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Investment Taxation for Expats in Portugal

Submitted: July 2014

Taxable income in this category includes:

 

Interest

For a resident, interest income in Portugal may be subject to withholding taxes, and must be reported with all your other savings income on your tax return. