Double taxation - is this correct?
Apr 25th 2023, 8:44 pm
#1
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Thread Starter
Joined: Oct 2019
Posts: 118
Double taxation - is this correct?
Hello,
I wonder if anyone can comment.
I'm NHR in Portugal and as such aren't subject to pension tax in Portugal. What I was totally unprepared for, was to pay Portuguese tax on UK generated income which more than wiped out any potential savings on my pension. My UK business is a holiday let. Last year I paid around 2.7K Euro tax on the UK income I'd already been subject to tax on.
Is this correct - it sounds an awful lot of tax on top of what I've already paid.
Thanks in advance guys.
Julian
PS if anyone knows of a good English speaking accountant based in Gaia/Porto, that would be great as well.
I wonder if anyone can comment.
I'm NHR in Portugal and as such aren't subject to pension tax in Portugal. What I was totally unprepared for, was to pay Portuguese tax on UK generated income which more than wiped out any potential savings on my pension. My UK business is a holiday let. Last year I paid around 2.7K Euro tax on the UK income I'd already been subject to tax on.
Is this correct - it sounds an awful lot of tax on top of what I've already paid.
Thanks in advance guys.
Julian
PS if anyone knows of a good English speaking accountant based in Gaia/Porto, that would be great as well.
Apr 25th 2023, 11:52 pm
#2
Joined: Dec 2001
Location: Dixie, ex UK
Posts: 52,448
Re: Double taxation - is this correct?
Typically with rental income, the country where the property is located gets first bite of the cherry when it comes to levying income tax, then the country where the owner is tax-resident has a tax computation, but the tax already charged is deducted from the bill.
If the result of the tax computation for the country of residence is higher than for the country where the property is located then only the difference is paid to the country of residence. in other words, you get credit for the tax paid in the country where the property is located. If the computed amount is lower in the country of residence, then no additional tax is paid. The overall effect of this typical arrangement is that you pay the higher of the two tax bills.
In short, you need an accountant to sort this out for you, especially if you have already paid the gross tax computed for Portugal.
If the result of the tax computation for the country of residence is higher than for the country where the property is located then only the difference is paid to the country of residence. in other words, you get credit for the tax paid in the country where the property is located. If the computed amount is lower in the country of residence, then no additional tax is paid. The overall effect of this typical arrangement is that you pay the higher of the two tax bills.
In short, you need an accountant to sort this out for you, especially if you have already paid the gross tax computed for Portugal.
Last edited by Pulaski; Apr 25th 2023 at 11:55 pm.
Apr 26th 2023, 5:32 am
#3
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Joined: Jul 2014
Posts: 1,109
Re: Double taxation - is this correct?
https://www.gov.uk/government/public...l-tax-treaties
Go to a search engine:
If you punch in the following search term: dual taxation agreement uk Portugal
Many results show up including multiple accountants and NHR tips.
See also: https://www.portugalresident.com/tax...s-in-portugal/
Go to a search engine:
If you punch in the following search term: dual taxation agreement uk Portugal
Many results show up including multiple accountants and NHR tips.
See also: https://www.portugalresident.com/tax...s-in-portugal/
Last edited by calman014; Apr 26th 2023 at 5:38 am.
Apr 26th 2023, 10:07 am
#4
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Joined: Oct 2019
Posts: 460
Re: Double taxation - is this correct?
Sounds like OP needs proper accountant. NHR does exempt UK rental income from PT tax. BUT, if rental income is from business like ltd or running estate agency, things can get complicated.
https://www.lisbob.net/en/blog/nhr-s...dent-tax-guide
Searching only for English speaking accountant is bad idea. You need to focus search on accountant specialized in NHR and UK tax system.
https://www.lisbob.net/en/blog/nhr-s...dent-tax-guide
Searching only for English speaking accountant is bad idea. You need to focus search on accountant specialized in NHR and UK tax system.
Apr 26th 2023, 10:34 am
#5
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Joined: Mar 2019
Posts: 876
Re: Double taxation - is this correct?
Are you on zero NHR or 10%?
If zero, you should not be paying any tax in Portugal on rental or pension income from the UK. I thought only Portuguese based income was taxable under NHR.
Do you employ a tax specialist or are you doing it yourself?
If zero, you should not be paying any tax in Portugal on rental or pension income from the UK. I thought only Portuguese based income was taxable under NHR.
Do you employ a tax specialist or are you doing it yourself?
Apr 26th 2023, 12:24 pm
#8
Forum Regular
Thread Starter
Joined: Oct 2019
Posts: 118
Re: Double taxation - is this correct?
