Skip to content 
VOICEOVER:
This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax.
DERREN JOSEPH:
Welcome, Augusto is reminding me that this is our fifth live stream, where we’re going to talk about Portugal/ US taxes. So welcome, thank you for joining us. So just in terms of some basic housekeeping, please remain on mute until we come to the Q and A at the end, understand that with the Q and A, quite a few of you have submitted questions and thank you for doing that. We will attempt to discuss them in the order in which they were received. And just to make it pretty clear that nothing we say here constitutes tax advice, consider this educational piece but it’s not a tax advice. If you want advice that is actionable in your unique and your specific circumstances, please, you need to engage someone who will then take a deeper dive into your situation and then can give an opinion legally, legally binding, and an opinion with consequences, right? So, what we’re doing is we’re using your feedback to have a conversation that is educational. So, I just want to make that pretty clear because some of you have been asking. So, without further ado, I will hand you over to Augusto who will talk about the intricacies of taxation in Portugal, Augusto?
AUGUSTO PAULINO:
Hi everyone. Thank you Derren for the invitation for this webinar, I’m very pleased to contribute again for this discussion. As Derren mentioned, of course, we will try to cover some of the main features of the NHR regime. And of course, this is general information, and we will try to address some of the questions that you raised during the Q and a, but anyway, of course, in the tax area, several methods that need to be evaluated and is on the details definitely. We talked that also in previous webinars that we made together, that would be useful to have an initial presentation about the main features of the NHR regime in Portugal which would be helpful to try to solve some of the questions right away and prepare us for the Q and A session as well for all of us to be in the same starting point let’s say, I don’t know Derren if I may share my screen. I think so, I’ll try to do that. Okay. Thank you.
I’ll skip the detailed presentation of myself, I’m a tax advisor here in Portugal. I’m part of a Group Your, which is a group engaged in the provision of accounting and tax and audit services to corporate and private clients. And I’ll to try to share some of our experience with the individual clients, including some US expats that decide to move to Portugal. During this presentation, I will try to present some, as I mentioned, general information on the regime, I will start with some brief considerations regarding the tax registration and the tax residency criteria in Portugal, also about the main tax filing obligation as individual that this such to be become tax resident in Portugal, and then speak about the NHR regime in more detail at the end of the presentation.
So just some initial comments about the Non- Habitual Resident regime application. So, what are the main conditions? Basically, we have two conditions. The first one that is the taxpayer is considered tax resident in Portugal, and that the Portuguese tax law. So, the NHR regime is applicable to tax residents in Portugal. These name NHR known, non-habitual resident is somehow confusing, but it is important to make sure that we are talking about tax residents in Portugal.
And the second condition is that these taxpayers have not been tax resident in Portugal in the previous five years. So, these are the two conditions. And the application for the NHR regime is May till the end of March of the year following the change of tax residency to Portugal. For example, in case of someone that decide to move to Portugal in 2021, until the end of this year, it should apply for the NHR status until the end of March 2022.
And the regime is applicable for 10 years. So, counting from the first year where the taxpayers is tax resident. With respect to the concept of tax resident in Portugal it’s also important to clarify that the main criteria would be the period that a person stays in Portugal during a 12-month period. And that rule is the 183 days, whether consecutive or not during 12-month period.
So basically, at each point in time, a person should look for the previous 12 months and confirm that they have been in Portugal physically, at least 183 days. And even in those situations that stayed for less time, the other condition is that the person is dwelling a house in Portugal, in conditions that suggest an intention to occupy such house as a habitual residence.
And this is important also because in Portugal, there is a concept of partial residency, meaning that during a tax year, that for individuals in Portugal is the calendar here. An individual could be tax resident only in part of the year. For example, someone that moved to Portugal and register as tax resident in September this year will only be considered tax resident in principle between September and December 2021, of course, that with these discussion about the tax residency, these are the domestic rules and of course we also need to take into consideration the double tax treaties and all the considerations about that. When we are discussing the tax residency between two jurisdictions, of course, there could be other tie-breaker clauses and so on. And that should be a helpful way to when we are discussing if we are discussing the tax residency between two jurisdictions. Well, as tax residents in Portugal, the taxpayers, including the NHR are obliged to report in Portugal, do worldwide income, even income that could be exempt or not served to taxation in Portugal under the NHR regime, such income needs to be reported.
