Portugal Competitive Tax System for Foreign Investors
As a person who tends to apply for Portugal residency by investment, you may require a piece of information about tax scheme of this country.
Portugal is one of the quietest countries in the world and the EU with a high quality of life for its residents. Investing in Portugal can be one of the best business decisions you will ever make for the economy is improving consecutively annually.
One of the factors that helps us know better a country`s economy, is its tax system. To learn better about Portugal’s tax system, we might need to know its basis first.
Portuguese tax calendar
The Portuguese tax year ends exactly by the end of the year which means on 31st December.
In case you are moving to Portugal, you need to register as a tax payer before doing any financial activities. Once you register, you will receive your tax identification number.
As a tax resident in Portugal, you have to pay your annual taxes before April 1st, which means if you earn an income from the beginning of the year 2020 until the end of it, the deadline to pay your tax is until June 30th of 2021.
Not paying your taxes on time, may cost you a lot of penalties. This amount varies from 200 euros to 2,500 euros. Late payment penalties can range from 10% of the money you owed, to double the total amount.
However, any special circumstances for not paying the tax, will be considered by the government.
Are you considered as a Portuguese tax resident?
The easiest way to answer this question is to count the days of your residency in Portugal. If you stay more than 183 days in Portugal in a year, you will be considered as Portuguese tax resident.
However, there are other factors which make you a Portuguese tax resident such as:
- Having permanent residence in Portugal on December 31st on that tax year,
- If the head of household is a tax resident,
- If you are part of a crew on a ship, yacht or aircraft which belongs to Portuguese entity,
- If you work for Portuguese state, in spite of your country.
Non-habitual tax regime in Portugal
Portuguese government is making a lot of efforts to attract professionals and foreign investors to this country. One of the actions they have been taking, was implementing NHR regime since 2009.
Investors who first acquire their residency through Portuguese golden visa, are already eligible for non-habitual tax regime.
An important feature relating to this regime, is Portuguese tax treaties. Portugal has a lot of double taxation agreements with many countries, therefore, you do not need to pay taxes twice. It means the income which is received overseas is not taxed in Portugal and you will only be imposed in the source country.
Advantages of being a non-habitual tax resident
You will receive a lot of benefits from being a non-habitual tax resident. The most important ones are:
- Benefit from your income tax treatment in the first 10 years,
- Some exemptions on foreign source income,
- A flat tax rate of 20% on your Portuguese income,
- No minimum stay needed,
- No inheritance taxes,
- No wealth taxes.
Overall taxes in 2020 in Portugal
The lowest tax rate in Portugal starts from 14.5% and it goes up to 48%. If your income is between 0 to 7,091 euros, you will be imposed at a tax rate of 14.5% and if your income is over 80,640 euros annually, you are taxed at a rate of 48% which is the highest.
Generally, Portugal will provide you a lot of tax benefits as an investor in this country and you can enjoy the low tax rate and good exemptions.
CBF`s high experienced specialists can help you achieve your Portugal residency by investment(GOLDEN VISA) and provide you more information on Portuguese tax scheme. To get started, please contact one of our advisors in UAE, Denmark or Canada.
If you have any questions about obtaining Portugal Residency through investment, please comment below.