Typically with rental income, the country where the property is located gets first bite of the cherry when it comes to levying income tax, then the country where the owner is tax-resident has a tax computation, but the tax already charged is deducted from the bill.
If the result of the tax computation for the country of residence is higher than for the country where the property is located then only the difference is paid to the country of residence. in other words, you get credit for the tax paid in the country where the property is located. If the computed amount is lower in the country of residence, then no additional tax is paid. The overall effect of this typical arrangement is that you pay the higher of the two tax bills.
In short, you need an accountant to sort this out for you, especially if you have already paid the gross tax computed for Portugal.
If the result of the tax computation for the country of residence is higher than for the country where the property is located then only the difference is paid to the country of residence. in other words, you get credit for the tax paid in the country where the property is located. If the computed amount is lower in the country of residence, then no additional tax is paid. The overall effect of this typical arrangement is that you pay the higher of the two tax bills.
In short, you need an accountant to sort this out for you, especially if you have already paid the gross tax computed for Portugal.
Thanks, that's a really clear explanation.
Apr 26th 2023, 6:07 pm
#9
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Joined: Jun 2012
Posts: 3,033
Re: Double taxation - is this correct?
If you pay a PT accountant who tells you that you will have to pay tax twice... you need a different accountant.
We had the exact same issue when we first arrived. An accountant familiar with dual tax treaties sorted it out easily.
We had the exact same issue when we first arrived. An accountant familiar with dual tax treaties sorted it out easily.
Oct 13th 2023, 4:28 pm
#10
Just Joined
Joined: Mar 2009
Location: Uk & Lisbon
Posts: 17
Re: Double taxation - is this correct?
What does "zero NHR or 10% NHR" mean exactly? Are there 2 types of NHR?
Also, is it factual that "if zero you should not be paying any tax in Portugal on rental income from the UK"? I've seen replies suggesting the opposite.
I am not concerned with pension income as I won't qualify for one in next 10 years, but would like clarity about what taxation arises (in both Pt & the UK) on rental income from a UK property for an EU citizen who spends time in both countries, but is NHR in Portugal. In those circumstances would I be / necessarily remain a tax resident of both countries?
Another q sorry: Is it possible as an EU cit. to classify yourself as tax resident only in Pt even if you jointly own UK property and spend time in both places?
Any replies gratefully received
Oct 13th 2023, 11:49 pm
#11
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Joined: Oct 2019
Posts: 460
Re: Double taxation - is this correct?
Welcome and its great you did some search before dropping questions.
Yes, there are two types of NHR, "0% NHR and 10% NHR". They refer to tax on pension and first one was original at 0%, few years ago NHR was changed to 10%, for pensions only.
As you ask about UK rental, you pay rent income tax in UK, regardless of citizenship or tax "residency". You have about £12.5k tax free allowance in UK.
If you properly complete PT tax return, there will be no tax to PT for UK rental.
You have to be careful with UK tax "residency" trap, or you'll pay taxes to UK on your world wide income.
https://www.gov.uk/government/public...dence-test-srt
Yes, there are two types of NHR, "0% NHR and 10% NHR". They refer to tax on pension and first one was original at 0%, few years ago NHR was changed to 10%, for pensions only.
As you ask about UK rental, you pay rent income tax in UK, regardless of citizenship or tax "residency". You have about £12.5k tax free allowance in UK.
If you properly complete PT tax return, there will be no tax to PT for UK rental.
You have to be careful with UK tax "residency" trap, or you'll pay taxes to UK on your world wide income.
https://www.gov.uk/government/public...dence-test-srt
Oct 20th 2023, 3:48 pm
#12
Just Joined
Joined: Mar 2009
Location: Uk & Lisbon
Posts: 17
Oct 21st 2023, 2:41 pm
#13
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Joined: Jan 2006
Posts: 360
Re: Double taxation - is this correct?
If you properly complete PT tax return, there will be no tax to PT for UK rental.
For example, someone without NHR who pays little or no rental tax in the UK because of the £12.5 k tax allowance.
Would they not have to pay some tax to Portugal on the rental income?
Oct 22nd 2023, 1:01 pm
#15
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Joined: Jul 2014
Location: Arcos de Valdevez "Onde Portugal se fez"
Posts: 16,832
Re: Double taxation - is this correct?
For someone without NHR, HMRC has first claim on rental income and it's also declared in PT, where it's also taxable but any tax taken by the UK will be taken into consideration.