So, the filing of the annual personal income tax return is of most importance because even consider some exemptions, all income needs to be reported. Okay. And so, with respect to the main steps, when considering moving and residing as a tax resident in Portugal, of course, in parallel to this decision of tax residency, there are other considerations more related with the authorization to live in Portugal. And of course, immigration regulation that individuals that are not Portuguese or not citizens of the European union country need to apply for a visa to live in Portugal. And just also to clarify that these image, our regime, and any tax regime has nothing to do with the type of visa that a person can have. So, these are two separate issues, the visa and the immigration procedure and the tax registration and the NHR.
So, considering of course, that individual as the authorization or the visa that allows him to leave and spend a time in Portugal on a permanent basis to do the steps for the text registration would be as follows. So, apply for the Portuguese tax identification number, register as tax resident apply for the NHR status, as we seen until the end of March of the following year, and then on annual basis file the personal income tax return in Portugal.
So, these are basically the main tax obligations for an individual in Portugal and the annual tax return as already mentioned. So, the tax period would be it same as the calendar here. So, runs from January to December, should report the worldwide income. So, in Portugal, the tax return, basically as information of income does not have information of property assets, whatever. So, it’s only income that we need to report. And of course, we may need to report foreign bank accounts if held. And these are the main many information that needs to be reported. And now maybe try to summarize some of the main features of the NHR regime. So, when we are talking about the tax session under the NHR regime, we should look at the source of income and the nature of such income.
I will start to talk about what we call passive income. So, income derived from investments or rental income, so not derived from business activity or employment. So, with respect to passive income, the rule, the general rule is that these types of income would be exempt from taxation in Portugal, under the NHR regime, if according to the rules, the double tax treaties concluded between Portugal and the country of the source of such income can be liable to backs at the country of source.
And the exemption is not applicable with respect to passive income that derives from blacklisted jurisdictions. Okay. To give examples if we are talking about, for instance from dividends received from abroad, the general rule would be that dividends are taxable in the country of source of the income. And in such case, even if not subject to effective taxation, there would be exempt from taxation in Portugal.
This would be applicable in, in general terms to dividends, to interest, to rental income. And one exception would be with respect to income related to capital gains. For example, capital gains derived from the sale of securities. We can talk about bonds or shares if in case of capital gains derived from, for example, shares, the general rule would be that capital gains will not be taxed at source according to double tax treaties, which would mean that as a general rule, those capital gains, which would be taxable in Portugal under the NHR regime.
And, and in such case, we will not benefit from the exemption. Of course, these need to be evaluated on a case-by-case basis, because there are some double tax treaties that may allow taxation at source of capital gains. And then in such cases, we can get the exemption, in most of the double tax treaty is concluded by Portugal. This is the taxation in Portugal and no exemption. And then the NHR, another exemption in case of capital gains would be capital gains derived, for example, from the sale of real estate property, located in other jurisdictions in such case in principle exemption applies under the NHR.
Now moving to other types of income and namely employment income, and self-employment income, with respect to employment team. The general rule that is that this employment income from foreign source will only be exempt from taxation in Portugal, under the NHR regime, if actually subject to taxation at source. This is the rule for employment income, with respect to self-employment income exemption it’s available only for those activities that are considered as I value added activities.
And as long as according to the double tax treaty concluded by Portugal and the source and the country of source of such income, such income can be subject to taxation at source. So only if the double tax treaties allow taxation at source, we will get exemption in Portugal. Again, those such an exemption is not applicable when we are talking about self-employment source in blacklisted jurisdictions.
Now moving to the pension income. So, these rules changed last year in 2020. And in the past pension income from foreign source was fully exempt from taxation in Portugal under the NHR regime, this is no longer the case. The general rule would be the pension income to be taxed at the flat rate of 10%. The change in the law was introduced in a way that protects the previously reduced NHR, which are still well, it’s still applicable the exemption in such case.
And just a one comment with respect to the income derived from Portuguese source. So, income from employment or business, or self-employment in Portugal, there is reduced 20% flat rate that is applicable to employment. And self-employment thinking from Portuguese source, but this flat rate is only applicable in those cases where the activities are also considered as a high value-added activity and of course, the high-value added activities are forcing, you know, least that it was enacted by the Portuguese tax authorities. And this list was updated in 2020. There were some adjustments tried to be more objective in terms of the classification of the activities. This is the list. I will not spend much time here, but okay.
