LIVESTREAM – U.S/Portugal Taxes For Expats -3rd FEBRUARY 2022

 

VOICE-OVER:

This podcast channel it’s about you, successful international entrepreneurs, successful ex-pats, successful investors. Sponsored by HTJ.tax.

DERREN JOSEPH:

Good evening. Good afternoon. Good morning. Depending on….decline and don’t ask again. Sorry. No, transcription. The person who requested the transcription service. Sorry. Okay. Thank you for joining us HTJ.tax. We do these live streams every week, with different tax topic of interest. And today we’re going to talk about US/Portugal tax. For those who are joining us for the first time, please remember that this is not an advice. We’re having a general conversation with general principles. If it is one of the topics, one of the topics that we discussed, that you want to take a deeper dive into it, you would need to engage a professional of your choice to work with you on it, and to get specific advice and you can engage us so you can engage whoever you feel comfortable with. But this is not advice treated as educational or entertainment, depending on your perspective, this is being recorded.

So, for those on zoom, we’re also live on to Facebook, LinkedIn, YouTube, whatever. And for those on zoom, if you do not want your image to appear, just keep your cameras switched off. Otherwise you will be recorded. So the recording will be available on YouTube, SoundCloud, iTunes, Spotify, wherever you get your favorite podcasts. We put it on somewhere between 15 to 20 podcast platforms, including our website HTJ.tax. So without further ado I introduce you to Augusto Paulino, who’s going to give a presentation on Portugal. And then we will just jump into the Q and A. I got your questions. There’ve been a lot of questions submitted over 20 questions submitted, and some questions are like part A, B, C, D, E. So it’s a lot of questions. Unfortunately, I apologize in advance. We will not be able to get through all of them, but we do as much as we can. For those who have not had a chance to submit your questions or topics, please type them in the box below them and get to them in the order in which they’re received. Over to you a Gusto.

AUGUSTO PAULINO:

Okay. Thank you Derren. Thank you for the introduction. Hello everyone. Thanks for joining this webinar. So just a brief presentation of my myself. So I’m a tax consultant in Portugal for almost 20 years, and we have assisted a number of private clients that decided to move to Portugal, including US citizens. And then the idea of these to summarize some of the most common questions that arise from a tax perspective and focused on the NHR regime. The non-habitual residents regime, which is a tax regime, a favorable tax regime that could apply in case of individuals that decide to move to Portugal.

I have a brief presentation to talk about the main features of this regime. I will ask Derren the permission to share my screen, just a moment. So, please confirm that you are seeing my presentation. So, the idea would be just in brief talk about the regime, the tax regime in Portugal. And as I mentioned, the main features of the Non-habitual resident tax regime.

So, an initial remark, just to clarify that the NHR is a tax regime that is applicable regardless, the type of visa or residence permit that an individual can obtain to live in Portugal. So this is just a tax regime and it works in parallel with any immigration and visa procedures.

So, sometimes things, a little bit mixed between golden visa or other types of visa and tax regime. So we are only talking about a tax regime and these tax regime is applicable to individuals that move to Portugal and are considered tax resident in Portugal, according to the local, the Portuguese law. And the other condition to apply for this regime is that the person has not been tax resident in Portugal in the previous five years.

So, these are the main conditions for the regime. And the idea is in terms of procedure, that the application is made until March, until the end of March of the year, following the one that individual move and change the residency to Portugal. The regime is applicable for 10 years, counting from the first year of tax residency. Some questions that are common with respect to this 10 year period is what about after the 10 years elapsed?

So in such case, the Non-habitual residents became ordinary standard taxpayers in Portugal, according to the general rules. And what happened if during this period, for some reason, the person decides to leave Portugal for one or two years? In such case the regime will remain applicable. If for any reason, a person returns to Portugal, as long as it is within this 10 year period, counting from the first registration.

So, and also another common question is, if there is an option to renew the regime after the 10 years. It’s not an option. So, it ends and you became a regular taxpayer.About the conditions to be considered tax resident in Portugal. So, the rules site that you became tax resident in Portugal, if you spend more than 183 days during any 12 month period.

So this is the first criteria, the general criteria. And then even if you do not spend 183 days, you can be considered as tax resident. If you have a willing import in Portugal in conditions that suggest an intention to keep it as habitual residents and also an important aspect, we would respect the tax residency in Portugal. That is the Portugal as the concept of partial residency. Meaning that, for example, in the first year, you can be considered tax resident only from the date that you registered in Portugal until the end of the year and not the old tax period, which in Portugal is same as the calendar year running from January to December.

