No entertainment value here; however, they both play out dramatic effects on our financial lives. Not movie-worthy: true, but to let it play out without following the script, we are at peril of losing. Creating an environment that promotes tax compliance wisely from the earliest stages is essential to improve tax compliance and reduce cost.
Tax can be an immediate event (withheld at source) or planned (capital gains tax) and the net outcome may have a serious effect on the bottom line. Combined with low interest rates which suggest that, in real terms, any capital lodged with the bank is being eroded in real terms.
In the case of receiving a nominal rate of bank interest, Portugal levies a flat rate of tax of 28% and, where interest is generated outside of Portugal, it will be reported under the Common Reporting Standard to the Portuguese authorities simply by sharing your tax identification (fiscal) number. This 28% rate applies to all earnings from capital, be it bank interest, share dividends or even capital gains.
You should report your worldwide interest and gains, wisely and without fear. When you have income outside of Portugal, you have to consider withholding taxes and the effect of double tax or bilateral tax treaties, whether you remit the income or not. Don’t forget capital gains tax!
A myriad of complex rules apply with options, either to have the tax deferred to a time when capital gains tax rates may be lower or become mitigated completely, all in a compliant fashion to boot.
Pensions and life policies follow in the next article (or production, if we are approaching with the same analogy). These types of mainstream investment vehicles provide a long-term tax compliant shelter for nearly all earnings from capital and when set up correctly, defer any personal assessment until such time that you need to draw income, capital or even loans in your own name. An excellent way to plan your tax liabilities come what may, and still recognised under life and pension regulation whilst at the same time adhering to the Common Reporting Standard.
Getting it right from the start could mean far less trouble down the line, providing a sensible implementation, acknowledging that it is not a one solution fits all approach. For you the taxpayer, it is now time to meet these obligations and gather your information to report your 2016 IRS. Your tax adviser should be in a position to understand where you can save tax wisely and report compliantly.
Your financial adviser’s involvement raises awareness, focusing on long term tax planning, exploring and taking measures to try and ensure your financial stability.
All statements concerning tax treatment and their benefits are based upon our understanding of current tax law and practices both of which are subject to change in the future. Levels and bases of reliefs from taxation are also subject to change. This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action.

Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises clients on private financial matters in both the UK and throughout Europe under the MiFID regulation. Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000. Raoul has a weekly radio feature (Raoul’s Rant) on the Owen Gee Solid Gold Sunday morning show on KissFM Algarve.