Just in terms of a summary of these notes. Well, NHR regime is of course, a favorable tax regime and Portugal in general is a whitelist tax environment. So apart from benefiting from the NHR regime, which is, as I mentioned, as several benefits, namely at personal income tax level, but there are some advantages in moving to Portugal, such as not having taxation on the, on the inheritance situations, for example, and even considering this new rule for pension income, with the taxation of 10%, it it’s still a good opportunity in terms of tax structuring of the incomes.
And that’s basically the main ideas that I have to share in this initial presentation. And they would be a good starting point for the Q and A.
DERREN JOSEPH:
All right, wonderful. So now we get to the fun part, the Q and A, and yes, I know you guys have sent in lots of questions, so we will address them in the order in which we have received them.
So, going up to the first question, I’m registered for your webinar. I have one question, I’m a US citizen with residency in Portugal. I would like to know the procedure of which tax return I should file. First, If I understand correctly, I should find my Portugal taxes first because it’s my country of residence and then find my US taxes that correct? There are many Portuguese accountants that say, you need to file a US returns first, which is correct. Augusto you and I have a spirited discussion on this earlier, please, over to you.
AUGUSTO PAULINO:
I don’t know if I have a correct answer. Well, in terms of timing, the statutory deadline, I would say to file tax returns is more or less than the same time I leave. So, in Portugal, the tax return needs to be filed between April and June usually, it’s more or less the same timeline that in US. Okay. The fact that would be important to confirm in each specific situation for any type of income, there would be a tax credit. Because if, for instance, there is an income that these taxation in Portugal, and you can claim a tax credit in US for such a taxation in Portugal. It would make sense to file the Portuguese tax return before US tax return and the other way around. It’s also true although according to our experience, it would be the situations that where we can claim tax credit in Portugal for taxpayers abroad would be residual in comparison with the other way around. So, I would say that it would make sense to follow the Portuguese tax return. First, if we can claim any tax credit in US. Derren please correct me.
DERREN JOSEPH:
That is a very powerful question. And it’s one that everyone asks, so you’re definitely not alone. So, essentially as Augusto said both as you know are due around the same time, because you’re outside of the US you got that automatic two-month extension to file your tax returns, do note that from a US perspective, your payments are still due on April 15. So even though you may get an automatic two-month extension to file to mid-June, or even if you file a Form 4868, or you get an extension to mid-October payments is still due by April. Otherwise, you may be hit by interest and underpayment penalties, right?
So, I know it seems kind of weird. So technically in a way we should be doing it at the same time, but depending on your situation, it really depends. Everyone’s situation is different if it is, most of your income is subject, as Augusto has just gone through in quite a bit of detail. If it is that you are subject to tax at source in Portugal first, then chances are we need to get the Portugal taxes so we can offset them with a foreign tax credits and Form 1116 against you’re US tax liability. So, yes, the confusing answer I know is that you want to start at the same time, but if it is, most of your income is going to be taxed here because it’s derived from Portugal. Then we need, we as the US tax team or whoever it may be for you would need to get the Portugal tax position first. And if it’s the opposite, most of your stuff is derived from the US and because of a treaty position or NHR, whatever is going to be taxed in the US first, then Portugal will need to see that first. So, I know that is not the answer you’re hoping for, but it is the answer. It really depends.
AUGUSTO PAULINO:
Yes, Derren just for completeness because there is a practical issue here. That, of course, when we file the Portuguese tax return, as I mentioned, we need to report the worldwide income, and to file the Portuguese tax return in an accurate manner, even considering an income that is exempt, we should present the income that was paid abroad for any reason. So, there is also this discussion that we took to file accurately. The Portuguese tax return, we should have the information of the tax is paid the abroad, but well, this is sometimes difficult to manage
DERREN JOSEPH:
Exactly. So, it becomes an away like a chicken and an egg, you know, which comes first, right? So that’s why we are saying both.
