[ HTJ Podcast ] U.S. & PORTUGAL TAXES FOR EXPATS – 11th February 2021


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That’s good, good evening. Good day, good afternoon, good morning. And depending on what part of the world you and I guess most people would be in Portugal so good afternoon, good to see everyone, welcome. I think this was the fourth time we were doing our webinar on Portugal US Tax is good to have you for those who can make it, and it will be available online. Afterwards, we put it up on YouTube and we also, if you want to see the video and we also put it in Podcast form, anywhere that you get your podcasts, what has to be Spotify or Apple or Googleplay wherever. 

So, we have a list of all the podcasts directories and platforms that we use at HTJ.tax. If you want to catch up with it afterwards or share it with your friends. Now, what that means is that we actually recording this session. So, if you do not want to be recorded, please just turn off your video. So, if you don’t want to be seen, what are we going to do? Is we divide this a one hour, talk into three parts? So, I’ll talk about US tats for just about 15, 20 minutes, and then a gun still gets into the Portugal side for about 20 minutes as well, which leaves another 20 minutes at the tail end for Q and a and a Q and a we thing is super important because I know what brings you guys here this evening is questions. So, some of you have sent you your questions in advanced to, to Hanna and to Hannah. We are, we’ve got to thank you. Thank you for sending them in advance. We go to the questions that we received ahead of time, first off, and then once we had done with that, it’ll be a free for all. You can type your questions in the, in the chat box below. So, with that in mind, I will now try to share my screen. So, so we are going to talk about us Taxes for International Entrepreneurs and Expats who we are based in, in Portugal. So just to kind of introduce myself. So, my name is Darren Joseph and I run a semi-autonomous team within a small practice called Moores Rowland Asia Pacific. 


We have about 30 offices in 12 countries. I’m actually, based in Singapore I’m in Costa de Caprica now, but officially I’m based in Singapore, been based there for the past seven years. I worked together with Augusto of our practices, tax practices, our members of a network called Fusion International, which has a strong presence here in Europe, which means that if there is any era of tax rules or jurisdictions, that we are not familiar with, we have a colleague in that jurisdiction upon whom we can call for guidance, because I am licensed by the US Department of Treasury. 

You know how it goes; I’m required to say that everything that I say here this evening should not be construed as advice. We are having a general conversation in general, Principles considered this Education, it’s an education piece, a for those who have specific questions. And I think, you know, at the end of this webinar, I’m going to be able to do a PORTUGAL tax return. I will do my own US tax return Spain. That his, that is, that is not the, the principal at We that we work with. It is impossible for us to know the nuances of your situation inside out. So, we may be a tax professional, but we are not yet Your tax professionals. We need to get advice from someone who knows the situation and side of that. 

You are engaged for that purpose. So, nothing we say here should be construed as encouraging you to pay less than your fish. We have taxes in any jurisdiction. And of course, I have to put it in writing as well. That’s how I keep my professional liability under control. So, as you know, these, these things are very litigious. So, we just need to tread very carefully. This is education. This is not advice. So, we are what we hope really in terms of education at the end of this, you will be able to understand what in general principles are that you need to keep in mind, as you engage a team to, to help you work through the, there are nuances of international tax. 

So, as I said, I’m going to be super quick, like not more than 10, 15 minutes. And I’m just going to talk about what I think are the select for key takeaways. And I think is helpful for you as a U S exposed person. And Portugal I’m also going to touch on the stimulus payments because people who have been asking lots of questions on that, animals are going to talk about president Biden’s as a tax plan, just top line, because it’s a pretty detailed, as everyone knows, we have citizenship based taxation, which means that we do, regardless of how long you stay outside of the U S if you are a us passport hauler, or you are a green card holder, you are required to find and pay taxes, regardless of where you reside. 

It does not matter how long you stay outside of the U S you are still subject to us tax rules. Some people think, I mean, the US is probably pretty aggressive in the sense that it’s hard, if not impossible to break tax residents, aside from surrendering, you’re possible to a green card, but to be fair, many of the countries, most advanced economies or sub practice rule wide taxation. And that includes Portugal as well. Portugal this tax year, a new worldwide Income, but it is, it is a pretty common with the advanced economies. And one we’re seeing just talking about the global trends is that many economies are moving towards the US model in the sense that trying to Tax citizens who are no longer resident in their country of citizenship. 

