Sorry, I have read numerous websites regarding US expats and Portugal taxes, but it is ambiguous if I would be paying taxes (in addition to US) on my retirement income, I have approx. $12k usd in federal retirement, and $12k in social security. The websites say a FULL-TIME resident (I would be) pays on pensions, but then they only address Portuguese issued pensions. Please don't send me to another website, I swear I have read them all, four times!
Quoted from the free euroFinesco s82 - Taxation of Pensions for US Citizens resident in Portugal:
US Social Security Pensions
Under the terms of this treaty, US Social Security pensions “may be taxed” at source (USA). To eliminate double taxation, the country of residence (Portugal) agrees to grant a tax credit equal to the US levy. Subsequently, the “AT” assesses according to domestic rules.
Many Americans who have grown accustomed to receiving their Social Security pensions free of tax in the States will find that, in Portugal, they will no longer have any applicable tax to credit, leading to ongoing Portuguese assessment.
If you receive a civil service pension from past government service (local, state or federal), this retirement benefit will remain exclusively taxable at source in the United States.
Nevertheless, this income must be reported on your Portuguese tax return to determine your final tax rate. Although not assessed in Portugal, the pension will still be considered as part of your total income and will have a “top-slicing” effect on your other sources of revenue.
I am reading that again right now. When I first saw it I thought it was for part-time residents, but it appears I may be qualified. I am currently a retired US citizen living in Mexico. The plan would be to move to Portugal next July. I would be staying there full-time, probably an apartment lease. I would be applying for the NHR before March 31st, as outlined. I would qualify, correct? If so, Portugal will be my new home!
Yes, you would qualify if you haven't been a tax resident in Portugal in the 5 years preceding your application for NHR status. Here is the best plain English explanation of qualifying for NHR. It's from an 2018 document downloaded from Deloitte*
Qualifying for the NHR status
To qualify as a NHR, an individual must meet the following requirements: • Be tax resident under Portuguese domestic legislation; and • Not have been taxed as a Portuguese resident in the five years prior to taking up residence in Portugal.
An individual is tax resident in Portugal for any year in which: • He stays in Portugal for more than 183 days (continuously or not) during a 12 month period, which begins or ends in that tax year; or • He has a residential accommodation available in Portugal in any day of that 12 month period, used as the individual’s habitual abode.
Any day (or part of) spent in Portugal will count as one day if the individual stays overnight in Portugal. Residency is established as of the first day of permanence in the country.
Registration as NHR
Recognition of this status is not automatic and requires activation by attending to the following formalities: • Application for a Portuguese taxpayer number; • Registration as tax resident; • Application for the NHR status
Nevertheless, in case the Portuguese Tax Authorities have doubts about the individual's effective tax position, additional documents can be requested, e.g. tax residency certificate(s) and other documents to prove that the personal and economic interests of the individual were located in another State in the five years preceding the arrival in Portugal.
The NHR status has to be requested until March 31 of the year after taking up residency in Portugal.
*What is Deloitte? Their member firms offer clients a broad range of audit & assurance, consulting, financial advisory, risk, and tax services. In 2018 they had 286k employees generating $43.2 billion in revenue.
You're welcome. As to the six months requirement, it's that or "He has a residential accommodation available in Portugal in any day of that 12 month period, used as the individual’s habitual abode."
I've never seen a link to an official source defining habitual abode. One interpretation is if you arrive in Portugal with a lease of at lease 6 months duration, you become a tax resident on day 1. Four and a half months after I entered Portugal with a residence visa and a 6 month lease, I changed my tax address using the Finanças site from that of my financial representative to mine, then requested NHR. It was granted.
The key is 183 days. If you arrive on 1 or 2 July you will have been in Portugal 183 or more days. So, you would apply before March 31, 2020. If you arrive on or after 3 July then you would apply for NHR status by 31 March 2021. Yes, the tax year is the calendar year.
This is a subject that catches many people off guard.
As stated above: An individual is tax resident in Portugal for any year in which: • He stays in Portugal for more than 183 days (continuously or not) during a 12 month period, which begins or ends in that tax year; or • He has a residential accommodation available in Portugal in any day of that 12 month period, used as the individual’s habitual abode.