AUGUSTO PAULINO:
And in some cases, when we can claim a tax credit in Portugal, we can also ask for the postponement of the filing. But the only reason to ask for that is when we actually have a tax credit in Portugal. And to determine the amount of the tax credit, of course, we need to file previously the tax return in the other country.
DERREN JOSEPH:
Right. And similarly with the US as you guys know, you can file for an extension. So that’s why it’s important that your US tax team, and your Portugal tax team, they work constant with each other. So, you know, just as you can tell from just all brief exchange, there’s a lot of interdependencies, and more importantly, then you have one team taking a higher view to make sure that you’re not taxed twice in the same income, because that’s one thing that nobody wants double taxation, right?
All right, next question, and for those who are logging in now on Facebook, you can type your questions below and we’ll get to them in the order in which they receive as well. So, is there an agreement between Portugal and the US with regards to social security for self-employed people? So, this person is saying I stopped paying self-employment tax when I began working here in Portugal and paying social security only in Portugal, not in the US. So again, this is a relatively straightforward one, but there’s a totalization agreement between the United States and Portugal and in the totalization agreement between the US and most Western European nations, which means that you’re not required to pay social security contributions twice.
And if it is that you are residents in Portugal, which I assume that you are, you should be paying into Portugal, whoever doing your US return will make a note on the return, especially if you have like, Schedule C income, or K1 that may trigger self-employment tax, they should make a note on the return invoking their totalization agreement and letting the IRS know that social charges are being paid in Portugal. So, they’re not required to be paid into the United States. So, for once we have a straightforward question, all right.
So, moving on, hi, I’m planning to move to Porto on the D7 visa in mid-April next year. I have passive income from 12 rental properties in Florida and interest income from mortgages I make with real estate investors also in Florida. So, he has a real estate business of some sort in Florida. I won’t have social security income until 2029. My questions are, first question, how will these sources of income, the rental, the interest, and eventually the social security benefits from the US be taxed during the 10 years that he would hope to be subject to the NHR, the non-habitual residence. And then after the NHR program for him would expire after 10 years.
So, he has some other questions, but let’s deal with this one first and less let’s deal with the first part of it. So, his rental property income, how would that be taxed here under the NHR Augusto?
AUGUSTO PAULINO:
Well, rental property would be exempt of taxation in Portugal under the NHR regime. So, the rental income under the double tax treaty would be taxable in the country where the property’s located, or at least US who have the rights to tax in such a way that would be exempt under the NHR.
DERREN JOSEPH:
Okay. So, we aren’t going to move on just yet, because we put some flavor into this, we were discussing this before the zoom call. So, let’s assume that this person has, I mean, it’s twin as 12 rental properties, right. And he has other investors. So, we’re going to assume that he has a structure, and we’re going to assume that it’s all in an LLC, a Florida LLC. So then, okay. Let’s same scenario, but it’s a Florida LLC. How is Portugal looking at that Augusto?
AUGUSTO PAULINO:
Well, I would say that we have a different two ways to look at that because in case of an LLC, which is a transparent entity, so it’s an entity that is not subject to taxation itself at the corporate level. The idea would be that any taxation of the activity of the profits of the LLC would be directly attributed to the partner, to shareholder for taxation purposes. That would be a way to look at these in such case, the discussion around these would be if the nature of the profit, that these located to the partner still as the nature of rental income or if it is a business profit. And there a lot of discussion around these, we may argue that the underlying income as the nature of rental income. And try to follow that route and argue that would be an income exempt from taxation, given the nature of the underlying income. It’s a possible approach possible. I’m not saying that this would be the view of tax authorities.
DERREN JOSEPH:
Yeah. So, you know, just to add to what Augusto has already said, it could be very, very nuanced. And especially so people, I know I’ve seen discussions and people have approached me and on our online forums on our website. And then they talk about invoking, I think it’s Article 7 of the tax treaty and business income, blah, blah, blah. But it really depends, because when you look under Article 7, that very first line, it speaks about having a permanent establishment here and in this case in Portugal. So, if it is that I think a key factor as whoever your tax advisers would be a key factor for them to understand which we don’t know in this case.