So, it’s something that is not going to disappear anytime soon is, is the message I wanted to leave with you. Then people ask me the question. Well, I’m in Portugal, right? So, who’s go, how is the US government going to be fine? We know what I am doing, and Portugal come on, the answer is those five letters FATCA. The answer to that? the Foreign Account Tax Compliance Act, despite misunderstandings online, it is not a tax. What it is, it’s a framework for information exchange. So, the US has been empowered and has gone around the world, signing bilateral agreements with most countries that you can think of a across the world and what it does, it requires that they are domestic financial institutions. 

So, for example, the banks here on the brokerage houses, financial institutions, Hey, in Portugal a non-Legally quite to go through the books and identify any one that they suspect of being US exposed and reporting them to the U S government. And I say a suspect because a, like many of you hear, I have more than one passable, and many of you do as well. And sometimes you may walk into a financial institution and you may enroll or deposit or opening an account with your other passport. What FATCA would do? It puts the burden on the financial institution to try and there sitting in the shoes are in the law. That basically look for any hints that person maybe you a US exposed, even if they deny it and still report to the US government. 

So that’s how they find out checks and balances, right? There is also something else called CRS, which we can get into there’s any interest in, in, in getting into that. What are your responsibilities? So, I came up with this, what I think is a cool acronym called BEST to do your best. B E S T,  B stands for the bank accounts. And when I say bank, I extend that to me and financial accounts as well. So, you’ve got to trust certain types of pensions, certain types of insurance policies, which are insurance wrappers, but inside it’s actually an investment account. So, any financial account we need to be speaking to you, if you are chosen to ask a, to see whether it is Reportable to do it as government, again, this is simply, or a reporting requirement in may not be any Tax light in may not have an impact on your tax liability when it comes to international tax. 

The key thing to understand is with domestic Tax in the U S the government, they are that the treasury will IRS is focused on collecting revenue. When it comes to international tax, they are focused on collecting information. So, what that means is that if you don’t pay taxes, then as an international, an entrepreneurial, an expat or a retiree or whatever, then ok, fine interest and penalties write. But we in a zero interest rates environment, it might not be that big of a punch, but if you do a lot to report a bank account, not only is a civil or criminal penalty may apply, and they’re pretty aggressive up to 50% of the unreported balance. 

Plus, jail time. Yes, you can go to jail for not reporting a bank account in Portugal. So again, it has no impact on your tax calculation. So please report next estimated taxes. Obviously, when you’re back in the us, you’d be paying and a W2 money is being withheld. It’s easy when you’re outside of the U S remember, the IRS does not like to wait until the following year to get paid. So, you need to work with a tax professional and to make sure you make the requisite a quarterly payment to the IRS failure to do that. And the payment penalties. So, estimate to Taxes S state tax issues, 50 different States, 50 different rules, but bear in mind, the, depending on which state you will last be domiciled in, you may still be caught in their tax. 

And that even though you are in Portugal. So as far as a rule of thumb, when we advise clients, we say, you know, try to read them a smile to one of the eight States without a state income tax, just in case. But again, it depends on your unique situation and your circumstances. So please pay attention to state tax issues. We have had so many clients at some point in time, they do move back to the U S and their face with a huge tax bill. Remember the federal government does talk to the franchise tax board is in each state. So, you may think they don’t know what’s happening with you, but the IRS is the federal government. We tell them so they know how much you’re earning, and they’re calculating what their cut up that should be and waiting to throw a notice out at you when your return to the US. 

So, Estate taxes please pay attention last but not least transfer taxes. Do you have to have a state TAXES very poorly understood why? Because to be fair, it’s not in the tax code. It is in the, the rules to understand this really derived from case law. So, we need to look at case law, but the bottom line is under certain circumstances, a certain gift, especially as you’re outside of the us, and you are getting into business relationships with a portrait Portugal Based entrepreneurs, or you may marry or get into a personal relationship with someone here in Portugal, who is not US expose when you receive money from them, or you transfer money to that other person, there may be gift tax implications to that. 

So, it’s something to, to keep in mind and to consult. And similarly, you, we don’t like to think about it, but as a state taxes are a real, but the good thing about the state Taxes and to some extent, gift taxes is that we can plan around them. So again, consult your tax professional, do your best, be E S T M, going to talk a bit about the stimulus payments. So, we had gone one around last summer, and another one was approved at the end of December. I got mine in early January. Some of you have got it at some of you have not done, and these are the bases that they are using. Once you are a us citizen, and you can cut all at once, you’ll have a social life. 

You should be getting It if you did not get it, don’t worry. There are ways around that once you file, when you’re filing 2020 returns, one of the questions that are a tax team should be talking to you about is which stimulus payments did you get with a stimulus payment? Did you miss? Because there may be an opportunity to get in, in, in the form of a rebate credit. And what does that mean? It means that if you didn’t get that check, you can reduce your taxable income by the extent of that credit, or if you’d do a refund, the refund will be increased by the extent of that credit. 

