• Home
  • About
  • Content categories
  • Masterlist

DSG – in the pipeline

~ Dennis' latest work assembled here

DSG – in the pipeline

Tag Archives: resident

Fiscal Residency  

20 Monday Sep 2021

Posted by Ursula in Posts

≈ Comments Off on Fiscal Residency  

Tags

fiscal, portugal, residency, resident

The vast majority of Foreign Residents share a common trait: most, if not all, of their livelihood comes from outside of Portugal. Great confusion and disinformation abound regarding such income from abroad. Before analysing the different requirements surrounding Individual Income Tax (IRS) in Portugal, it is useful to dispel some of the myths and establish a few of the basics regarding Portuguese taxation and the obligations of the Foreign Resident.  So the first question to consider is: Who is required to become resident for tax purposes in Portugal?


Fiscal Residency
It is important to distinguish between a Residency Permit (Residência) and Fiscal Residency.  The former requires a lengthy bureaucratic process at the Estrangeiros Office.  The latter is circumstantial in nature.
An individual is deemed to be tax resident if :
       • physically present in Portugal for more than 183 days in a calendar year;  or
       • physically present in Portugal for less than 183 days but has established a permanent place of residence at 31 December; or
       • if an individual at the end of a tax year owns a dwelling in Portugal that the tax authorities might reasonably assume to be his or her usual residence, the individual generally is considered resident for that tax year;  or
       • if the head of a family is resident in Portugal for tax purposes, other family members may also considered to be resident, even if living abroad.  
However, if the foreign country has a double tax treaty with Portugal, the treaty contains rules to decide in which of the two countries an individual is legally considered resident. Needless to say, if you do have a Residency Permit (Residência), you are deemed to be resident regardless of number of days you are actually present in Portugal.
The Portuguese Tax Authorities
While the tax authorities used to turn a blind eye to foreign residents, the pendulum is now moving in the other direction.  Rather than being invisible, expats have become prime targets.  Many (legally) tax residents of Portugal have never submitted a tax return, thus likely to be eligible to pay tax owed and back interest as well as hefty penalties. The government has made cracking down on tax fraud one of the cornerstones of economic policies and foreign residents are no exception.  If you come forth voluntarily, you are dealt with accordingly.  However, once on the “Black List” of tax-cheaters, it is difficult to shake that status.  By being compliant, you can take an important step towards peace of mind.
Where you pay your taxes
Unfortunately, you don’t get to choose where you pay your taxes.  The Law does.  Just because you may pay (incorrectly) back home doesn’t mean that you will win any favour with Finanças.  Double Taxation Treaties clearly define taxpayer obligations.  And Portugal now has tax treaties with all of the EU countries and many others around the world.  An additional 10 countries are currently completing the ratification process, another 10 are under negotiation and another 30 waiting to start the process. In other words, Portugal is rapidly internationalising its fiscal perspective.
It may come as a surprise that filing a correct tax return in Portugal can actually save you money.  Submitting a tax return is not synonymous with paying tax. The Portuguese tax code has generous allowances and unexpected exclusions on certain forms of income, broad deductions for numerous types of expenses and liberal tax credits for many common expenditures. Many people find their tax burden in Portugal to be significantly lower than in their country of origin.
Year One
In your first year as a Fiscal Resident in Portugal, you will need to make the transition between one tax system to the other.  This does not happen of its own accord.  You need to take overt, concrete steps to make this happen.  Otherwise, you will continue to pay tax in your home jurisdiction yet accumulate fiscal obligations and, eventually, serious penalties in your new country of Residence, Portugal.  We, as citizens, are compelled to be compliant with the Law. We, as taxpayers, are only required to pay the legal minimum.