So, we can’t say one way or the other, but a key factor to consider is whether you have what we call substance or permanent establishment here in Portugal. So, if it is that you are making decisions for that business, from your home in Cascais or the Algarve or wherever it is you are, you’re running that business from Portugal. So, you know, then this permanent establishment, he had his nexus here. So potentially that whole structure could be taxable in Portugal potentially. Right. So, it really, really depends on if it is that you have a full team boot on the ground in Florida, and all you’re doing is you sitting back and you are in the Marina in Cascais, and you’re just having a good time and you just receiving passive income, then that’s another scenario, right? That is completely different from if you actively involved. So, this is something to consider. And we also get this as a slight segway. We also get this with some YouTubers as well. They may think, you know, that your main audience, you are speaking in English on your YouTube channel and you’re getting income, but that income is being derived from English speaking audiences in the US, but the point is that you are running that enterprise from here in Portugal. So, it really you know, it’s, it’s something to consider and you should really seek advice. And in that disclosure really explain to your advisors exactly how your business is being structured. So, and just to get to the second part of this question Augusto, he’s asking so, what happens after the NHR expires? You want to comment on that?
AUGUSTO PAULINO:
Okay. After the 10-year period, what happens is that the general rules applicable to the regular taxpayers in Portugal will apply. And the general rules would be that the overall annual income subject to a progressive tax rate up to 48% for personal income tax. And of course, some passive income, for instance, we are talking about rental income in the example, would be tax at the flat rate of 28% as an option.
DERREN JOSEPH:
Okay, great. Moving on to the next part of his question. So, Seville is asking, I have substantial annual income in my Roth IRA. So individual retirement account in the US. So, his question is how my Roth, because Roth is going to be tax-free in the US. So how is it going to be taxed if it’s going to be taxed in Portugal, Augusto?
AUGUSTO PAULINO:
Okay, this is the important discussion is in this case to clarify the nature of the income deriving from the Roth, I would say that in principle would qualify as a pension income if received in several installments after retirement. So, in such case, if we can confirm this nature as a pension income, that would mean that the pension income under these new rules of the NHR regime would be taxable in Portugal at the flat rate of 10%. However, it is important to clarify that these 10% may or should only apply to do a component of the pensions received that corresponds to income, meaning that we should not tax the amount received in the pensions that correspond to the capital contributions made by the person. So, the challenge would be to a niche pension income to split and only tax the income and not the amount of the contributions that were made by the individuals to this product.
DERREN JOSEPH:
Okay. So, I know that, you know, when we say this, because this is a question that we always get asked, and after we give the explanation, there’s collective disappointment, right? Because people were under the impression that there’s a DTA and it’s still being bandied about online, right? So, there’s the, DTA not going to be paying any tax in Portugal, and that is wrong. And for those who may be new, you would have, you can look at what has been happening in Spain, right next door, so forever. Right? So, the way it works is that Portugal will tax it. But as Augusto said, we’re going to have to bifurcate whoever’s working with you, you know, whoever your chosen tax team is, they’re going to need to bifurcate that monthly income between what was the original contribution and what is the return on the investment? And the return on the investment will be subject to the 10% tax. Now, then we get, so then you’re saying, well, what about the treaty? Right? That’s in violation of the treaty. Not exactly. So just like happens in Spain for those who, you know, may have spent time in Spain, or they have friends, or they connected with Americans who were in Spain, you do invoke the treaty but what you do is you reclassify that income, even though it was derived domestically.
Ensure compliance with US taxation in Spain. Contact our knowledgeable advisors.
And this is strictly on a US tax return, right. Has nothing to do in Portugal. Portugal has got their piece already, and they’re happy. So, US tax return, you’re going to invoke the treaty and reclassify that income from domestic to foreign income. And then you get a foreign tax credit, which would be usable to offset against any other tax liabilities that you may have to do US. So, you know, so the point is that it is not straightforward. And when you sit with your preferred tax advisor, they can walk you through. And in a case like this, where you are maybe where you still may be in the US and planning to come to Portugal, it creates planning opportunities because the NHR, as, you know, as it’s as readily apparent by now, it’s very nuanced.
So, before you arrive in Portugal, you may want to contact an advisor and go through all your income and go through all your assets and understand how Portugal will see it. And if you don’t like how it’s going to be treated by Portugal, then you have an opportunity to plan before arriving here. So, it may be a planning opportunity. So, that’s it, as far as ROTH has concerned.