So please talk to your team about it. There’s a lot of great information on the IRS website. How do you provide your bank in FOR so you can get it sent to your bank account, or, you know, whatever? There’s a lot of FAQ. So please check out the website if you haven’t already done. So, let’s see filing requirements. Okay. Yeah, it does phase out though. So, I go to this one first. It does phase out. So, most of our clients tend to be higher income earners. This is just the way it is. So, a lot of the questions that I get Co getting thrown at me is like, why is my stimulus payment less than what everyone else is getting? 

And why have I gotten nothing? The first thing I do is I check the file and say, well, you, I mean the price of success you earned above the threshold. So, it does phase out and then above a certain threshold, you get nothing. So that that’s something to keep in mind, but I want to go back to actually the filing requirements that changed each year or so, just because you were too quiet to file last year, that doesn’t mean you are not required to file this year. And just, just, you know, like a heads up the, the minimum income, your gross income. And you can see that depending on your filing category, if you filed married, filing separately, the threshold is actually $5. 

So, if you made more than $5 last year, you need to be filing a tax return is the point that don’t take for granted that you do not have to file a tax return, please verify just, just verify. Okay. And then on to get into president Biden, as we know, he, you know, that there was a comprehensive tax plan that was released as part of the campaign. Now that he’s in office, obviously it’s not that simple, even though it’s the Democrats control Congress, but still, there’s always wheeling and dealing. There’s always some negotiating. So, don’t assume that it’s going to be a copy and paste of what the proposal was, but it’s in the proposal was pretty comprehensive in terms of those of us who are internationally exposed for a high-income earner. 

There is the they’re looking at a, an extra tax on those earning over 400 K, which will be quite a few of the clients that we have, then the corporate income tax, for those who control structures who have a corporate structure. So, there may be here, but there may be involved in vested or running. Businesses is a case may be w a it is proposed that the corporate income tax rate jumps from 21 to 28. What else a guilty for those who have companies in low-cost jurisdictions like a, where I’m officially base Singapore, maybe Hong Kong as the case may be there’s that, that guilty tax, the tax for that is imposed on US controlled companies in a low tax jurisdiction. 

It may increase. So there, there are certain elements there, but the good thing is that we have a sense of what’s coming. So now is a time to, as you’re doing your annual returns anyway, check in with your tax team. I always believe that your structure is kind of like your car. You get your car checked out every so often, just to make sure it’s going to be running well, same with your corporate structure. You know, you just want to check it out, you know, kick the tires, you know, check me oil or whatever, or just to make sure that in light of changing rules, not just in the us and internationally, it’s still serves its intended purpose. So, we have some questions that we got submitted earlier, which we will go through in a queue. 

And but for now, I will turn you over to Augusto who will talk about the Portugal side of things.


A brief presentation of myself as well, I’m a tax consultant in Portugal L for US for over 18 years, I lead the Tech’s practice of a Grupo YOUR , which is a Portuguese based a group of companies engaged in the management and accounting support. We work here in the concept of a one stop shop for corporate individuals. So, we assist a number of clients, of private clients that this, that decided to move to Portugal. 

And the idea of this, webinars tried to share some of our experience and of course, and to try to address some of the most common questions that arise regarding this special reason that we have a special tax regime called the non-habitual residence, a regime. So, this is a, I will keep the detail about my personal presentation. I’ll go through a day during this presentation is some, as I mentioned, some of the features of the NH as a regime and, and the presentation, and we’ll take about, I’d say 15 minutes a and try to cover. 

As I mentioned, that some of the most common questions that we receive, I would start with the brief explanation about the risk techs, registration procedures in Portugal and the NHR application. So, of the main conditions for this regime are, are basically to one, one of them is of course, that the person must be considered Tax resident of Portugal. And the second one that has not been tax records in Portugal for at least five years, and do the application for the, in an insurance status is made until the end of March or the year, the following the change of Tax residency. And it’s also important to note that in PORTUGAL we have this regime for 10 years counting from the, the first year when the person changes the tax resident, the tax residency for Portugal. 

And I think some questions that arise regarding these 10 years period of because the regime, just, just to let you know that during the 10, this period of 10 years, a situation can be suspended or in case the, the text by a change or a text residency elsewhere. And if for some reason came to the back to Portugal during this 10-year period, He the regime is also a believable. 

