Swedish parliament to revoke its double tax treaty with Portugal

By Dennis Swing Greene, in Business · 14-05-2021 01:00:00 · 3 Comments

The proposal that the Government of Sweden sent to parliament to denounce the convention to avoid double taxation (CDT) with Portugal will be voted on 02 June.

At the origin of this initiative is the fact that until now, Portugal has failed to ratify the protocol to the agreement signed by the two countries in May 2019.

Under the tutelage of Magdalena Andersson, the Swedish government decided to present a bill to parliament proposing the termination of the double tax treaty, informing the Portuguese executive that it could be reversed if Portugal ratifies the protocol amending the treaty before parliament votes on the diploma.

The protocol was signed in 2017 by the finance ministers of Portugal and Sweden introducing amendments to the convention to avoid double taxation between the two countries, namely with regard to the taxation of pensions of Swedes allowing migrants to benefit from full IRS exemption on retirement who have moved to Portugal and are covered by the Non-Habitual Resident (RNH) tax regime.

In practical terms and if ratified by both countries, this protocol will give back to Sweden the right to assess pensions as of January 1, 2023 - or in January 2022 in relation to pensioners residing in Portugal and with pensions paid by Sweden under the RNH regime who do not opt for the flat 10% IRS rate created in the 2020 Portuguese State Budget (OE2020).

In the absence of ratification by Portugal, the Swedish Government intends to renounce the treaty to avoid double taxation. Sweden could begin to tax the pensions of its citizens residing in Portugal as of 01 January 2022.

Without commenting on the 10% rate for pensions that are embraced by the NHR regime (which is optional since beneficiaries can choose to keep the exemption until the 10 years that the programme grants), the pension tax within the scope of the NHR does not contain any progressive element, contrary to what happens with the general regime in force in Portugal for the taxation of this type of income.

The difference between the Non-Habitual Resident programme and the general taxation in Portugal means that the NHR is a special regime, specifically targeting to attract Swedish retirees coming to Portugal to take advantage of this tax benefit. Swedish government sources stress that, under these circumstances, Sweden is not willing to give up its taxation rights guaranteed under Swedish legislation. The standard tax rate that Sweden applies on pensions is 25%. For the Swedish Ministry of Finance, tax treaties should aim to avoid double taxation, not provide an opportunity for tax planning”.

Dennis Swing Greene is Chairman and International Fiscal Consultant for euroFINESCO s.a. www.eurofinesco.com



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Comments:

There are many Swedish pensioners with low pensions, remember that prices for food and housing are also much higher in Sweden. It is wrong for the Swedish state to tax pensioners who have chosen to settle in another country, if they no longer live in their home country and do not use medical care or other community services, then tax should not be paid either in Sweden. It is not thr super rich Swedes who are affected by this, but it is pensioners with normal incomes, people who buy villas in the Algarve for 2 million euros or more do not care about pension income at all. The truth is the Swedish state has run out of money and is now chasing ordinary people to finance mass immigration.

By Magnus from Other on 20-05-2021 11:41

Speaking with some expats in my region, it seems countries that accept retirees tax exempt are in decline, from what the gossip says (please don't quote me) Cyprus was doing this, accepting foreign retirees who could bring their retirement tax free, this has now stopped, Portugal gave many French this option, 10 years tax free, all this is comming to an end, many French will leave Portugal in the near future along with many English, the demographics of Portugal will change as it was the foreigners who poured lots of money into this country to make it what it is, what will the outcome be in the future, let's wait and see. As a footnote, if you know how much some of these foreign pensions are i can agree with taxing them, many foreign pensions are maybe 4 times the wages locals get, I'd like to see a chart of European pensions, my mother gets €180 per month , how much do the French get, paying a small tax to reap the benefits of being in this country is well worth it or as they say, go elsewhere.

By João Martins from Algarve on 15-05-2021 12:56

Portugal please ratifie the protocol.
So we postpone this bad situation with one year

By Gustav from Algarve on 14-05-2021 02:02
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