Sri Pete

Diddion, Please consider this scenario.

A U.S. taxpayer moves to Portugal and is accepted as an NHR and actually lives there for the entire tax year. Said person receives earned income sourced from another foreign (to the U.S.) country with which Portugal has a tax treaty. The country that is the source of this income either has the power to tax it but does not or taxes it at a lower rate than Portugal would. Furthermore, this income weighs in at less than US$101,300 a year. The person qualifies for a Foreign Earned Income Exclusion (see U.S. IRS Publication 54, Chapter 4) by virtue of three things: having their tax home in a foreign country, having foreign earned income and being a bona fide resident of another country (i.e. Portugal) for the entire tax year. This exclusion means that their foreign earned income is not taxed by the U.S. (although it must be reported). Under the NHR regime, this earned income would not be taxed in Portugal because it is sourced from a country with which Portugal has a tax treaty and is either in principle or in practice taxed by that country.

Surely this person benefits from NHR.

Some notes on fiddly details in the above: (1) The figure of $101,300 is the maximum per annum that can be excluded from taxation under the Foreign Earned Income Exclusion; any amount above that would be taxed in the normal way. I put the less-than-this-amount condition in the scenario just to simplify it; someone earning more would still benefit (assuming I am right about the whole matter). (2) The person's "tax home" (for the purposes of U.S. reporting) could be Portugal but need not be (as long as it is not the U.S. or a U.S. territory). (3) I understand that Portugal has 71 double-taxation treaties but have not checked that there actually are any among them that would fit this scenario in terms of how they tax earned income.

Ukkram

My type of income is only taxable in the country of "residence" according to the DTA (South Africa - Portugal). This makes the NHR nil and void. I pay normal tax here on all my income despite having NHR status.

My income is from movable property (investments) gains made in SA.

EMR

As Ukram has confirmed, NHR covers some but not all forms of income despite what some estate agents and accountants will tell you.
We have a large property ,golf complex near us and they still advertise " live tax free in the Algarve " .

Pilou

When you want to emigrate to Portugal and the advantages of the RNH are very important for you, you need to check your tax situation.
For example we are Dutch, when we receive our old age pension from the Netherlands, we will pay income tax on that in the Netherlands and we won't have any advantage on this type of income from the RNH. Better to check that before you settle.
Depending on the personal situation, the RNH can still be advantageous for other types of income.

Red Eric

Are you sure the NHR would be of no benefit to you even under these circumstances?

I may well have this wrong but I am under the impression that the Dutch authorities will only tax your pension income in the event of it's not being taxed at a high enough rate or on enough of a proportion of it by PT. Therefore without NHR, you would be subject to the full rate of PT tax on the full amount.

Would the Dutch allowances and tax not be more advantageous to you and could you not opt for it by applying for NHR?

Pilou

The Netherlands will tax the full pension if above 10,000 EUR. It depends on your personal situation if the RNH is still avantageous. If you only have a Dutch pension and no other income, Portugal is not the best country from a fiscal point of view.
Let's be honest, the prices of houses are in Portugal higher than in Spain and France. Only because of the RNH. So good to check before investing if it is worth it.

For those who are in love with Portugal, don't calculate, don't bother about RNH or not, just buy and enjoy life.

ricko

.
Is there a readable document that gives an overview of the forms of income that is relevant to NHR?

Red Eric

Yes, if above 10,000€ and you apply for NHR in PT, which is exactly my point. It's not automatic that the Dutch tax the pension if it's above 10,000.

If you don't apply for NHR, then the PT authorities get to tax your pension at their full rate. I haven't compared the allowances and the rates but PT's are pretty steep and start off low. That's why I'm saying it could be advantageous to apply for NHR in order to get taxed at Dutch rates and not pay any difference to PT.

A fine sentiment.

I can see where you're coming from and half agree but however much I detest this and similar schemes on principle (and you won't find a more steadfast opponent than me, I can assure you), I think you'd have to be barmy not to try to work out where you stand with NHR as a newcomer if you were eligible and there was a chance you could benefit in some way or another.

Ukkram

I have spent many hours researching this and found conflicting interpretations of the NHR system even between PwC and KPMG. My accountant even asked members of the Accounting Practitioners Institute of Portugal and no one could advise her on my problem. I am now waiting for the outcome of my second appeal.

This news came out a few minutes ago.
https://www.blevinsfranks.com/news/a...m_campaign=292

Loafing Along

Attached is the english NHR guide from the Portuguese Finanzas

Pilou

What I said before, we will apply for RNH because we have other types of income that fall under RNH. And yess, I agree, I think the standard income tax rates in portugal are rather steep.
In a couple of years we will be able to see what people decide after the 10 years period of RNH : will they stay or will they sell up.

ricko

Thanks for this info.

I've had a brief look through it, and what stood out was the phrase ...

Rental income, certain capital gains, interest and dividends can also be exempt

Where would I look to find further details of these exemptions?

ricko

Thanks for this document, it looks packed with useful information.
I expect it will take a while to digest what is in it.

ricko

I've had a look at this document from the perspective of a retiree, and it looks like the first half (up to page 8) is not relevant.
Then, under the section FOREIGN SOURCE INCOME, I see the heading:

Income in category B (Self Employment), E (Capital Income), F (Real State
Income) and G (Increase in Wealth)

I assume that:
Capital Income means Bank Interest and Company Dividends
Real State Income means money from letting property.

but what is Increase in Wealth ?

RichardHenshall

Capital Gains