And then I believe, of course, with respect to the taxresidency, there are a lot of questions that can be addressed, namely, in respect, when we are discussing the textural residency between two jurisdictions, that should always be evaluated and that the double tax treaty concluded by Portugal and the other jurisdiction in this case of US. It’s a very specific case because as you know, being a US citizen or holding a green card, you will always be considered as taxable in US as well.

But well, that’s the rule. I think we can move just in times of trying to summarize the process in Portugal for tax purposes. So, the main steps are applied for Portuguese tax number registered as tax resident. Apply for the NHR status. And of course, on an annual basis to file the Portuguese personal income tax return, as Non-habitual resident tax payer, similar to any other taxpayer in Portugal, you need to report the worldwide income. Even if for any reason, such income could be exempt under the NHR rules, but you always need to report the worldwide income in terms of the annual tax return.

As I mentioned in Portugal, a tax period is the calendar year from January to December and apart from reporting all income worldwide, you also need to report foreign bank accounts. So, there is no requirement to report assets or balances of the financial accounts, but you need to report the number of the accounts held abroad.

So trying to address some of the main features of this regime and some of the benefits that the NHR regime grants. In terms of passive income from foreign source, such income could be exempt from personal income tax in Portugal in certain conditions if certain requirements are met. So, one message that is important to give is that not all income from foreign sources exempt under the NHR regime.

So, sometimes people think that this is a full exemption of taxation. It’s not the case. We need to evaluate the nature and the source of the income to confirm if it is exempt or not in case of passive income. For example, if we are talking about divedends interest, rental income, that could be taxable at source in your other country, according to the double tax treaties in principle, this means that these types of income are exempt from taxation in Portugal under the NHR regime. But to give a different example in case of capital gains derived from the sale of securities shares, bonds, whatever capital gains can be subject to taxation in Portugal.

For example, in case of capital gains derived from the sale of shares in US companies. So, such capital gains would be taxable in Portugal and even under the NHR regime. I think that this is the main message, is that not fully exempt income from foreign source and with respect to employment income and self-employment income also from foreign source exemption is also available.

But depending on the situation, for example, employment income, it’s only exempt from taxation in Portugal if actually subject to taxation at source with respect to self-employment income. If derived from what we call the high value activities, the exemption may apply, but in such case, the rule is that such income could be subject to taxation at source. Again, according to the rules of the double tax treaty, and with respect to the high value activities, there is a specific list that I will share in the end of this presentation, but then the idea about these, high value activities is that, it forces several professional activities. And this list was amended in 2000 with effects from 2020 onwards. I would say that it broadens the opportunities for professionals to benefit from the regime. But it’s always required to evaluate depending on the nature of the activity, if it could be applicable and considered as a high value activity for the purpose of the NHR regime. Another important aspect of the NHR regime as to do with the taxation of pension income from a foreign source.

So the regime originally foresees full exemption from taxation of pension income. These regime was changed in 2020, March 2020, and now it forces the raxation at a flat rate of 10%. But this new rule it’s only applicable to individuals that register as tax residents in Portugal after March, 2020. Meaning that the changes introduced in the law were in a way that protect the regime for a previously registered to expire.

And just when final comment with respect to the benefits applicable to both salaries and employment income, earn self-employment income, derived from activities performed in Portugal and income sources in Portugal, a flat rate of 20% may apply in case of the activities again, and this flat rate of 20% compares with the progressive tax rates applicable to general taxpayers up to 48%.

So, it’s a great benefit in terms of personal income tax. Just one additional comment with respect to activities, develop formed main lien, Portugal that has to do with social security contributions in poetry and the, the NHR regime. It’s a regime that only foresees benefits for personal income tax purposes. So, if employment income or self-employment income is subject to social security contributions in Portugal, the NHR will be treated as any other resident in Portugal and social security contributions will be due on the work performed in Portugal.

And now just, I will not enter into much detail on the list of whether the activities. So it is this new list is based on the Portuguese classification of professions in order to be more objective in terms of the evaluation, if a certain activity qualifies or not. And just trying to summarize some takeaways. So in general terms, in brief terms, Portuguese resident regime is a favorable tax regime that allows to accrue wealth in a white listed tax environment. It also allows the disposal of assets benefiting from tax exemptions. It may also allow to pass on wealth or estate without inheritance or gift taxes, and finally allows to enjoy the retirement with a minimum tax leakage now of 10%, which is still a very attractive regime. And as I mentioned is applicable for 10 years. So, I believe these are the main ideas that we want to share with you and now, or maybe we can move on to the questions and maybe some of the questions were already answered during the presentation, hopefully.