Now, moving on, because we have some more questions, hello my questions are not as advanced of more or less awry. I’ve just more or less arrived in Portugal. And I’m most interested in the case of same question of retired persons that don’t have access to the big foreign earned income exclusion, because they’re not actively earning.
Right. So how does Portugal calculate a tax credit consideration for taxes paid in the US and he or she goes on to say, okay, I’ll leave it there. How does Portugal calculate taxes on retirement income to be fair? We’ve just answered that. So hopefully that part has been completely covered. So now we can move on to the next part of that question from Sonia, is the Portuguese find tax credit only for persons actively employed or for any US taxpayer, such as retired persons, pensioners, retired pensioners. So, we just mentioned that as well. So, the money that you’ve paid to the authorities in Portugal can be used as tax credits to reduce your US taxable income. So it can be, even though it may be Portugal tax paid on US source income, it is possible using the tax treaty and a more sophisticated treatment of Form 1116 to reclassify that income and have those that tax credit from Portugal available for use in the US, so that’s a yes.
Next question from Sonia. So, she has a multiple part question. Does Portugal, have any senior or elderly reductions or tax breaks Augusto?
AUGUSTO PAULINO:
Well, there is a tax break, but I, I’m not sure to be honest, the exact amount at this stage, but I believe it’s 4,000 or something like that, 4,000 euros only. So, the actual, it’s not a significant reduction in terms of the tax basis of the pension income.
DERREN JOSEPH:
Okay. That’s great. Sonia, I hope that answers your questions. We’re moving on to crypto. So, someone is asking in Portugal we understand the crypto investors are not tax, but crypto traders may be taxed. Now what’s the difference. I’ll comment on the US side. And then Augusto will comment on the Portugal side, on the US side, as a crypto investor or slash trader you, you’ll probably be aware that the us tax code does not specifically define the difference between an investor and a trader there’s some guidance in terms of, I think publication 550, but there’s no specific definition. And what we would, we as a US qualified tax professionals need to do would be to look at a fact pattern in light of case law. And just to summarize what case law tells us that you can’t qualify for a trader. And I know it’s in the US if it is that you actively involved in a virtual currency, you may want to be a trader because it’s more tax efficient to be so classified, if it is that you are actively involved in it, right? So that, so it’s, it’s something that someone would pursue once they get to a certain level. So, to qualify at the very least in the US, you would need to trade substantially regularly, frequently, and continuously.
So that’s what the IRS looks for, as we derive from case law substantially regularly, frequently, continuously. And then secondly, but obviously you need to profit from this short-term price swings. You know, you are profiting from short term price wins. So, you’re not kind of like buy and hold, you know, you buy a Bitcoin, and you hold it until years to come. No, you need to be in the business of profiting from short-term swings as well. So, assuming that you check both of those boxes, you may qualify to be a trader and enjoy the US tax benefits that derive there. Augusta, do you want to comment on Portugal?
AUGUSTO PAULINO:
Well, in Portugal, not only we do not have any, specific regulation with respect to the qualification of trader or not, but even worst, we do not have any tax rules directly applicable to crypto or to gangs from crypto trading an investment. So just to recap, the Portuguese tax authorities issued a binding opinion about these matters. So, it’s not in the law. So binding opinion of the tax authority, which of course, it’s only binding for that specific situation, but then you way, it’s the only guideline that we have until now about the tech session applicable to crypto, to gains draft from crypto investments or trades. So, and that binding ruling basically says that if you are only an investor and you do not perform the trading or the trade-off crypto on a regular basis as your main activity, that would be not subject to taxation. That’s what bindings says. But of course, it does not enter into the detail about the qualification of what is considered as a business, or what is a trader. We do not have any type of any kind of guideline until now, also from a regulatory perspective, we do not have any kind of rules that would, for instance, say that someone that performs this activity in a certain manner, or with certain means would need to register as a trader.
So, there is not also a regulation from a practical perspective or for regulatory purposes. So, I would say a gray area and very, very uncomfortable for the tax advisors to have an opinion on this. But of course, there is the common sense that is in line, what the distinguish or the characteristics that Derren mentioned about the frequency, the number of transactions. And so, on that we can of course try to consider some guides, at least.
