The impact of the Covid19 pandemic on the Local Lodging Accommodation (“AL”) market is devastating. In May, average occupancy rates reached only 5% in Lisbon and 3% in Porto, worsening the already low levels observed in April when Lisbon registered an average occupancy rate of 10% and Porto 11%. Despite the dramatic drop in demand, average monthly rates remained at usual levels, reaching €93 in Lisbon and €70 in Porto.
Beneficiaries of retirement pensions from French sources (excluding public sector retirees) who settled in Portugal before 01 April 2020 may benefit from the Non-Habitual Resident scheme, an attractive tax-free regime for a period of 10 years. This favourable assessment results from a combined application of the double tax treaty concluded between France and Portugal and the “Non-Habitual Resident” tax regime (“NHR”), established by the Portuguese legislator in 2009.
- The Franco-Portuguese tax convention provides that Portugal alone has the right to tax French retirement pensions (excluding public pensions) received by a Portuguese resident.
- Under the “NHR” rules, Portugal grants a total exemption for ten years from taxation of pensions to taxpayers settling in Portugal.
Other Tax Authorities in the European Union are concerned by this situation which they consider to be the subject of aggressive tax competition on the part of Portugal. These criticisms have led to regime changes recently introduced by the 2020 State Budget.
In France, the Tax Authority has expressed its intention to monitor these taxpayers closely. In particular, it considers that a taxpayer who pays no tax in Portugal cannot be classified as a Portuguese fiscal resident within the context of the bilateral tax treaty and therefore cannot benefit from the protection of this agreement. The French Tax Authority intends to rule out the application of the tax treaty and regain its right to tax retirement pensions from French sources.
- French pension beneficiaries who have declared tax residency in Portugal must indicate that they do not benefit from the protection of the tax treaty. These French nationals must declare their retirement pension in France in addition to other sources of income;
- or by sending a rectification proposal leading to a tax adjustment in France.
French courts have not yet ruled on the treatment of such “NHR” taxpayers. There is little doubt that the outcome will be controversial between the position of the French tax administration and that of taxpayers. In all in cases, any letters received from the tax authorities should not be left unanswered. The response to be made and the arguments to be put forward (scope of the agreement tax, existence of taxable income provided that it is not fictitious, the effectiveness of the Portuguese residence) must be adapted to each particular situation.
The 2020 Portuguese State Budget entered into force as of 01 April 1 2020. It reformed the tax system of NHR beneficiaries, by introducing, instead of a total exemption, a flat rate assessment at the rate of 10% for a period of 10 years on pensions from foreign sources. More specifically, the 10% rate applies not only to pension income paid as a result of retirement but also to other types of pensions such as income allocated in the event of early retirement, as well as other benefits granted under compulsory social security pension schemes, including amounts paid by the employer on life insurance contracts as well as contributions to pension funds, retirement savings schemes or any complementary Social Security plan. If retirement is also taxable in the source country, Portugal will grant a tax credit which may be deducted from the tax due abroad.
With regard to other types of income (dividends, rental income, etc.), no amendment was introduced in the State Budget. In practice, these changes also concern taxpayers who already benefit from the scheme. “NHR” taxpayers who are resident in Portugal and who have already applied for but who have not yet received a response can choose the application of the new regime to their 2020 income tax return.
In 2019, more than 180,000 foreigners obtained Portuguese nationality, more than double the number of babies born in Portugal (81,351) over the same period. The number is a record high and reflects the growing impact of the current immigration legislation that has increasingly opened the country’s doors to migrants. The majority of applicants come from Brazil, Cape Verde and Israel. On average, there are almost 15,000 foreigners per month who are approved for Portuguese nationality.
In 2020, Portugal ranks first among the most peaceful countries in the European Union as reported by the Institute for Economics and Peace. The worldwide classification is led by Iceland, which holds the top spot since 2008, followed by New Zealand. The Ministry of the Interior expressed its satisfaction with the maintenance of Portugal’s third place. In 2014, the country ranked 18th. At the opposite end of the spectrum are the regions of the Middle East and North Africa, home to three of the five least secure nations (Iraq, Syria and Yemen). Afghanistan continues to be the most dangerous.
