When assessing Company profits, taxation occurs in a two-stage process: first, the Company pays Corporate Income Tax on its profits, then Shareholders pay Individual Income Tax on these distributed profits (now called dividends). This assessment procedure is called “economic” double taxation. Almost all countries in the EU have adopted one of several methods to eliminate “economic” double taxation-some via the Company, some via the Individual. Regardless of the method, the end result should be the same: dividends reported by the Individual should be after the elimination of any “economic” double taxation.Continue reading
Expenses for masks, visors and disinfectant gel are now to be considered deductible health care expenses. If you buy individual protection equipment in an establishment that sells other products (such as supermarkets), you must ask for a separate invoice in order to deduct these expenses on your IRS return. In pharmacies, the deduction is automatic.
The value of tax benefits to non-habitual residents keeps growing according to the “Tribunal de Contas” (National Audit Office). In 2018, there were €548 million in NHR exemptions granted to foreign pensioners. Nevertheless, this apparent tax giveaway would have never existed if the NHR regime had not attracted these foreigners to Portugal in the first place. For example, these pensioners paid almost €80 million to the state in Individual Income Tax (“IRS “) on non-exempt income. In addition, there are IMT, IMI and VAT levies which the Government collects above and beyond the scope of the Non-Habitual Residency scheme.
There are two types of Fiscal Representation in Portugal:
- – Fiscal Representation in Personal Income Tax (“IRS”)
- – Fiscal Representation in VAT
Appointing a Fiscal Representative
It is mandatory to appoint a Fiscal Representative whenever a third-country national who is not resident in Portugal has income arising in Portugal. Alternatively, although residing in the national territory, an individual is absent for a period exceeding six months and obtains income in Portugal subject to Portuguese taxation. For a non-resident to start the process of appointing a tax representative in Portugal, the taxpayers must have a Fiscal Number (“NIF”) and a password (“senha”) to be identified on the Finanças Portal. Continue reading
There may be a variety reasons for you to discontinue an “AL” business: a) you need your place for yourself; b) the property may be up for sale; c) the bureaucracy may be too cumbersome for you; d) competition may have driven down prices and the activity is no longer profitable, e) other. Whatever the motive that you no longer wish to continue to let short-term furnished accommodations to holidaymakers, there are several steps that you will need to take to make the change: Continue reading
The withdrawal of a property from a Local Lodging tourist activity was already potentially subject to capital gains assessment under previous legislation. However, the way the law was drafted left room for doubt as to the exact point that the tax would be due. In the 2018 State Budget, this doubt was clarified, making it unambiguous that there is deferred payment of capital gains tax when the property is further assigned on an ongoing basis to income from category F (long-term rental). Without this abeyance, a Capital Gain may be attained in the year of cessation of the business assignment. Regardless, reporting is done in your annual “IRS” return.
For IRS declarations running from April through June, there are several updates to take into account in Annex B (freelancers), with more tables to complete: 17A, 17B, 17C and 17D. All are destined to declaring expenses and charges borne by the independent worker in the exercise of a business activity (income, electricity, water, transportation, communications and insurance, among others). They stem from modifications to the Simplified Regime introduced in the 2018 State Budget.
The guidelines of the Doctrine Declaration (“Ficha Doutrinária”) dated 04 December 2017 clarify tax liabilities based on nº 5 of article 81º of the IRS Code. Assessment of income from foreign sources classified under categories E (capital), F (long-term rent) and G (capital gains) earned by taxable persons considered to be Non-Habitual Residents follows the exemption method where the source country has the power to tax this income under the applicable Double Taxation Agreement. This rule infers that the tax exclusion does not hold for jurisdictions without such an agreement in place. Tax-exempt income must still be reported annually in Portugal to determine the final tax rate to be applied to total aggregate income subject to assessment.
Following the automatic IRS, the “AT” advances to automate VAT in three phases.
The Tax and Customs Authority has taken the first step in automating the VAT declaration, making available pre-filling of certain amounts in the fields related to “transfers of goods and services” with tax paid and those corresponding to “Tax in favour of the State”. Continue reading