DERREN JOSEPH:
Exactly. So, it’s very nuanced. So, if we look at it from an extreme position, so like, if so we have I’ve clients, our team has clients that are traders, high-frequency traders, right? So, they do hundreds of thousands, if not a million transactions per day. So obviously, and they’re sitting, sitting at a number of computers and their screens everywhere, and that’s what they do day in, day out. Obviously, they’re going to be traders, right? So that is not an investor, that’s an extreme example, but in an extreme example, to make the point, that is a trader. Now, on the other side, you have someone that bought crypto 5-10 years ago, whenever it first came out and they are enjoying their days surfing in Costa di caparica or at the Marina in Cascais just having a good time enjoying their life while they value of the virtual currency, appreciates that as an investor.
So, but most people are somewhere in between, right? And you probably want to get an opinion from a Portugal qualified tax professional so that you understand where you sit, because, you know, as Augusto mentioned, these are shades of gray, right? So, I hope that’s okay. I hope that’s helpful to the person that asks moving on. So, Robin is asking I’m a French designer and my clients are in the United States. So, I would like to know if it’s possible and legal to have a US LLC, as a French citizen, living in Portugal with NHR and receive the dividends while only paying zero while paying 0% tax looks a bit weird to me. So that that’s a fair comment because, you know, as I like to say, and I think most people in our space, if it seems too good to be true, chances are, it is too good to be true. But I know why you’re saying that because there are the tax professionals who mind you, as far as I’m aware, I’ve met one or two of them, and neither of them are Portugal qualified. They come from other countries, and they have been offering this structure to their clients who are based in Portugal. So that really ties back to the point that we were making earlier about, you know, where is where’s the permanent establishment, where decisions being made.
And even though the company may be incorporated in the United States, the LLC is incorporated in the west. It sounds as if it, I don’t know your situation inside out, but if it is that your decisions are being made, that company’s actually been run from Portugal, then chances are, it would be taxable as a Portugal company. But if it is, you are, you know, you’re removed from the process, and you have a design team, and all your clients are boots on the ground in the US. And you just sitting back, you look every once in a while, to make sure that the designs make sense, and they look good then, but you’re not actively involved, just look maybe once a week, once a month, whatever that’s different right? So then perhaps it’s taxable. It’s going to be taxable in the US because you have substance in the US right. You have activity in the US so it will be taxable in the US. And in that case, it will be taxable here. But the idea that you can create a structure with the United States where it’s not taxable in the US and it’s not taxable in Portugal. So, you in some sort of wonderful zone, then I agree. It sounds weird because it is weird, and we don’t think it works, Augusta do you want to comment on that?
AUGUSTO PAULINO:
Well, I think we’re three of us agree that it’s weird.
DERREN JOSEPH:
Okay. That’s great. We have five minutes left. Do we have any other questions? Let me scroll down. And I’m going to check one of the other platforms. Any questions from Facebook? Nope. Okay. Thank you very much for your time. I’m glad we’re able to answer all of your questions in the chat box below. Hannah has put out contact details.
If you want to reach out to Augusto, you want to reach out to myself or both of us. Feel free to reach us and the contact details below, but those who are watching us and other platforms like YouTube and Facebook, you can just type your comments below. Or I was one of us will see it, and we’ll get back to you. Otherwise, you can feel free to email us at help@htj.tax that’s help@htj.tax Everything that we have said, hey, this livestream has been recorded and it will be available on wherever it is that you find your favorite podcast. So, you can listen to it again. It’ll be an Apple, SoundCloud, Amazon, everywhere that you get your podcasts and listen to it again, pass it on to your friends, you know, people in your network. And if you have any other questions, feel free to reach out to either or both of us. Thank you very much, and we’ll see you next time. Bye now
VOICEOVER:
Here are four ways we can help you.
- Sign-up for a free webinar on US Expat Taxes and International Entrepreneur Taxes at www.HTJ.tax
- Stream premium education or videos at www.HTJ.tax
- Contact us for Tax optimization consult via zoom
- High Net Worth. We can quote for doing your US International taxes returns.
Our books and upcoming events are available at HTJ.tax. Please subscribe like, share and comment down below or email us at help@htj.tax to engage us to advice on international tax or business matters.
Please subscribe, like, share and comment below. Our books and upcoming events are available at HTJ.tax. Email us at help@htj.tax to engage us to advice on international tax or business matters.