If it is still within the 10-year period, counting from the first year that we can Tax residence. So, it’s not extended, it’s just suspended for, to experience that is considered non-resident for tax purposes and, and dual now, and up to date, there is a Know information now that the regime can be renewed after completely the 10 years. So basically, we should to consider these as a benefit or a tax regime that is applicable during this limited period of time. 

No, that is another. And the topic is the concept of course, of tax resident in PORTUGAL. And we have a, according to the domestic law to a main, eh, condition’s to be considered tax resident here in PORTUGAL. And a one is to stay here more than one under the, in 83 days during, eh, any 12-month period, 

But even in cases where a person stay less time than one other than it is three days a M it can also be considered tax resident. If a person has a billing problem or a property in Portugal in that could be considered as a, the mind and all of us let’s. And as the intention to occupy it as a betrayal residence, a and also important to note that Portugal as the concept of a partial residency, this is important because during a specific year and in Portugal the tax year corresponds to the calendar here, a person can be considered a tax resident only for one or two months. 

For to give you just an example, if a, you register as tax resident in November, you, you will be considered a resident in Portugal from November until the end of December of that year. And let’s say for two months, and this is also important to, to make sure that if it is a case, a comply with the tax obligations here, just in terms of the Tax region in Portugal the tax payers that are, that have the NHS starts to Are for all purposes is considered as a tax residence and serve should be to general texts or allegations, including of course, filing in and all of a personal income tax rate of return. 

As there have been mentioned already in Portugal, it needs to be reported Do worldwide Income regardless of the source of the income as tax resident to you to expire as needed to report or In a part from Reporting the, the, the worldwide income, there is also an obligation to Reporting Portugal to the tax authorities, all the foreign bank accounts held by tax payers. So, this reporting obligation does not include any information about the assets elder broad or the, the balances of the bank accounts is, is, is just the need to report the number and the institution, a bank, or a financial institution, where are those the bank account side? 


So, I’ll to summarize the main feature or features of the, the, the NHR regime starting with what we call passive passive income from, from foreign source. And the rule is that a such rest, your income could be exempt from taxation in Portugal under the NHR regime. If such Income can be liable to Tax in the country or in practical terms in brief, what happens is that, and I don’t know if you are seeing the presentation. 

I think so again, I was just saying that in general terms, DV that’s interest in rental income, that it is a, from, from a foreign source is exempt from tech session in Portugal under the, the NHR regime. Because such a nature of Income in principle would be a subject to taxation in the country of source.  But to give another example with respect to capital gains, for instance, capital gains on securities, there are these, these exemption in Principles will not apply. It will always depend on the double tax credit treaty concluded between Portugal and the country of source of the income, but in most situations with respect to capital gains on securities, what happens is that such income is only subject to taxation in the country of source or have source X or excuse me, and in the country have the residency of, for the text by It, which means that as a general rule capital gains on securities will not be exempt from taxation in Portugal. 

One exception to this rule with respect to capital gains could be the case of, of real estate held abroad, because usually the text treaties allow, allow the tech session at source. So, in the country where the property is located, and if that is the case under the NHR regime in Portugal, we will get exemption from such as capital gains on the real estate <inaudible>. 

And the same rule may apply to what we call a lens in which companies. So basically, a capital gain on a vehicle that the most assets are constituted and buy by real estate. So, these are some, some comments regarding the passive income from foreign source. And then what about employment Income and self-employment income I’m from foreign source a so implementing Income under the NHR regime, it can be exempt If. 

The dean can do is text and actually subject to tech session at source that this is a condition for the exemption, and Portugal with respect to self-employment income, it could be exempt from taxation in Portugal If derived from a, what we call I value-added activities. And, and the, in it could be text at source a cordon, again, with the most of the double tax treaty concluded by Portugal in independence, too. 

This presentation, you can see a after, after, afterwards, but we include the list of I value added the VAT. It is what it is considered an iron value added a VAT in Portugal. And there was a, change in this list for four to 2020 or more. 


In terms of a Pension Income foreign source Pension Income. There was also a change in 2020 in the past, for instance, or suspension Income was an exempt from taxation. Is that the next session in Portugal, but from 2020 onwards, these Pension, it can be subject to a 10%, a personal income tax, a flat rate, and do the exemption He still applicable in any case, two will do not have to be to all residents that registered until a and two or before the change in the law. 

About the, the income from a Portuguese source that are also some tax benefits associated with the NHR regime, which basically means that the personal income tax rate is a flat rate of 20% instead of the progressive tax rates applicable to come on a Texas resident. A, and this is a special tax rate is an applicable to two salaries and a self-employment Income arising from the, the four or five value added activities. 