It's not just 183 days. If you change or have your address at the finance office as a resident on any day of the calendar year, then you are a tax resident and have to apply prior to March 31 of the following year. Doesn't matter if you haven't received your household goods, Or if you arrived on December 29th, or if you haven't made or ad a SEF appointment. It's your residency status at finances office.
This happened to us when Customs at the port contacted in late December to say our address needed to be changed to match the final delivery destination. We changed it not realizing it would change our status (yes we inquired and was told it was just for Customs to receive and deliver our goods). In February we contacted our "professionals" about the March deadline and was told categorically that it was March of next year. To be sure we reached out to other professionals and was told the same thing. We believed them, and of course, was denied NHR status when we applied in May. I blame myself for not overriding advice and going with my gut. I've since found this has happened to many, many people who received bad information from many sources. Use this as an anecdote, not legal advice, which is what I recommend from almost anything you get from online forums of FB groups. There is a ton of fantastic information but equally as much misinformation. Additionally what maybe be true for someone for the US is not the same for someone from the UK.
@wilsonworld, it's always best to apply for the NHR as early as possible, to be on the safe side. The worst that can happen is they tell you that you're too early and to reapply, but if you apply too late, then all is lost.
Besides, when you apply, you are asked which year you'd first like the NHR ruling to apply to. for example, someone applying today can request it to take effect in 2019, or delay it starting until 2020.
I think the NHR problem is rooted in folks applying for their NIF with a Portuguese address vs. using their home country address when they come to PT to do some looking around. I see on this site several people indicating they are coming to PT to scout out real estate, open a bank acct. and get their NIF. As I recall we had to provide a PT address to open a bank acct. If folks are in turn using that PT address on their NIF application, the NIF will show that address as the fiscal domocilio.
Now, let's say one arrives in PT in December applies for their NIF using a PT address and March 31st comes and goes without one having applied for their NHR. They're screwed. In fact I would suspect you just became taxable for that year at the typical PT rate.
Had one used their home country address on their NIF application and waited until they received their first year temp. residence card before changing the address on their NIF to a PT address, they would have until the following March to file for the NHR. That's assuming an arrival in PT in December, a first SEF meeting in Feb./March and acquisition of one's Resident Card in May/June.
I think, and feel free to correct me, to be eligible for the NHR one has to have NOT had a fiscal domocilio in PT for the past five years.
Well, perhaps the person in the scenario depicted above that used a PT address to apply for their NIF and failed to file for NHR by March 31 unknowingly created a fiscal domocilio in PT for that first year and can not in good faith attest to NOT having had a fiscal domocilio in PT in the past five years. Thus, they would be ineligible for NHR. I
I really wouldn't have thought something like this could have so many angles. Bottom line, I reckon, is if I arrive in mid July 2020, I should file sometime between Jan 1 and March 31st 2021. I will file mid January. I don't see any other option as I will not be on a scouting trip, I will be settling in to a rental for the long term.
I'm really happy that I happened to read this forum and this particular item. Luckily, I plan on moving a bit after January 2020. I will also wait until 2020 to apply for my NIF and apartment lease, which should give not give me any problems for filing for the NHR status after January 2021 but BEFORE March 31, 2021. I think I finally understand it, but if I'm missing something please let me know. I was aware of the federal pension not being taxed, but was not aware of it being used for the overall tax basis. As they say, it's the little things that'll get you! thanks for all the helpful advice.
With all the concern and talk about getting the NHR, I applied for it on Monday of this week. I was approved 2 days later.
I had concerns given we arrived in PT this January and didn't apply by March 31. However, the key is the address you indicate on your NIF. The attorney that prepared our NIF application, correctly used our address in the U.S. (one may not think an address outside of PT is appropriate for a tax document, but in this case it is). Then in May of this year I changed the address on my NIF to our residence here in PT.
Applying this week was apparently not too early and I would venture to say they probably only looked at the address on my NIF to determine when residency occurred.
I was concerned they would reference the Lease agreement I provided the tax office used to prove our residency as it started in November of last year. Plus we resided in that property in January. Luckily, they did not. It appears to me, that they simply looked at the date when I changed the address on my NIF to a Portugal address from my US address.
To Wallvester about NHR: YES! yes yes yes. You nailed the details and, we hope we understand correctly, you did NHR all on your own. You have made our day. Hoping everyone reads your post and maybe you should 'save' it to re-use when the torrent of misinformation begins again in about 1 month.
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