DERREN JOSEPH:

Wonderful, thank you very much Augusto for that really comprehensive overview. So, now we’re going to jump into the questions. Again, for those who just joined. If you did not get a chance to submit your questions previously, just type them in the box below, and we’ll get them get to them in the order in which they are received. Disclaimer, as you saw on the bottom of each of Augusto slides, this is not intended to be advice, we’re having a general conversation about general principles. Let’s jump into question.

Number one. I am interested in learning about the NHR. Hopefully you’ve learned a lot. I moved to Portugal in August, 2021. So, August last year, I’m retired and I have not worked since mid-June of 2021. Do I qualify for NHR? And would that be a value to me? So, I guess this person may be wondering about a late registration fot NHR, Augusto?

AUGUSTO PAULINO:

Well, if the person moved in 2021, it’s still on time to file the request for NHR until March. So, we have two months, okay? And in terms of benefits, yes. I imagine that if as foresee is receiving pension income, for example, it could have benefits with the NHR regime.

DERREN JOSEPH:

Okay, wonderful. And, just to be clear, so if this person, him or her applies now and gets approved, would it be retroactive to last year though? Or would it be just for 2022 for when they filed the returns in 2023?

AUGUSTO PAULINO:

Okay. So, the NHR regime once approved is applicable since the first day that the individual was considered tax resident in Portugal.

DERREN JOSEPH:

All right. So, fantastic. So, it goes all the way back to August, 2021. Fantastic. Thank you.

AUGUSTO PAULINO:

As long as the regime the status is obtained until the end of March.

DERREN JOSEPH:

Perfect. And so for whoever asked that question, you can feel free to reach out to Augusto to take that forward. Question number two, I have questions regarding the taxation of a US persons when they’re investing in a Portuguese fund for the Golden Visa. So, someone is a Golden Visa investor from the US. What kind of taxes do they need to take into account? And what are the rates, in most cases, they would not be residents and they won’t be tax resident in Portugal. What’s the best way to declare income from these funds with dividends and capital gains. It would be great, if you can talk about PFIC. Okay.

So, one of the upsides with the Golden Visa is that you get to enjoy Portugal, but there’s no minimum stay requirements. You can still live in the US or wherever in the world that you would subject to the rules of the Golden Visa regime. But this is not a talk about immigration, right? So from a tax perspective, if it is you don’t trigger one of the two indicia that Augusto indicated in his presentation. So, you’re not going to be here for 183 days or more, and you don’t have your center of life here, then you you’re correct in your assertion that you won’t be subject to Portugal tax, but you’re still American, right?

So, you’re still a US person. So, as always, you’re subject to tax on your worldwide income. Now you’re asking specifically about the Golden visa fund. So, there are a number of ways of getting the Golden Visa. One of them is investing in certain funds now, as you indicated, or you suggested you’re right, some of them are given a special treatment under the US tax rules called PFIC. So,PFIC stands for Passive Foreign Investment Company, what does that mean? Well, there are number of rules in the US tax code meant to address investors who invest outside of the US.

So, it was a big deal once upon a time to invest for Americans, invest outside of the US and take advantage of the fact that they don’t need to pay taxes until there’s a liquidity event at the end of whatever the lifetime of their investment is, which is unfair, right? Because if you invest in US Situs funds, you get a 1099 every year, and you need to pay taxes on whatever the dividends are. And even though they may be reinvested, you still need to declare and pay taxes. So, the domestic financial institutions within the US they complained they complaints to the Congress and saying, hey, foreign financial institutions have an advantage on that.

So, in 1980s under President Regan, the PFIC rules were created. So, I won’t get into the details of it, suffice it to say that it can be quite aggressive. If you have a foreign investment, for example, one of the Golden Visa investment funds, and they’re not properly declared. And, so you need to, first of all, make sure that you and your tax team is familiar with international issues. And this is something we do. We are advisor’s of advisor. So we often do speak to US tax teams that are very domestic focused, they don’t understand the international rules. So there are number of ways of treating the fund, if indeed it is a PFIC.

So, basically a PFIC is any foreign mutual fund, just being very, very general. But if you have a foreign mutual fund, more or less, chances are, you need to check to see whether it’s a PFIC. There are number of ways of treating it under Section 1291, 1293 and 1296, I think of the tax code. What you’re looking for, some of the funds in the Golden Visa funds in Portugal, they are designed for Americans. So, what they do is they make an election called a QEF election for qualified electing fund, and they will give you a statement every year. So, that’s what you’re looking for. The ideal is to find a qualifying elective fund.

