Fact: British passport holders who are not resident in Portugal can now only spend 90 days in any 180 day period in the Schengen area and that includes Portugal. To stay longer implies a different approach to one’s tax situation and therefore should be assessed with careful consideration.
Sovereign’s previous articles in the Portugal News explained how British Nationals must now apply for Portuguese residency via a D7 Passive Income visa or a Golden Visa by investment. Sovereign Group has a concierge residency application service.
Fact: British Nationals can no longer get the town hall CRUE five-year certificate and must now apply for residency via one of the visa routes.
Fact: Many British nationals rushed to get their town hall CRUE residency five-year certificates before 31st December 2020 before Brexit in order to be able to stay in Portugal for longer. This certificate is for permanent residency, not, as many believe for being allowed to stay in Portugal temporarily. In requesting this certificate you are informing the authorities that you are a permanent resident of Portugal.
The certificate must be registered at the tax department within 60 days of issue to inform the tax department that the individual is now a resident, thus changing their status from non-resident to tax resident. Sovereign can update the tax department with your new status.
Fact: Portugal’s Non-Habitual Residency Scheme has attracted many individuals to take up residency in Portugal to take advantage of the 10 year favourable tax regime. Under this scheme pensions are taxed at 10% whilst many other sources of income can be exempt from taxation in Portugal.Sovereign provides the service to register your NHR status.
You cannot have been deemed a resident in the previous five years prior to the NHR application. If you have been wrongly registered as resident (see below) Sovereign can submit an appeal to the tax office to register you as non-resident, backdate the necessary five years, to enable you to apply for NHR status and be eligible for its benefits. However, you must be able to prove you were paying tax in another country and were tax resident there and have not actually have been living in Portugal.
Fact: As a resident of Portugal, you must declare your Worldwide income via a yearly tax return in Portugal.
This is not optional. Many British expats believe that they are tax compliant because they are paying their taxes in the UK. One cannot just opt to declare their pensions in the UK. They must be declared and tax assessed for payment in Portugal.
Sovereign can prepare and submit your tax returns and trigger the Double tax treaty with the UK to enable you to receive your pensions gross in the UK so that you can pay the tax in Portugal.
You might be wrongly registered as a tax resident!
Fact: If your IMI property tax bill is sent by the tax department to your Portugal property you are registered as a tax resident of Portugal. By registering your Portuguese residential address at the tax office, you are registering as a tax resident.
Prior to 2003 upon applying for a fiscal number individuals were automatically registered as tax resident in Portugal. This was because fiscal representation, which non-residents of the EU must have, did not exist in those days. In these times everyone was logged as resident and many people continue with this status without realizing the long-term implications. You should not remain wrongly registered as a resident as this can lead to notifications from the tax department for you to submit tax returns here and to declare your Worldwide income in Portugal. Sovereign can register as your fiscal representative to alter your status to non-resident.
Fact: The Portuguese tax department is sending out demands to people who are registered as tax resident who have not submitted a tax return in Portugal during the last four years. Sovereign has seen many individuals this year receive a demand from the Portuguese tax office for the submission of tax returns from 2017 – 2020. The tax department is either sending out this information because as a tax resident you have not submitted any tax returns here or because they have been informed of your income outside of Portugal and it must be declared here. They are giving you the opportunity to submit the returns before they are automatically processed. If completed automatically by the tax department, the fine for late submission is much higher than that issued for a voluntarily submitted return.
If you do not have NHR status you will be taxed at progressive rates of between 14.5% - 48% on your worldwide income even if you have already paid tax abroad.
Sovereign can prepare and submit an appeal against the submission if you are incorrectly registered or prepare and submit the return on your behalf if you are truly resident here.
Sovereign has seen many cases where individuals have, out of the blue, received tax bills from the Portuguese tax department demanding backdated tax be paid on their foreign income, including capital gains tax, tax on pensions, pension drawdowns, sale or increases in investments & dividends.
To summarise, it is important to ensure you are correctly registered in Portugal. Ignorance of the law is no excuse, and it is easy to fall foul of the tax department.
- If you have a CRUE certificate you must also be tax resident.
- If you are tax resident, you must declare your worldwide income here.
- If you are wrongly registered as tax resident get this changed to non-resident.
- Do not ignore tax department notifications. Most give you just 15 days to respond.
The Sovereign Group first established an office in the Algarve in 1999 specifically to meet the growing demand for fiscal assistance from foreign investors, residents and retirees. As well as assisting and guiding clients through the complex application processes for Portugal’s popular non-habitual resident (NHR), ‘Golden Visa’ and D7 Visa schemes. Sovereign LDA provides continued support to corporate and individual clients that require ongoing fiscal representation and accounting services for the letting of their Portuguese properties and submission of income tax returns.
The Sovereign Group are trustees and pension providers with offices in 26 countries and offer a wide range of services https://www.sovereigngroup.com/about-sovereign/our-history/
Whatever your fiscal query, contact us on firstname.lastname@example.org or telephone (+351) 282340480.