So, these are the list, the design, the life of value-added activities is a new list for us since 2020, we will not enter in too much detail. I will say that in, in, in, in general terms, this new list broadens the opportunities to, to, to, to consider activities as a value-added activity. But anyway, it should be evaluated on a case-by-case basis. These, these are the main ideas that that would like to at this stage bringing to you, of course, in terms of a conclusion outside of that, the NH Are regime, eh, is a very attractive region in Portugal a and E is still a student. 

We can consider still a very attractive, even for pension income, with a tax leakage of a 10%. And also, with that note, that for now, we, we, we do not have in Portugal and right to the constraints with respect to when heritance or gift tax is the, so there are ways to structure a, any, any narrative story to give Texas without the knot not located in Portugal or at least a, without a tax leakage. 

Of course, all of these make sense if we’ve, we’ve had a word from both perspectives from the Portuguese side, and also from the, the country of source of the Income. And then, and that’s the, that’s the key message in that, and that I would like to do it 


Are right. So now we can jump into that.  A lot of people came in for, especially those are the same questions, so Q and a time. So, what I’ll do is I promise is I will for sharing my screen and go back to the questions that were submitted ahead of time, right? And then once we run through these, we can go to the one’s in the chat box for this one and HR and US retirement Roth, 401k, social security, Augusto? 


Oh, we, we, we will start a, with a, a tricky one to jump in the deep end. Okay. So in, in case of a, a pension income, as, as I mentioned in the presentation, It in, Principles the subject to taxation in Portugal at the rate of after that, the flat rate of 10%, that would be the, the general rule for Pension Income of course there is always a discussion around what is considered with a pension chem, according to the domestic law, and try to have a weight if in specific a pension schemes there and also, or the, or, or the types of savings for retirement, if the income derived from such products can be considered Pension Income are not according to the Portuguese rules, because sometimes what is, what we may have is an opportunity. 

If it is the case to consider as investment, Income more passive income that could allow us to get some tax reliefs. And that will depend on the characteristics of the savings and the product itself. 


Right. And just to quickly jump in, because I see people a typing away or keyboard, or so basically, I know that the comeback on that one, as well as a whole long I’m paying tax in the US and I’m going to pay a tax here in Portugal, how am I going to be double taxed? Well, the answer is, and this is where I think it’s super important that you dealing with a team that understands both the US and Portugal otherwise, we are, again, this is kind of messy, and we have experience with this because this is how Spain has handled it. This, this is new to Portugal, but this taxation of foreign Pension has existed in Spain for quite a while. 

So, there is a way within the us tax treaty, leveraging the tax treaty to recharacterize retirement income in a way that allows you to offset the 10% that you have to pay to Portugal. So, the bottom line is no, once your team knows what they’re doing, you won’t be double taxed, moving on to question as to why has Portugal changed the rules. 


Okay. So basically, I think that we are talking about the change in the rules of the pension. Income a live, it was the most relevant one. And It asked to do with them on the fact that that Portugal was, I can say changed by other European union countries. I’m about the, the, the, the NHI regime, and, and specifically with respect of the Pension the tech session or, or the exemption of Tax session of Pension Income because that regime would allow the pension Income to be in fully exempt from taxation, either in the country of source and in Portugal. And that’s, according to the other, other countries would be something that is not aligned with the Principles of the European union. And, and we find this a solution outside of the tax at a 10%, which can still be a, a, an attractive, attractive taxation in terms of, for the, the, the beneficiary is of the Income and may or may or may be sufficient to a, the other countries. I would not say that they, they are happy with that, but at least it’s not a full exam. 


Understood. And I’ll answer three and four, we kind of touched on three and four in responding to one. What about the tax treaty? And what about the foreign tax credits? The bottom line is yes. When you leverage the treaty between the U S and Portugal in the right way, or you will not be, usually be taxed twice in the same Income you may be double tax. And I see some Questions in the chat box, which do hint a double tax. So, I’ll get to that later, but at the federal level, and at the level of Portugal tax authority, know you won’t be a double tax because we know how to leverage the treaty in the right way. 

Number five, I’m just skipping, jumping to number five. What if I’m self-employed well, again, from a US chats perspective, it is business as usual, you will be from a You US will Tax you, of course. And I’ll talk about this self-employment tax afterwards, after Augusta response to the Portugal side, please. Augusto 


Okay. So, from a Portuguese perspective, If the self-employment income derives from US. I think that that is the question and under the NHR regime rules is that we need to look at the volt tax treaties and see if under the double tax treaty, the self-employment income can be a, can be subject to taxation in the U S or not, as Derren said, if it is the case, and if it is the case, then we, we can get exemption under the NHL regime, but it is such exemption it’s only applicable if the self-employment income derives from, or the so-called IFL, whether the activities or otherwise as such, it can be subject to tax session in Portugal as a text resident here by the, the, the rules of the worldwide income taxation. 