Now, if you don’t have that ability to work with a fund, that is a QEF, and that will give you a US tax statement every year, then you will need to let you tax advisers know because then the tax advisor that you have will need to create QEF statement every year, and they’ll need to work with the fund to get the data, to make it US tax ready. So, the bottom line is that it’s not a showstopper, I’ve seen some stuff written online, you know, and it could be a little bit doom and gloom and fan mongering. Don’t worry, once your tax advisor knows what to do, they’ll be able to work with you and work with the fund to prepare the relevant statements to make sure that they’re properly disclosed on the US tax forms, which is the Form 8621, and the relevant calculations done. If the right calculations are done, then the PFIC becomes will become called tainted. And some really aggressive throwback rules are invoked. So that’s they’re meant to be very punitive. So. you want to completely avoid that. So hope that answers your question. If you’re considering the Golden Visa do not run away, because it may be a PFIC, just speak to your advisor and make sure that you’re prepared to deal with the US tax consequences. Hope that helps. All right.

AUGUSTO PAULINO:

Derren, just for completeness and with respect to the Portuguese perspective. So, in case of income derived from such funds, it depends on of course of the nature of the fund, but if it is not related with real estate in Portugal, in principle, what happens is that any income earned by non-residents participants will be exempt from taxation in Portugal, just for completeness.

DERREN JOSEPH:

Fantastic. Thank you. All right. So I’m seeing the questions coming in. Please continue to put them in the boxes below. We are seeing them, but we’ll get to them in the order in which we do receive them. So, right. Question three, please describe the tax liabilities in Portugal and money removed, I guess, okay, when you mean remove, I guess you’re talking about IRA distribution, so a US IRA’s distributions, are they considered pensions from a Portugal perspective? I know you touched on this Augusto?

AUGUSTO PAULINO:

Yes. Well, we need to refer the way, the nature of the income. I understand that also from a US perspective, in terms of qualification of the income and for example, the whole tax treaties would be treated as a pension income. Yes, that’s correct.

DERREN JOSEPH:

Right. So as a result, so what you’re asking, the answer’s going to be, yes, it will be taxed assuming that you are a tax resident in Portugal, it will be taxed by Portugal. If it is, as you would have seen in Augusto presentation, the NHR would allow a preferential tax rate of 10%, but it is going to be taxed. You don’t need to worry about double tax once your tax team knows what they’re doing, the reason, why is that the US side of your tax team will be able to invoke double tax agreement between Portugal in the US to ensure that the taxes that you’re paying in Portugal offset any liability you would have in the United States for the IRS. So, hope that answers your question.

Next, number four. The rules for pension income have changed recently. Can you explain the changes, I guess they’re talking about 2020, Augusto?

AUGUSTO PAULINO:

Yes. So, the changes with respect to the pension income was that, originally the NHR regime forces that pension income from foreign source was fully exempt. So, now a tax flat rate of 10% is applicable.

DERREN JOSEPH:

Correct? So just for those who were interested in the little politics behind that, some other European countries complained a bit about Portugal, and it’s not just picking in Portugal because it’s happened. They’ve complained about other European countries, as well. Example when Britain was part of the EU that complained about the Res Non Dom regime in the UK.

AUGUSTO PAULINO:

There are similar regimes right now in Spain, in Italy, in Greece. So, but with respect to that, even this week, we get the formal information from the Swedish tax authorities that canceled the application of the double tax treaty with Portugal. One of the reasons is the NHR regime. We have already this discussion with the Norway, I believe some politics involved,

DERREN JOSEPH:

It’s quite political, but, you know, 10% isn’t bad. And from a US point of view, assuming depending on your situation, it’s not well, depending on your situation, because the NHR is quite nuanced. It may not materially impact your tax return, but speak with your advisor about your specific situation.

Question five, as an expat, a US expat here in Portugal, what forms will I need to fill to do my Portugal taxes? That’s a big one Augusto.

AUGUSTO PAULINO:

Well, it depends on the nature of the income. So one thing is for sure that, if you have any income worldwide, you need to file the personal income tax return in Portugal. That is due between April and June of the year, following the one that you can relate to. And then to see the information and the specific appendix of the tax return that needs to be filed. It depends on the nature of the income that you receive in a certain year.

What we can do is that if there is no, or the specific activity developed in Portugal, that gives rise to all the tax obligations, namely with respect to VAT, Social Contributions, and so on. For personal income tax return, the only tax obligation, the only tax filing obligation is the personal income tax return once a year.

DERREN JOSEPH:

Right? So, you know, if it is whoever asked this question, if you new to Portugal, maybe I know you filled with the spirit of adventure, but it may be worth getting professional guidance, if, you know, depending on your situation, because it’s best to start off on the right foot in Portugal, and you don’t want to get on the wrong side of the tax authority, if you were to make a mistake by trying to self file. So, and on the side of caution, be prudent, get professional advice.