Non-Habitual Resident migrants nearly double

26 Wednesday Sep 2018

Posted by Ursula in Posts

≈ Leave a comment

Tags

foreigners, france, italy, migrant, nhr, non habitual, resident, uk

Non-Habitual Resident migrants nearly double

Improved conditions and generous tax breaks have attracted more foreigners to Portugal in the last year and a half. The increase in the number of Non-Habitual Residents was 83% over the period, currently totalling 23,767 with NHR status. The rise is mainly from France, Italy and the UK. Emigrated Portuguese nationals are also returning but only account for 6% of the total.

Working for a UK company in Portugal

23 Thursday Aug 2018

Posted by Ursula in Article, Posts

≈ Leave a comment

Tags

brexit, british, employee, freelance, portugal, resident, social security, uk, work

A common situation arises where a UK employee wishes to continue to receive a salary from a British-based company but would prefer to provide the services virtually via the internet while residing in Portugal.

Unfortunately, there are significant obstacles to this type of arrangement:

  1. As an employee of a UK-based company, you cannot enrol nor make contributions to Social Security (National Insurance) in Portugal.
  2. If you continue to declare as a UK resident but, in fact, are living and working in Portugal, you will fail to meet the criteria of the UK Statutory Residency test requirements.
  3. To be employed by your UK company in Portugal, the Company would need to set up a subsidiary or branch office in Portugal. While this is possible, the process involves both initial start-up costs as well as ongoing overhead to the Company. This solution is unlikely to be cost effective for just one employee.
  4. Once a branch office is in place, Portuguese personal income tax (“IRS”) on a modest salary (€35,000) would be ±25%. In contrast, as a freelancer in Portugal, taxation on a similar amount would be just ±5% in year one, ±7.5% in year 2 and ±10% after that.
  5. Post Brexit (March 2019?), requirements could become more complicated. While not even insider political negotiators know how Brexit will turn out, there is no reason to expect anything less than a more complex state of affairs for UK individuals wishing to work abroad.

Working as a PT freelance contractor to the UK Company

The best solution to the dilemma is to be a Portuguese-based freelancer, contracting with the UK Company, rather than continuing to work as a UK salaried employee. By being registered as providing “other support services” from Portugal, you will be assessed on just 35% of your gross invoicing to the Company under the Portuguese “Simplified Regime”. Social Security deductions will be made on a similar reduced basis. As already mentioned above, the final tax due should be substantially lower.

The Company should also find this arrangement to be advantageous by eliminating UK National Insurance obligations, thereby lowering overhead. Payment of freelancer invoices can continue to be made to the sole trader’s local UK bank account if so desired.

The Company hires on a project-by-project basis; the freelancer earns more; the Company lowers risk. Shifting to an independent worker status based in Portugal can create a win-win situation for all concerned.

The Common Reporting Standard draws near

25 Monday Jul 2016

Posted by Ursula in Article

≈ Leave a comment

Tags

2015, 2016, 2017, common, compliance, fiscal, information, irregularities, oecd, portuguese, previous, reporting, resident, sharing, standard, years

 

The Common Reporting Standard (CRS) is an information system for the automatic exchange of tax information, developed in the context of the OECD. So far, 98 countries have signed up with more expected to join in the near future. Until now, the parties to most Double Tax Treaties in place for sharing information have done so only upon request. This approach has not always proven effective in preventing tax evasion. The new method is supposed to transfer all relevant information automatically and systematically. Continue reading →

Subscribe

  • Entries (RSS)
  • Comments (RSS)

Archives

  • September 2021
  • June 2021
  • May 2021
  • April 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • September 2016
  • August 2016
  • July 2016

Categories

  • Article
  • Articles
  • Briefs
  • Brochure
  • Posts
  • Shorts
  • Uncategorized

Meta

  • Register
  • Log in

Blog at WordPress.com.

  • Follow Following
    • DSG - in the pipeline
    • Join 74 other followers
    • Already have a WordPress.com account? Log in now.
    • DSG - in the pipeline
    • Customize
    • Follow Following
    • Sign up
    • Log in
    • Report this content
    • View site in Reader
    • Manage subscriptions
    • Collapse this bar