Right. And just to reinforce the point, know, you won’t be double taxed once your team knows how to leverage the treaty in the right way. Now I’m going to be a bit sneaking, and I’m going to jump to question him in, because I think that ties into this question in terms of self-employment taxes, as you know, in the us, you pay ordinary freelancers, because there are a lot of freelancers, I guess you would pay ordinary income tax on the Income you earn, but then you also pay a special self-employment tax at 15.3%. If it is that you are a tax resident here in Portugal. And if it is as an Augusto has said that you will be taxed on that income, and you wouldn’t be also paying the social charges here in Portugal under the totalization agreement, which is different from the double tax treaty, you would be relieved a paying the 15%, 3% back in the US. But as you say, as soon as you recognize it is quite nuanced, again, you need to speak to your adviser on that jumping to number six, at which point exactly. This someone become Portugal Tax resident, Augusto? 


Okay. So, as I mentioned, we have two main rules do 183 days or presence during a 12-month period or a Everything building in Portugal that can be considered as a, the house. So those are the main, the main or conditions or requirements to be considered tax resident. I know that sometimes these get, gets a little bit confused with the, the resident’s permits that the visa and so on, and I think is important too, to, to consider the immigration issues or the resident’s permits in the visit procedures is a totally separate from the tax residency. 

So, we can have a residence permit, a for immigration purposes, we can have a visa. It doesn’t mean that we are tax resident in Portugal. And, and, and this has nothing to do with the type of the nature of the visit. It could be a golden visa, a working visa, or, or something like that. We should always look at deck’s rules and  and look at the one in the 90, and then in 83 days have a presence in, in the country or in your property here. 


Okay. That was great. And that’s a, that’s a key takeaway here as well. That immigration rules are a very different from tax rules in Portugal as they are in the us as well. So, it’s a common feature in both sections, number seven. What about my LLC? Back in the U S or my other Offshore entity from a us perspective, they are still subject to, to the us tax rules when you move or hear to Portugal, if you do it from Portugal the LLC, you know, you are doing annual reports in whichever state it is. And if you are elected S Corp status or a C Corp status that has its own compliance responsibilities, or an LLC, which if it’s just a single member it’s on your sheet, you will see it can be shared your He as the case may be. 

So the bottom line is that the Reporting is the same as if you were in, in the U S and similarly, if you have an offshore company that it will be subject to the same rules is if you are in the us, which would be, it could be put in a low tax jurisdictions, for example, the BVI, or it will be subject to the guilty rules, which I mentioned earlier, the global intangible, low tax income rules that came in and the president former president Trump, and those would still apply when you move to Portugal. So again, we need to consult your advisor on the US side, and Augusto, Portugal the saying, okay. 


Okay. From the Portuguese side, we, we have a rule for allocating the, the profits of a partnerships or a, a transparent, let’s say vehicles that we may have a broad. And basically, if we are talking about a vehicle that is located in a low tax session jurisdiction, which is the case for, for example, or VVI, this means is that the profit of such vehicle would be directly, you are located to the partner in Portugal <inaudible> without the need, or, or the existence of any distribution.  So, it’s  what we call the CFC rules. 


Hmm. Okay. And we touched on it to a realization Agreement previously, what about on my bank accounts I’ve mentioned and do your best B stands for bank. All your financial accounts are subject to US disclosure, typically Portugal. 


As well in terms of the, I would say they’re changing information obligations that are more, more or less in line with the International procedures. So, at this stage, financial institutions communicate to the government side, the existence of bank accounts and so on. And so, it is important to make sure that everything is cool. Why? Well, a structured, 


Okay, understood. A number 10 is state tax planning. And again, estate tax is, as I mentioned, and to do your best teaching for transfer taxes. So, it is not properly described and explain in code. So, we need to use caseload. Caseload tells us is that they IRS tax court. They’re look at it in 10 plus deliberate action. So, did you intend to ship to your domicile from the US to Portugal that is a driving factor in a state tax planning? So, the key point is the key takeaway I want you guys to have is when you speaking to your tax advisor, bring estate taxes into the conversation, and I know it’s a more of a topic, but please is suddenly needs to be discussed because the decisions you make right now could impact on your kids, on your spouse, on the beneficiaries, because of the estate tax rules. So, a domicile is a very nuanced topic. So, we need to speak with a professional about it. Augusto any comments on the estate tax. 