Okay, next question. Is it better to file Portugal taxes before the US? We had this, we had this discussion, we had this question asked previously, because as you know, as Augusto just mentioned, the Portugal taxes are due between April and June.

And Portugal also has a calendar year Jan to December, just like the US. So, for the US payments are due by April mid-April, but because we’re outside, we get an automatic two month extension to submit the physical return, which takes us to mid June. So, normally the busy period would be between April and June. Augusto, what are your thoughts?

AUGUSTO PAULINO:

Well, from our experience with the US clients, then the idea would try, would be to try to file portrait his tax return first, because in case of income, that is subject to taxation in Portugal, you can claim that tax credits in the us and the, and the best approach would be to first confirm if there is texts during Portugal or not, and then filed the tax return in the US and claim tax credits. If it is a case.

DERREN JOSEPH:

100% agree, that’s how we work together. What we do is we set up the return, we set up the US side of the return, because from the information provided, we can do every single form in the US aside from the 1116, which are the far it forms. So then we sit and we wait for AUgusto to finish the Portugal side, and then we plugged those in, and then you get to go. So, chances are both already at the same time, but Portugal has to finish that calculation first, because that’s a calculation. We carry over until the U S 1116. And we may need to invoke the double tax treaty just to make sure that they get applied. Hope that helps. Just remember that from a UD side, you may get an extension. If you follow for you at 68, you may get an extension of time to file, not time to pay for those who are new ex-pats. This may be your first time living outside of the U S during the attack cycle. You still need to make that mid April deadline. So please start speaking to your tax teams, moving on. Number seven, what does the NHR do? TA taxes? I think a Gusto answered that in, in detailed. It is pretty nuanced though. It’s not like, you know, Spain with a Becham law, Nes non Dom in Ireland or the UK or the flat tax in Switzerland. It is very, very nuanced. Don’t you agree with us now?

AUGUSTO PAULINO:

Yes. We always need to look at the nature of the income that we are talking about and also the source of the income

DERREN JOSEPH:

Yeah. All right. Moving on. What happens? Okay. Question eight. What happens to taxes? If we get a 1099 from the US? So I am a person who ever asked this knows what a 10 99 does say us return. So a 10 99 would be for someone who is self-employed and independent contractor. So if someone is sitting in Portugal as an independent contractor, earning money from us clients, what does that do to the Portugal returns of Besto, but I know you covered it in your presentation, but yeah. Summarize.

AUGUSTO PAULINO:

Well, if you give you the is mainly performed physically in Portugal, even if the client is the customers are with clients in this case, are in US, such activity would be subject to taxation in Portugal is self-employment income. And then it, we need to evaluate if it qualifies as a I value whether the DVD in order to benefit from the 20% flat, right. Or if it is an other activity. And in such case, the progressive tax rates up to 48% will, will apply.

One, important aspect that I mentioned also in the presentation has to do with the Social Security contributions, because if the person is physically in Portugal and performs all these activity and professional activity here in theory, at least is subject to social security contributions in Portugal as well.

DERREN JOSEPH:

Yeah. And think that’s, that’s a really important point. Yeah. The people I get so much, you know, people’s jaws just fall to flows. Like, what are you serious? I have to pay so much because what it could do, if it is that you are high value, high value added, so that’s 20%, but then this puts an extra what? 20 to 20% on top of that.

AUGUSTO PAULINO:

Yeah. It depends if it is a self-employed in this case. It’s 21.4.

DERREN JOSEPH:

Exactly. So, which is, it’s pretty steep, but you know, but it’s not, but then this is not a Portugal issue. This is Europe. So social charges apply wherever you go. So for those who are new, just something you need to factor in any planning. Number nine is a big one. So this is the only big ones that we want to do about some, I’m going to read it in full. Hello. I do have a question. I’m a US citizen. I’m still in the us, but I’m considering applying for the D7 visa. The D7 application process requires applicants to sign an apartment lease and Portugal prior to applying for the D7. And prior to flying to Portugal, if I’m still living in the , the signing, this lease for an apartment in Portugal, immediately triggered tax residence and Portugal, or is Portugal tax residency not triggered until I land and I set foot on Portugal, soil, Augusto?

AUGUSTO PAULINO:

Okay. So the fact that you sign a rental agreement does not immediately trigger the text residency. So the first day that you get to Portugal could be the first day of tax residency. If it is your intention to stay here as an these house that you rented, you rented with the intention to be your main involvement.

DERREN JOSEPH:

Okay. All right. So this is one of those questions, parts.

AUGUSTO PAULINO:

Yes, just for completeness. Usually this is a common procedure process. So first you need to, to have a rental agreement or even buy a property in Portugal and then apply for the, the visa and for, and follow all the steps that are required for immigration purposes to have a residency permit and so on. And only after those steps are completed, you can be a registered tax resident.

