Live and Invest in PortugalUnderstanding Taxes in

PortugalTivoli Carvoeiro Hotel

July 2016

TaxationOverview

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Overview

• OECD Country – Tax Treaties

• E.U. Country – Tax Directives

• Whitelisted jurisdiction3

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Taxes in Portugal

• Personal Income Tax | Corporate Income Tax

• Property Transfer Tax | Property Tax

• Stamp duty

• Value Added Tax

• Car Tax

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TaxationResidency - Individuals

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Tax residency in Portugal

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ResidentsNon habitual

residents

Non residents

Scope of taxation

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Residents

Non habitual

residents

Non residents

Non resident individuals

• Scope of taxation: PT source income

• Withholding tax (final) – 25% or 28%

• Tax return – Rental income and capital gains (property)

• Tax Treaty may avoid or limit withholding tax in Portugal 8

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Resident individuals

• Scope of taxation: Worldwide income

• Qualifying criteria:• 183 days in Portugal; or

• Hold a dwelling on any given day of the fiscal year.

• Dual residency and/or double taxation?

• Solutions?

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Non habitual residents

• Qualify as a resident; and

• Not qualifying as a tax resident in Portugal during any of the five previous years; and

• Apply for the regime.

• 10 years.

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The difference R vs NHR

• R: Worldwide income.

• NHR: Comprehensive set of exemptions + lower rates

• R: Progressive rates up to 59%

• NHR: Lower rates for earned income* – 20% + 3,5%

• Exemptions for passive income or income taxed abroad

• *Eligible activities.

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Eligible activities

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• Architects

• Auditors

• Biologists

• Computer programmers

• Data processing and

hosting specialists

• Dentists

• Designers

• Doctors

• Engineers

• Geologists

• Scientific research and

development professionals

• Sculptors

• Senior management positions

• Singers

• Tax consultants

• Theatre, ballet, cinema, radio

and TV artistic professionals

• University Professors

• Web developers and designers

• Investors, directors and managers of

companies promoting eligible projects

under tax incentive contracts

• IT consultants

• IT professionals

• IT specialists (other)

• Life sciences specialists

• Musicians

• News agency and other information

professionals

• Painters (artistic)

• Psychologists

Income exempt from tax (NHR)

• Foreign income that may be taxed at Source• Dividends, Interest, Royalties, Rental Income, Capital Gains on property

• Self-Employment income (eligible activities)

• Foreign income that is effectively taxed at Source• Employment income

• Foreign income from a foreign source• Pensions

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Income liable to PT tax (NHR)

• Capital Gains on foreign shares – 28%• Why?

• Capital Gains on the sale of Portuguese Property

• Portuguese source income – Progressive rates vs 28%

• Income paid by tax havens without a Tax Treaty – 35%

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TaxationCoordination with US regime

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USA

• Tax based on citizenship - Subject to U.S. tax laws, regardless of residence.

• Different than most countries – Residence Vs Citizenship

• Same tax return filing requirements as if resident in U.S.

• Must report worldwide income + FATCA

• Special considerations• Foreign Earned Income Exclusion• Savings clause

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US Income

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Dividends

• US 15%

• PT 0%

Interest

• US 10%

• PT 0%

Capital Gains Shares & Bonds

• US 0%

• PT 28%

Rental

• US X%

• PT 0%

US Income

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Pension

•US 0%*

•PT 0%

Salaries

•US 0%

•PT 20% or PR%

Dividends

• CA 15%

• PT 0%

Interest

• CA 10%

• PT 0%

Capital Gains Shares & Bonds

• CA 0%

• PT 28%

Rental

• CA X%

• PT 0%

Canada Income

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TaxationOther taxes

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Corporate Income Tax

• Tax Rate 21,5%

• GAAP + Tax Adjustments = Taxable Profit

• Dividends and capital gains may be exempt

• CIT is levied on branches and subsidiaries

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Corporate Income Tax

• Resident enterprises

• Subsidiaries

• Worldwide income

• Non resident enterprises

• Without branch – Tax Treaty avoids withholdings

• With a branch – Local Profits

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VAT

• Applicable to almost all goods and services

• Standard rate 23%

• Two reduced rates

• Medical services exempt

• Differs from sales tax

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Taxes on your Portuguese house

• Property transfer tax (IMT) - Acquisition

• Property tax (IMI) – Holding

• Rental Income – 28% (expenses deductible)

• Capital gains on property – Progressive rates ½ + Rollover relief

• 36 months after, 24 months before

• Capital GainsSale or Donation – (Acquisition * Monetary Adjustment) - Expenses

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Game plan

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Two months prior to departure

• Seek professional coordinated advice

• Establish your plan

• Collect all the necessary documents

• Apply for a Visa / Residency Permit

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Two weeks prior to departure

• Obtain a Portuguese Taxpayer Number

• Appoint a fiscal representative

• Ship your personal belongings

• Find lodging in Portugal – Rental or Ownership

• File an exit tax return in the US or Canada?

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Arrival

• Collect your Visa / Residency Permit

• Open a Portuguese bank account*

• Implement your tax plan – NR or NHR?

• Utility contracts and shipped personal belongings

• Register at the local Town Hall

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Each case is worthy of a bespoke solution.

ASSETS

TAXVISA

Remember…

Questions?And answers…

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Lisbon OfficeRua Rodrigo da Fonseca nº 9 – 3º B

1250-189 Lisboa

Portugal

Tel.: +351 21 131 04 08

Fax.: +351 21 131 04 08

E-mail: lisbon@lugna.pt

Web: www.lugna.pt

Associated Offices in the USA and

Canada.