Well, in Portugal except some specific situations, we do not have what we call legs TAX. So, in principle, from an individual’s perspective, there are no a big concern, or if they, they, they intend to, to leave and become non-resident. 


Okay, great. And the last of the pre-submitted questions, it it’s, it’s there on the screen. So, someone, or somehow, they enjoy a capital gain in the U S and through, I guess, great planning. They manage to pay zero tax on it with this philanthropy taxes and Portugal, Augusto? 


Well, if I understand, correct the phone from this question, the, the, the, the topic that has to do with the capital gains in the U S 


Yeah. And let’s assume its security is because I noticed differently. 


Yes. Yeah. Let’s assume that we are talking about securities. And, and as, as we have discussed the under the double tax treaty between Portugal and US at US, we will have the power to tax capital gains from securities from, from US source, let’s say, so, be it is such a way that means that in the, even under the NHS, a regime, such as capital gains will not be exempt from taxation in Portugal. And, but, but just for completeness, the tax rate applicable in such case would be the standard rate applicable to tax residents. We it’s 28%, and not the 10%, the 10% it’s only four Pension Income. 


Okay. Thank you for that. 


Maybe and just to go back too, to do a, another topic that we, I have already discussed, and that is to do with the tax residency, because someone in the chat ask If owning a property in Portugal is enough to be considered tax resident. I would say a few things. The first one is, is such a property such as it could be considered a habitual residence. So, having a property, for instance, that is rented, it’s not a considered as residence. And of course, we also need to look at the tax residency in terms of other criteria, when we are discussing the tax residency between the two jurisdictions. So, if a person, as a, a residency in two countries, we need to look at this specific situation to under the rules of the double tax treaty, to try to find some type of break clause that allow us to conclude in which country the person is Tax Reporting. 


Okay. Thank you for that clarification. Now, moving to the question is in the chat box, and just in case someone is listening to this afterwards, I’ll just read it out because they won’t be able to see what we’re seeing as well. So, my husband is concerned as a passive income, which includes his pension and social security in my investments. We’ll come a salary and Tax in the U S and Portugal, I guess, is a double Taxes is, gets confusing to this person. So, from a US point of view, the tax rules will be unchanged. So, you know, if it’s Roth, it’s already taxed, if it’s a 401K, it will be subject to tax, and the investments will be taxed in the same way as if you were on US sort of to start up with. 

And then if it is a, on the Portugal side, and then the best of guiding me if I’m wrong, or if it is pension, of course, we need to look at the nuance is to make sure how we categorize. If it is a Pension, it will be subject to the 10% tax in Portugal. But because of the Note, we bring the tree to you, the task street team to the equation, we might be able to look at it and to leverage the treaty in a way that you don’t pay tax twice on the same income. So, you, in other words, you could get to offset the tax that you paid to Portugal on your us tax liability. That, that that’s the key takeaway. 

I know it’s complex. And that’s the thing with working with a us tax season that does not understand Portugal and Spain, because to be in is quite similar, or if you, if they don’t understand PORTUGAL and then yes, you’re going to be taxed twice. That’s just the way it is. But if they understand how to leverage that the tax treaty, no, you will be taxed twice that there will be the takeaway if the Gusto or any clarification’s or am I okay there? 


No, you are perfectly okay. That’s it.


Next question. I know some people that remain non fiscal residents in Portugal, is there, is that an option for us citizens with temporary residency, Augusto? 


Well, that’s the discussion around the text residency, and to too, for the fact that ever a residency permit, it doesn’t automatically trigger the tax residency. 


Correct. And I, and I, I know some clients who have Portugal is like a plan B or maybe just for, you know, to just dip in and out. And there their main residence is elsewhere. So, they have the resident’s permit or permission, but you don’t live here. So, and, and for vacations as well, they come on a holiday. Yeah. 

The next questions. So, if I buy a house in the spring, I guess that means a house in San Portugal and begin my golden visa application. If by the end of December, all is in place, my US Income will be subject to Portugal taxes that’s done. 

Well, it could be the case depends on the time that such person a scan during that specific you’re in. So that’s the 183 or that six months. So, it’s yeah. And maybe the trigger.


In practical terms, we can argue that, if the person is not the residency permanent yet even temporary, what we can argue that until that moment, he has no intention to stay here on a permanent basis. Is this something your kind of, we should, should be careful? 