DERREN JOSEPH:

Okay. All right. Person has like parts, ABCD to this, to this question. So, the context is I have some mutual funds that have some gains, so they appreciate it. I’d like to sell them to reset the basis after the D7 is approved, but before flight to Portugal. So, okay. So I think Augusto has answered that part. It your US residents won’t be triggered until you land in Portugal with the intention to reside here. So, moving on to the other parts of your very long question, but we’ve got shades it’s okay.

We will go through them remote from the US, okay. Right. He’s talking about the sequence of his events. He is in the US, he’s going to get his NIF open, a Portugal bank account and signed the lease applied for the D7 wait for the approval, and then after approval. But before flying to Portugal, selling mutual funds deal with the US capital gains and then moved to Portugal, then land in Portugal and move into his apartment and apply for the NHS status, effected the dates of my relocation, but not before. Okay. All right.

So, I think Augusta has answered your question. If not, please, just type a little bit, I think your question has been answered. Thanks for asking that. That’s a really good question. Next one. Number 10, would all us social security be taxed in Portugal, Gusto, social security payments from the us government

AUGUSTO PAULINO:

Under the double tax treaty in principle, no social security payments will be subject to taxation if any of us.

DERREN JOSEPH:

Okay. Fantastic. Well, finally, we have a question with just a simple answer, which is very rare.

AUGUSTO PAULINO:

Oh, well, it’s simple.

DERREN JOSEPH:

Oka. Okay. IRA distributions be taxed in Portugal. We answered that previously. And someone else asked that question. Number 12, does Portugal tax inheritance. Okay. So there’s Portugal. What puts you go tax the inheritance money that our son would receive when we pass away? So Americans living here, tax resident here, they want to know Portugal tax there. The inheritance that they plan to pass on to their son who does not live here. Augusto? You’re still you’re on mute. Okay.

AUGUSTO PAULINO:

Sorry. I was saying that that inheritance tax is always some nuances as well, that if we are talking about, eh, in inheritance from parents to sense the narrative in our intern stacks in Portugal as an exemption, so it’s not applicable.

DERREN JOSEPH:
Okay. But then, okay. And I guess as it they’re asking a lot of cash that would apply, but what about, I’m just thinking a lot. What about if it were real estate?

Well, in terms of t ax session of inheritance it, we have an exemption from parents to direct parents. 48m 3s. Direct descendant dissidents. So what about

If we are discussing inheritance in terms of assets that are not located in Portugal, for example, a tax resident in, in Portugal, but we are talking about assets that are not located in Portugal. Those assets are not subject to inheritance tax under the, the location rules of the Texas in Portugal. Okay. Gotcha. But if it were Portugal sites as assets, would it be subject to any sort of transfer taxes or stamp duty. No stamp duty will not apply to me. No terroristsAnd kids. Okay.

AUGUSTO PAULINO:

If it is a gift to other or the narratives or to other others, the not diet parents in between parents and sends it could be the subject of tax sensation. Yes.

DERREN JOSEPH:

Okay. I hope that answers your question. I’m going to switch from one list of questions to another. So just to give everybody a shot, first question on my other screen does applying for the NIF automatically registered NIF will be the Portugal tax ID for those enough, familiar with it automatically registered someone is tax resident, or is there a separate process to attaining the NIF, the Gusto you clarified that it would be upon arriving in Portugal with the intention of residing here, correct? Yes.

AUGUSTO PAULINO:

Yeah. So in terms of a process, it usually the tech student fication number is requested as a non-resident, for example, for filing for, for, for the purpose of signing a rental agreement, you should have texted interfication number in Portugal, but when you all think initially this tax identification number is as a non-resident, then only when you move to Portugal, you change your tax residency. So the taxi didn’t fication number is no longer as a non-resident, but as a tax resident.

DERREN JOSEPH:

Well, that clarifies next question. And this other list it’s about inheritance. Again, someone is asking about inheritance, not being taxed with NHR, but I it’s inheritances. It’s a big field of, but I think you you’ve hit on the key points if it’s not Portugal Citus. No. If it’s Portugal, Citus and it’s to a direct descendant, for example, your kids. No, but if it’s to someone else potentially, yes. Augusto?

AUGUSTO PAULINO:

Let’s say to you.

DERREN JOSEPH:

Okay. So next question. Verone if I dated my NIF with my Portuguese address in January, 2022, so I guess you arrived last month. Cause we in February, now this has been quoted in February. So you would have arrived in January 20, 22. Do I have until the end of March, 2022 to apply for the NHR or the end of much 2023 to apply for the NHR

AUGUSTO PAULINO:

March 2023 in such case, because the year of registration was 2022, then you have until the end of March of the following year, of course, you can obtain in the status and apply for it right away.

