ricko

I've just started doing my first Portuguese tax return.
I get a strange translation on one of the forms, that I can't fully understand.
It's Table 11 on Anexo J, the form for foreign income.
It seems to be asking for deposit accounts in foreign banks that have a presence in Portugal,
and accounts in Portuguese banks at branches outside Portugal.

Can someone please let me know what is actually required?

Red Eric

If you've got income of any sort (eg interest from savings) from bank accounts outside Portugal, you declare the amount / tax paid abroad in field 8 and give the bank account IBAN in field 11.

ricko

Many thanks Red Eric.
It's as simple as that!
The translation might have unnecessarily complicated the issue.

Red Eric

I think it's probably also catering for institutions which operate in Portugal but are headquartered elsewhere, so the client's income isn't visible to the PT tax authorities. Maybe The nuances of high finance are frequently beyond my ken.

But essentially, it's just details of foreign-sourced income from savings or investments - I think if you declare an amount it will insist on the account details field being completed, as opposed to left blank.

If you have income from PT-based savings / investments you may include them on your tax return, but you're not obliged to. It's up to the individual to decide whether it's advantageous to do so ie whether there's any benefit to be gained from paying tax at scale rates on all income as opposed to leaving it at the withholding tax already paid.

RichardHenshall

Might the particular class of accounts mentioned by the OP represent accounts that would be already subject to PT withholding tax and therefore fall into the 'optional' category?

Red Eric

I'm not sure.

There is a field in section 8 for tax withheld in Portugal, so it would seem to me there are financial institutions which operate here and deduct tax at source but are regarded as foreign entities, so the income goes on Annex J. There's also a field in that section to indicate whether or not the income is to be incorporated and taxed at scale rates along with other income or taxed at the flat 28%. As the 2 issues are distinct, it's not clear to me whether under those circumstances where PT withholding tax has already been paid and the subject doesn't want to pay at scale rates, the declaration is redundant or whether it's obligatory in all cases because it's "foreign" income.

It's much easier when it comes to PT banks etc in Portugal and foreign banks etc abroad, where in the case of the former the declaration is entirely optional and only of use if incorporating with other income and in the case of the latter it is obligatory.

I'll try to remember to have a look at the additional notes behind the relevant fields when I get around to filing my tax return this year but they may not shed much more light on that particular matter.

TonyJ1

The field is for residents to report foreign bank accounts and foreign investment accounts. This has to do with the international exchange of financial information. You don't report any balances, but with the cross references, the authorities will be able to cross reference income reported (or the absence of reporting)
Domestic financial institutions report interest and dividends directly to the tax authorities automatically (imposed by law).

ricko

Does this relate to the field labelled "Opta pelo englobamento ...." ?

I didn't get a meaningful transation for this. I tried looking up "englobamento" in a couple of dictionaries and found "aggregate", "inclusion", and "encompassment", none of which
enlightened me.
However, as, for NHR claimants, there is no tax on dividends or interest, I thought it safe to leave this field blank.
Who would have to fill in this field?

Red Eric

Yes, it does.

With certain types of income which are subject to withholding or special* tax in Portugal, you can opt to either leave it at that or to include it with your other income and pay tax at scale rates.

Looking at savings interest as a specific example, if your money's in a PT bank account, tax will be deducted at the rate of 28% from the gross interest before it's paid into your account. In the circumstance that the rest of your taxable income falls below the 28% threshold on the tax scales, it would be advantageous to include the savings interest on your tax return so that it's taxed at the appropriate band as opposed to the flat rate. Thus you'd declare the interest on the appropriate section and opt for englobamento.

* The arrangement also applies in some cases where tax is not deducted at source and is therefore declared on the annual return (eg letting income) but defaults to a flat rate unless englobamento is opted for.

That's it in essence although there's a little more in the detail and in deciding whether or not it might be advantageous in various scenarios.

TonyJ1

For nhr - best to endorse it 'não'

ricko

Thanks again Red Eric, that is very useful information.
Could you please explain why you think this.
My first thought was that this would run the risk of someone mistakenly taxing the amount at 28%, as per Red Eric's
explanation; whereas if you selected "yes", the amount would be treated the same as other income and be exempt for NHR claimants.

ricko

I've just had email responses saying that there are no IBANs for savings accounts.
Would there be any problem in leaving table 11 blank in Anexo J?

Red Eric

You can try, but If it insists on one (which I suspect it might if you're declaring savings interest or similar), you could generate it from the bank account / sort code combo.

IBAN Calculator

There's a little explainer here by way of a preamble, if required : United Kingdom IBAN and BIC Format

RichardHenshall

As far as I can see all my accounts have IBANs regardless of account type - it's shown on the statements.

TonyJ1

If you are on the nhr, and you get interest from a country with which Portugal has a double tax treaty, there is no further taxes payable whilst under the nhr regime (the appropriate form - L should be completed every year). If you opt for 'engoblamento' (aggregation) and happen to have income subject to tax, the interest will be taken into account to determine the tax on the income subject to tax (ie will increase the tax rate on the taxable income). Therefore you should opt to exclude it (não), then it will not be used in the calculation. Therefore, if entitled to the nhr, then the safest option, is the ´`não`- the interest will be ignored in determining the tax on income subject to tax (eg local rental income, capital gains on shares and other financial instruments - from whatever source, Alojamento local (short term rental) income, etc).