Okay. Understand that. And that’s were having a Portugal tax expert, how is it because you would understand the nuances of the rules rather than just reading the letter of the law itself. So that’s important. Next question, to clarify, on in the US or retirement income questions, if a prisoner really pays tax on the distributions in the US that they also have to pay tax on Portugal, the answers is going to be as simple as a Pension the will, will be paid. We need to pay the 10% that Augusta do is describe and explain in great detail, but because we know how to leverage the tax treaty between the US and Portugal, you get to offset that 10% as a pizza Portugal against the us tax liability. So, you’re not going to be taxed twice, at least at a federal level. Next question American would Juul, citizenship, and Portugal if I retired and Portugal so I guess this is still in the US. So, if I retire to Portugal, will the 10% in pensions apply to me, or am I at a different category with us to, 


Well, I am not sure if I pick the, the, the, the exact the question can, can, can you, can you please do.


Sure. One of the persons has both a us passport and Portugal passport. I’m assuming they are in the us right now. So, they are asking if they have returned to port you’re going to retire, would they have to pay the 10% on the US pension’s or would they be in a different category? Generally speaking? 


No, it’s, it’s the same rule and the 10% is in case they apply for the NHR status. 


Okay, good. Next question. What if I’m a, Portuguese a resident, but maintaining my main domiciles or a tax residency in Florida, which has also in my home state or some years spending more than one 82 days in Portugal, would I have to pay any tax on any of my US-based Income in to Portugal or would I just pay tax in Portugal on whatever the income I receive in, or from doing business there. So, I guess this is a situation where they get the da to visa, a golden visa, whatever, but they may remain in the US and some years they do not spend more than the number of days to trigger tax residency on those years, would they still be taxed in the U S Income in Portugal? Augusto?


If in a specific year is not considered tax resident. It will not be subject to taxation or on any foreign source income, but if a person stays more than one of the day and 83 days in Portugal and his tax resident in, in such cases, the answer will be yes to buy Taxes in Portugal long, the worldwide Income. 


That was great. And the next question, you did mention this in your presentation, but just, I guess, to emphasize it, the person is asking, how is it an X bot resident tax after the HR has expired Augusto?


But this is on the general rules of applicable to tax residents in Portugal. 


Right. Okay. Next question, so, if you have a property in Portugal, are you automatically considered a tax resident? 


Is that that’s the one that I have, I think already. Okay. 


Yeah. Okay, great. You have any referrals for one of the suicides, so somebody asking to move, or some, somebody is still in the US that will need tax legal, real estate, golden visa assistance. So, they were looking for like a one stop shop. So, it will be helpful to have all these elements, I guess, in under the same roof, I guess, do you have referrals to the other services on the real estate, on the golden visa side, Augusto? Is that something that you can, your team can help with that? 


Yes, YOUR, we can not assist directly because in Portugal, there are those immigration issues and we do not perform legal services, but of course we all work together in close collaboration. We’re in a legal environment, we can assist too in that as well. 


So, Augusto can introduce you to that. It’s a separate thing because they’re not allowed to be under the same roof in Portugal. 

Next question. Thank you for clarifying. The 10% is Pension Income only, I assume Pension includes a 401k and social security to a potentially yes. Augusta, is that a fair answer? Yes. Okay. Yeah. Okay. Someone is asking how do they stock? 

What’s a starting point. Hannah, one of our colleagues. She put our contact details in the chat box. If you just scroll up, you’ll see how to reach us, Augusto and or both of us. So, yeah, next question. And I guess this would be the last, because we’re over our time. What if you came here to PORTUGAL and in the process of money, fish test shell, the international, but you are not, I know I butchered that. I apologize. So, they Portuguese speakers, but do not intend to become a tax resident, but cannot leave the country until getting the residency permits. 

But by waiting that for, for that privet to be issued, I guess you pass 183 days you’re in a year, does that automatically make pain tats and US-based Income and Portugal during that year, obligatory like that. So, you got on that again. We need, regardless of the, the reason that tweet Portugal that we need to look at the tech’s rules. And if we are, cannot be considered fix a resident elsewhere, prove that you can read the text residents for okay. 

And with that, we’ve gone slightly over. Thank you very much for your time guys. You know how to reach out to Augusto his contact details are in the box below so as mine. 

Thank you for attending, and please feel free to reach out to us on a website, ours is HTJ.tax. We will publish this on YouTube and wherever you can find it in your favorite podcast platforms. Thank you very much. Have a good night. Bye now.


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Table of Contents: [ HTJ Podcast ] U.S. & PORTUGAL TAXES FOR EXPATS – 11th February 2021

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