DERREN JOSEPH:

Okay. Okay. Hope that answers your question. If not, you can just type another one below. Next question from John, would you still have to pay us taxes if you and the NHR, when your us parents pass? Okay. So I’m assuming that your parents are well, your parents are based in the US and you are based in Portugal and US estate tax rules. Taxes are potentially levied on the estate, not on the person receiving the taxes. So, the US doesn’t necessarily have an inheritance tax. Like for example, in the UK where the person receiving the asset is subject to tax, but it’s the person who has passed on their estate is liable to task. I know there are certain states that’s at the federal level. I know there’s certain states that may have a version of an inheritance staff, but generally speaking at the federal level, and most of the US states, the estate tax is levied on the estate of the person who passed. So if your parents are in the us and you were here in Portugal and you know, unfortunately they’re passed on, then their estate would still be responsible for any estate tax issues.I hope that helps. Someone was just commenting the no inheritance tax in Portugal regardless. Okay. Thank you Manuela. Moving down is US rental property income, not taxed in general on just under the NHR. Augusto US rental income. You’re on mute.

AUGUSTO PAULINO:

Again. So with respect to rental income from foreign source in this case income from real stating in us, this is not subject to taxation in Portugal. It is exempt under the NHR regime.

DERREN JOSEPH:

Right? So, so I hope that answers.

AUGUSTO PAULINO:

The general standard standard taxpayer in Portugal exemption will not apply. So this time these type of income would be served to taxation.

DERREN JOSEPH:

Right? So hope that answers your question about the NHR versus new NHR when it comes to us rental income. So if it is that you have a rental portfolio and the US investment properties in the US then you should consider the NHR get advice, because I don’t know what your overall situation would be, your other assets, but it’s something to consider. So I hope that helps. And next question, Victor, and this tax applies to US government pensions as well. Yes. Pensions US government pensions. Augusto, I think you touched on this already?

AUGUSTO PAULINO:

Well, if we are talking about public pensions received from work performed to the government or other entities, I believe that under the double tax treaty concluded between Portugal and US, US have exclusive rights of taxation. And, therefore, I believe that in such case are not subject to taxation in Portugal. So in case of pensions, derived from work performed to the over.

DERREN JOSEPH:

Okay. All right. Hope that answers your question, Victor Jeffrey, to clarify, would I pay tax in Portugal and use a fine tax credit in the US or pay tax in the US and not pay any taxes in Portugal, Jeffrey, sorry. I’m not sure what type of income we’re talking about, but if it is pension income, which is what a lot of people ask about, if it is that you receiving, like you have a 401k, you have an IRA, and there’s going to be a distribution from it. There’ll be subject to, Augusto said that 10% in, in Portugal. And we will, we have to reclassify the income.

It’s a bit of some tax alchemy that international tax professionals who have familiar with this situation would know how to do so there’s a bit of alchemy involved. So that income, even though it’s us source will be reclassified as foreign source. So that way we can apply the, we can use the tax credits for the taxes already paid to Portugal against any us liability. So the bottom line is just stepping back and looking at that big picture is not, you’re not going to be paying tax twice. You’ll only be taxed one time on that income. You’re not going to be double taxed once your team knows what they’re doing. I hope that helps.

All right, next one, John, I obtain the says NHS, but I guess he means any tribe team, the NHR in 2020, but file my application bef before March, 2021, will my rate be the 10% or the zero rates, right. Because yeah. Right. It changed. Right. So you obtain the NHR at the beginning of 2020, presumably that’s before the 10% regime kicked in and sorry, I’m getting more messages, but I filed, what do you mean by file your application before March, 2021. But anyway, in a situation like that, where he got the NHR at the beginning of 2020, does he do what he enjoyed the former rules where his pension income would be free of that 10% tax, Augusto?

AUGUSTO PAULINO:

Well, the relevant date is the date of tax registration here in Portugal. So, if the data for registration in Portugal was before March 2020, the previous regime applies.

DERREN JOSEPH:

Okay. Gotcha. So before March 2020, if you registered, if you would tax resident in Portugal before March 2020, you’re good. Afterwards, you’re in with the rest of us. Okay. Hope that helps. Next question. Okay, Bruce. Okay. Since show possible to sell mutual funds. Okay. Fine. Oh, okay. So Lisa is asking us step kids, considered kids when it comes to that inheritance tax in Portugal, which I guess would really be the standard to the transfer taxes, Augusto?

AUGUSTO PAULINO:

I think so I’m not an expert in terms of rules, but I would say yes.

