Strange tax translation
May 11th 2020, 4:55 pm
#16
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Re: Strange tax translation
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.
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.
May 11th 2020, 5:19 pm
#17
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Re: Strange tax translation
What you say is true. However, things may vary considerably over time (they certainly have during the past 10 or 12 years!) and insignificant amounts can suddenly become much more significant. I was really only citing an example by way of an easy practical explanation, as opposed to commenting on the actual monetary worth. Other types of investments treated in the same manner might indeed have higher current yields but I didn't want to wander down all those highways and byways and bank interest is a nice simple term we all understand to mean the same thing.
However, if the amount is material, then the necessary calculations should be done to see if worthwhile. If worthwhile, then the foreign interest has to be subject to 'engoblamento' as well - this is the rule. In this case, best to have on hand the bank interest declarations as even €0.01 difference may result in an audit query - not serious, but still a pita to sort out
May 11th 2020, 5:24 pm
#18
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Re: Strange tax translation
In most instances with current low interest rates, probably best ignored by most tax payers. However, if the amount is material, then the necessary calculations should be done to see if worthwhile. If worthwhile, then the foreign interest has to be subject to 'engoblamento' as well - this is the rule. In this case, best to have on hand the bank interest declarations as even €0.01 difference may result in an audit query - not serious, but still a pita to sort out
May 11th 2020, 9:59 pm
#19
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Re: Strange tax translation
you could generate it from the bank account / sort code combo.
As far as I can see all my accounts have IBANs regardless of account type - it's shown on the statements.
I can confirm that our savings accounts do not have IBANs or individual sort codes. This is because we are not a clearing bank and we use a holding account to receive transfers from customers.
Ecology Building Society do not have IBANs attached to our accounts as we do not have the facility to make international payments. We only deal with transferring funds to UK based accounts.
Our Online Savings Accounts are designed to be used in the UK and only used British Pound Sterling. For this reason, we do not provide IBANs.
What sort of problems would occur by leaving Table 11 blank?
May 11th 2020, 10:08 pm
#20
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Re: Strange tax translation
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).
My original thoughts were obviously incorrect.
May 12th 2020, 7:53 am
#21
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Re: Strange tax translation
If you're doing a return online, it's almost certainly not going to validate unless the required info is there and although not 100% certain, I think something's got to go there if foreign bank interest is declared. It may accept just the BIC.
I'm not quite sure I see why you can't "spoof" an IBAN given the other details available, even if the institution doesn't itself use them. You have an individual account number and a building society sort code, don't you? But that's maybe something to leave aside for now if the other works OK in terms of submitting the declaration.
May 12th 2020, 10:07 am
#22
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Re: Strange tax translation
Just to make that absolutely clear for the sake of the casual reader, that's PT bank interest (as opposed to foreign) you're specifically referring to there, is it not?
What you say is true. However, things may vary considerably over time (they certainly have during the past 10 or 12 years!) and insignificant amounts can suddenly become much more significant. I was really only citing an example by way of an easy practical explanation, as opposed to commenting on the actual monetary worth. Other types of investments treated in the same manner might indeed have higher current yields but I didn't want to wander down all those highways and byways and bank interest is a nice simple term we all understand to mean the same thing.
Is it not obligatory to declare foreign bank interest, whether or not it is to be subject to englobamento? I thought country of residence, as opposed to country of income source, was where tax on interest, investments etc is supposed to be levied
What you say is true. However, things may vary considerably over time (they certainly have during the past 10 or 12 years!) and insignificant amounts can suddenly become much more significant. I was really only citing an example by way of an easy practical explanation, as opposed to commenting on the actual monetary worth. Other types of investments treated in the same manner might indeed have higher current yields but I didn't want to wander down all those highways and byways and bank interest is a nice simple term we all understand to mean the same thing.
Is it not obligatory to declare foreign bank interest, whether or not it is to be subject to englobamento? I thought country of residence, as opposed to country of income source, was where tax on interest, investments etc is supposed to be levied
May 12th 2020, 1:29 pm
#23
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Re: Strange tax translation
OK, so try with just the BIC code.
Would it suffice if I get these for the majority of the savings accounts, or does there need to be a 1 to 1 relationship with Table 8?
May 12th 2020, 1:48 pm
#24
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Re: Strange tax translation
Not sure from what you've said so far.
What are we talking about here (not in figures - just broad brush stuff)
Is it just interest from deposit accounts? All in the same institution, or in different building societies / banks?
What are we talking about here (not in figures - just broad brush stuff)
Is it just interest from deposit accounts? All in the same institution, or in different building societies / banks?
May 13th 2020, 9:24 am
#25
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Re: Strange tax translation
There's half a dozen saving accounts and a couple of current accounts, with interest of about £2k (assuming that cash ISAs need to be included).
May 13th 2020, 9:33 am
#26
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Re: Strange tax translation
One figure for interest per country, One figure for dividends per country. Banking accounts and other financial accounts to be reported line by line
May 14th 2020, 7:12 pm
#27
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Re: Strange tax translation
One figure for interest per country, One figure for dividends per country. Banking accounts and other financial accounts to be reported line by line
Do you:
.put one entry per country on Table 8
then:
. list all the Institutions giving you income, on Table 11.
So, if you had interest and dividends from the UK, there would be two entries in Table 8, and multiple entries in Table 11?
Thanks
May 15th 2020, 7:23 am
#28
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Re: Strange tax translation
I'm not sure if I've read this correctly.
Do you:
.put one entry per country on Table 8
then:
. list all the Institutions giving you income, on Table 11.
So, if you had interest and dividends from the UK, there would be two entries in Table 8, and multiple entries in Table 11?
Thanks
Do you:
.put one entry per country on Table 8
then:
. list all the Institutions giving you income, on Table 11.
So, if you had interest and dividends from the UK, there would be two entries in Table 8, and multiple entries in Table 11?
Thanks
That's it - one entry per income type / country combination in Table 8.
One entry per account in Table 11.
May 15th 2020, 8:34 pm
#29
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Re: Strange tax translation
Many thanks to all those who helped.
It's a great relief to have this sorted out.
It's a great relief to have this sorted out.
