(@jordan_zimmerman)
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@recursivefantasy It's pretty clear in that article - ̶o̶n̶l̶y̶ ̶i̶f̶ ̶i̶t̶'̶s̶ ̶a̶ ̶b̶l̶a̶c̶k̶l̶i̶s̶t̶e̶d̶ ̶t̶a̶x̶ ̶h̶a̶v̶e̶n̶ ̶(̶t̶h̶a̶t̶'̶s̶ ̶N̶e̶v̶i̶s̶/̶S̶t̶.̶ ̶K̶i̶t̶t̶s̶,̶ ̶e̶t̶ ̶a̶l̶)̶.̶ (edit - this is wrong)

 

Capital gains from the disposal of securities (shares, bonds, etc.)

  • Subject to an optional rate of 28%, 35% if from a blacklisted tax haven
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(@recursivefantasy)
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@jordan_zimmerman Thank you Jordan. It is clear to you, but I found the punctuation and language muddled. I read it as 28% under most circumstances, but 35% if from a blacklisted tax haven. Though I must say the 'optional' part had me a bit confused as well. 

So from your understanding both capital gains on disposal of securities and dividends are not taxed in Portugal, only the US?

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(@x-camone)
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@jordan_zimmerman @RecursiveFantasy

If it's from a tax haven, it's taxed at the higher rate of 35%. Any other source, it's at 28%.

Under NHR, capital gains from real estate may be exempt because of the DTA, but not capital gains from other property such as securities.

Income from capital (like dividends mentioned above) would usually be exempt under NHR because of the DTA.

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(@jordan_zimmerman)
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@x-camone Thanks for the clarification. I need to investigate this more.

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(@jordan_zimmerman)
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(@x-camone)
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@jordan_zimmerman Yes, that looks spot on on that topic.

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(@recursivefantasy)
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@jordan_zimmerman That is definitely very clarifying. Your notes give me a solid plan on how to access my funds without taxes eroding most of it. Thank you very much for your help and notes.

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(@jeanne)
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@jordan_zimmerman  Very useful summary. Thank you for sharing.  I'd been wondering if/how IRA and Roth income would be handled under PT taxation. From your analysis, it looks like they would be taxed at only 10% of 15%=1.5%. 

Do you know if PT treats 401(k) withdrawals in the same manner as IRAs?

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(@jordan_zimmerman)
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FYI - I didn't make that summary. I completely forget where I found it.

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(@recursivefantasy)
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@jeanne Wait. How did you arrive at that 1.5%? Unless I misunderstood myself it is stating that it is 10% when the basis is known (meaning the price at which you bought is known so the capital gain can be defined). Otherwise it is 15%. Nowhere does it state that it is 10% of 15%.

As far as I understand capital gain is what the stock appreciated since you bought it. Lets say you buy a stock for $100 and then you sell it for $120. At that point you would be taxed 10% on the $20 that it appreciated, not the other $100. However, if the basis is not known for whatever reason, then you would be taxed 15% on the entire amount.

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(@jeanne)
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@recursivefantasy   this is how I read your doc, "If basis cannot be determined, the amount of CG is set at 15% of the withdrawal amount."  I.e. the 15% is the calculation of the deemed capital gain.  Then I applied the 10% tax rate to the deemed CGain because the line above that in your analysis says CGT= 10%. 

or is the intention, ...if basis cannot be determined, a CG tax rate of 15 % is assessed on the withdrawal amount.

whether we're looking at the CG deemed value or the CGTax rate makes a big difference. 

I think a deemed CG will likely always apply in the case of RMDs when invested in a fund rather than individual stocks?

Further, would the flat 10% rate under the NHR applicable to 'pension' income override the 15% rate during the ten NHR years for IRA/Roth income? Possibly a moot point in light of the double taxation treaty, but the question just came to mind. 

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(@alleycat)
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@jordan_zimmerman Hello Jordan, may I ask if you are already a PT resident with history of tax filing or are you in the preparation mode?  Thank you for these two leads. We are trying to get savvy on the tax ramifications before we apply for our D7, but want to expedite our progress and also find a good fit for us in hiring an advisor.

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(@jordan_zimmerman)
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@alleycat We are residents now. Also, we were previously residents of Panamá for 8 years. We only became residents this year so 2022 will be our first filing in Portugal.

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(@martin)
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I think you really need to speak to a tax advisor like sovereign trust in lagoa algarve....asking for tax advice here is not something any of here are specialised in

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4 Replies
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(@jeanne)
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@martin  I don't think this basic information requires yet another specialist tax advisor. I was simply requesting clarification on one of the calculations in the tax info doc that was posted, and Jordan has apparently already consulted two tax specialists and was kindly sharing the info he received.

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(@martin)
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@jeanne 

 

ok thanks

 

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(@alleycat)
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@martin  Hello, Marin...you mention Sovereign trust. Do you know if the advisor/s there are specialists for expats from the US?  Will I easily find their website by an internet search, or perhaps you could DM me with contacts/name. Thank you very much for a lead to an advisor.

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(@martin)
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@alleycat 

 

they used to my accounts so I know them and from my experience I was always happy

boss is called Nigel or speak to Marina

Company Formation in Portugal | Business Setup in Portugal (sovereigngroup.com)

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(@martin)
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Joined: 16 years ago

you would have to aske about usa as i cannot say

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Posts: 2545
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(@martin)
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my experience of paperwork is that it takes ages for anything to happen, with the exception of tax and you owe them money and then oh wow are things FAST!!

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