MarkSJD

Hi,

I have read and understand the process. However, I have not been able to make contact with anyone that has successfully moved to Portugal from the UK and is receiving their DB and DC pensions with no UK or Portugese income tax.
Is there anyone out there that can help me?
I do not want to spend money on moving, accountants etc and find out that the process does not work in practise.
Thank you and regards
Mark

Dundee Dave

Hi there.
Not got a handle on the shorthand yet, what are DB and DC pensions?

mfesharne

I think he means defined benefit and defined contribution pensions which I also think are private pensions.

If so, my wife & I both took our private pensions early and are registered for tax in the UK - We did however have to make a declaration of that here........ but assuming the OP holds a passport from another UK country, he has right of residency anyway.

Dundee Dave

Hi there.

Many thanks for the explanation, so simple and obvious once someone points it out.

mfesharne

That nice Mr Google is your friend! LOL!

EMR

I have not seen anything that suggests income is TAX FREE but rather qualifying income in Portugal is taxed at a rate of 20% max and that income from abroad that has already been taxed is not subject to further PT tax.
EG if you have already paid 25% in the UK and the applicable PT rate is 28% the you will not have to pay the difference which is the case for normal expat residents.
As with most things in Portugal take qualified professional advice.
Not always easy to find.

mikelincs

Usually. if you are a resident in Portugal, then you should declare ALL world wide income, and you will be taxed on thatt, however if you have already paid tax in the UK, then that can be be claimed againt any Portugese tax owed as there is a double tax treaty. You should opt to have your private pesions paid without tax witheld. In the UK state pensions are always tax free, however that amount is deducted from your allowance with regard to any other pensions. I get UK state pension, and a UK NHS pension, pay no tax on the state pension but that amount reduces the tax free part of my NHS pension. Some pensions, like civil service and some other government pensions have to have tax deducted in the UK, and you cannot get them paid without the deductions.

EMR

Where has this theory that Pensions are " tax free" in Portugal for non habitual residents come from.
As you say apart from your state pension tax has to be paid in one country or the other.

Red Eric

From places like Deloitte's website

Quote:

NHR individuals can benefit from the special personal income tax (“PIT”) regime for a ten year period.

Foreign-source occupational pensions may be fully exempt from PIT if:

• Its recipient qualifies for the special NHR tax regime;

• The pensions are:

• Subject to tax in the source country (in accordance with the applicable Tax Treaty) or

• Deemed not to be derived in Portugal in accordance with the Portuguese sourcing rules, i.e. not paid by a Portuguese tax resident entity nor attributable to a Portuguese permanent establishment of a non-resident.

If these requirements are met, the pension will not be taxed in Portugal. In addition, the Tax Treaty

between the source country and Portugal may preclude that country from taxing the pension, resulting in potential double non-taxation.

That can be found here (click on the highlighted text, then on NHR Flyer Pensioners for the full text (in English)

EMR

You are quite right and is what I and others have been saying,TAX has to be paid in one country or the other, it is NOT tax free.

Red Eric

I don't know what your interpretation of the phrase but I'd say that if 2 countries could potentially tax your pension but neither does so (ie double non-taxation), that sounds to me rather like "tax free".

newintavira

We do know someone who has found themselves in the situation of "double non taxation" and is paying nothing to either Portugal or Ireland. Seems pretty unfair to me really when I'm paying about 40% but it is possible if the source income country isn't interested in taxing the income either.

As always, experiences with different tax offices and officials can and will vary ;-)

EMR

That a rather clever intepretaion of what is a very simple arrangement.

If you pay tax in the UK or any other country where Portugal has a tax treaty with you cannot be taxed again in Portugal.
Logically if your income in country A is not taxable then under this arrangement it may not be taxable in Portugal.
You cannot elect NOT to pay tax in either country , you are legally liable to pay it in one or the other and to declare such income to which ever country is your tax residence
.If Resident in Portugal then you are also TAX resident in Portugal.
I have read very different views on other financial sites to that quoted today..
The only authority that matters in this case is the Portuguese financas.
In countries such as Sweden with high tax rates it is to their advantage to elect to pay tax in Portugal.

newintavira

The situation I refer to was studied by financas at a high level (there was a bit of a battle) and it was their eventual ruling that resulted in the person in question not paying anything.

Not interested in debating the rights or wrongs of it (as I've already said, I think it's very unfair, given what we have to pay) but it is a real life situation, and it seems there IS a grey area that clever accountants can use in certain situations...

Red Eric

Whether we approve or not, it looks as though the government were fully aware of the possibilities.

There was a law enacted by the previous government, which few people were able to benefit from due (apparently) to doubts over its wording. In 2012 the current govt revised the law and the then Minister for the Economy, Alvaro Santos Perreira, was all over the news saying how they wanted Portugal to be Europe's Florida.

Florida, note, is famous apart from its sunshine, for its particularly friendly climate with regard to tax. Especially so with regard to pensions, many of which not only escape state tax in Florida but also, by dint of their owners' relocation, in the state in which they were earned. Sound familiar?

Since the tweaking of the law which oiled the wheels, there have been press reports of numbers of people taking advantage of Portugals "tax free for pensioners" regime. Deloitte's is by no means the only accountancy / financial advice firm broadcasting the possibilities to all and sundry over the internet and elsewhere. It's impossible that the government is unaware of this - and if it wasn't their original intention they have had ample opportunity to do something about it. But they haven't.

Going back to the OP's original question, the answer isn't "you can't do that because I don't think it's right". It's obviously happening for some people but are any from the UK?