DERREN JOSEPH:

Yeah. When it comes to inheritance rules, even with the US tax and, estate taxes as transfer and state taxes, that’s a whole other discipline it’s in US. Taxes is actually the area of practice would the highest amount of litigation. So for us, because we have professional liability insurance, right. So, we have the greatest chance of being sued if we do a state tax work, because it is very, very contentious. Just leave it there. Moving on, John, okay, alright. So yeah, John, I got your question before.

Okay. But I some getting it on two screens. Okay. But I’ll deal with it here. I’m a US citizen with UK employment. If my company relocates me to work from Portugal, with my income tax bill, Laura higher than the, than the US if I earn more than a hundred K euros at what income tax bracket would I be liable for paying Juul tax in the US and are there any other taxes I’ll have to pay as an employee, as a, an employee in Portugal, such as social security, healthcare surcharges, capital gains tax, crypto tax, et cetera. And three, if I’m a spouse and a D7 visa, I’m allowed to work for foreign company in the USA, UK as an employee and independent contractor? If so, would my tax bill? I said, okay, this is a lot. And I appreciate you providing a lot of, you know, details, but I think this may be a little bit beyond the scope of what we’re trying to do here, but generally speaking. So when you see the, if your company moves you to re relocate, are you in Portugal now? So if it is that you on not in Portugal and you’re in the UK, because you’re a us citizen with UK employment, I’m assuming that U K employment is being exercised in the UK.

Now, if it is, you decide to come to work in Portugal with your income tax, be higher or lower, we’d need to run a sip. We need to run a calculation because the three jurisdictions in play, the US, the UK, and potentially Portugal, they will, it’s not just about the headline tax rate. They also deductions to reduce your taxable income there, you know, and various classes of income over characters of incomes, for example, capital gains versus ordinary income versus investment income that taxed in different ways in the different jurisdictions. So some of them will need to run a scenario and we can help you with that. If you, if you reach out to me via email, you just message. Yes, email, I think I got you your other question, this question by email. So email it to me again. And we can perhaps take that further because a scenario need to be run where we calculate, what the impact of any move would be. So, because each, you, you have a lot going on, you have a comprehensive portfolio, which is good, good for you, but I don’t think anybody could do it justice in the time that we have here. So I’m sorry, but we S we, we can handle this, but we need to handle this separately. Thanks for your patience. Next question, John is asking distributions from revokable trust, consider the pension income by the Portuguese tax authorities.

I’m specifically interested in investments which have not grown. So this is not a cap gains question, but I’m concerned that Portugal does not recognize the trust structure, which it doesn’t no civil law country recognizes trust with some exceptions, but generally no. And could therefore consider this as distribution from pension. So it’s revokable and it’s. Yeah, so Augusta correct me if I’m wrong, but the tax authority would just see straight to the trust. It does not exist and whatever the character of the income that you’re going to receive, if it is being received from a pension, as you say, it’ll just be treated as pension income and the Portugal tax authority will be blind to the fact that it passes to a trust.Am I correct in saying that Augusto?

AUGUSTO PAULINO:

To be honest, I don’t know, because it also depends of the position of the person in terms of the trust, or if it was the settler or not. This is something that needs to be if all the way to the top, because the rules may be different if it was the settler or not.

DERREN JOSEPH:

Okay. Gotcha. All right. So that’s another one we’d need, the devil is into detail with some of this stuff, right. So please, could you reach out to us separately, John? Okay. Yeah. John, can you just reach out to us separately? And we can perhaps, you know, take a deeper dive into it and give you a considered position and help you in any planning that may or may not be necessary. We have come to the end of our time. I’m really, really, really, sorry. I know I have, I’m seeing 10 more questions. I’m really sorry, but you know, it’s tax seasom and that that’s the way it goes.

Please feel free to reach out to us directly on a Gustos this is being recorded. So if you’re playing this recording, you can just rewind to Augusta’s slides and you can see his contact details. You can reach out to him directly, or you can reach out to myself via HTG dot taxes, go to a website, and you can, you can, you can find me there and we’d be pleased to consider any viewable situations from both a planning perspective. So we help you with strategy tax, planning, alchemy, and on the, on the, on the backside, we will help you with the actual tax filings as well. So please reach out to us. I’m really, really sorry, but we got so many questions and, and we’re grateful for all of you who have logged in on the various platforms.

Again, this is being recorded and will be available on wherever you’re going to get your podcasts. So you can just check HTJ.tax. Thank you, and we will see you next time. Have a good night, day, depending on where you are. Bye bye. Thank you. Bye. Okay. I’m just reading more messages. Okay. You’re welcome guys. Thanks for joining us. See you next time.

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