“In the employment support programs, there will be specific measures to combat youth unemployment and in particular that of qualified young people,” said PM António Costa, stressing that “young people are essential in the recovery of the economy”. According to the estimate of the National Statistics Institute, the youth unemployment rate was above 20% in April, being the age group most affected by the pandemic crisis.
Turismo de Portugal continues with online training actions for the Clean & Safe” Seal. This initiative is aimed at Tourist Enterprises, Local Lodging Accommodations, as well as Tourism and Travel Agencies that want to know the control measures for cleaning, hygiene and basic COVID-19 prevention.
Registration is certified and free of charge. The training sessions last a total of 2, 3, or 4 hours depending on the type of activity. With a limit of 500 participants per session, there are several times available during the coming weeks. The training will provide participants with an overview of the internal protocol related to their organization during the COVID-19 outbreak .
The 2020 State Budget update allows independent workers on green receipts who fail to make their first two payments on account of the year in July and September due to breaks in their business activity. If they reactivate their regular business invoicing by the end of the year, they may settle in December the total amount owed without fines or charges.
The Portuguese government is creating a specific programme of €4.5m to encourage “AL” holiday lets to be transformed to affordable rents for young people. The purpose of the programme is open more affordable housing for urban youth that is accessible and with better conditions. The government also proposes to make available non repayable grants to subsidise the income of the most needy families who cannot cope with these rental expenses.
If you live in a foreign country or are travelling when tax payments become due, there are two ways to meet your tax obligations: 1) Direct Debit or 2) Bank Transfer. If you choose to use Direct Debit (Standing Order), you must first domicile the IBAN of the appropriate account with a bank located in a country of the Single Euro Payment Area (SEPA). The SEPA countries are the member states of the European Union, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino, Switzerland and the Vatican City State.
This foreign bank account must also be registered and confirmed by the Portuguese Tax Authority (Autoridade Tributária e Aduaneira). You must record the account on the Portal das Finanças and send the original of the Entitlement Certificate to the Directorate of Taxpayers Registration to the following address:
- Direção de Serviços de Registo de Contribuintes (DSRC)
- Avenida João XXI, N.º 76 – 6.º
- 1049-065 Lisboa, Portugal
Direct Debit payments do not incur any costs as opposed to international bank transfers that do. If you are paying via a bank transfer, provide your bank with the information below so that the bank can forward the essential information to the “AT”:
- TIN: 600 084 779
- Name of the creditor: Autoridade Tributária e Aduaneira
- Bank account number: 83 69 27
- IBAN: PT50 0781 0019 00000008369 27
- Bank name: Agência de Gestão da Tesouraria e da Dívida Pública – IGCP, E.P.E.
- Swift code: IGCPPTPL
- Your tax identification number (“NIF”) contained in the payment document
- Reference for payment: Each reference corresponds to a specific number for payment, which is set out in the document.
Please note: Each bank transfer requires its own documentation as opposed to Standing Orders that recur on a regular basis. The payment should be made at least 2 working days before the deadline.
Paying your Portuguese Property Tax (IMI)
To pay directly from your Portuguese bank account, follow these steps:
- Open and log onto your Portuguese bank account;
- Click on Payments;
- Click on State – Pay to the State;
- Enter the 15 digits of the Reference Number from the bottom left side of invoice;
- Enter the Amount in Euros;
- Enter 9 digits of the Fiscal Number (“NIB”) from the top left;
- Click Next;
- Verify the information and Pay;
- Print your Receipt.
To pay from a foreign bank account:
Make a transfer from your overseas bank with the following information:
- Your Portuguese fiscal number (“NIF”)
- “Referencia para Pagamento” – the reference number on your bill
To the following account:
- Creditor´s name: Autoridade Tributaria e Aduaneira
- Bank account number: 83 69 27
- IBAN: PT500 781 00190 000000836927
- Bank name: Institudo de Gestão da Tesouraria e do Credito Publico
- SWIFT Code: IGCPPTPL
For further information, contact:
Centro de Atendimento Telefónico (CAT) of the “AT” (Autoridade Tributária e Aduaneira), through the number +351 217 206 707, every working day from 9H00 to 19H00 or contact the electronic service (e-balcão) on the Finanças Portal.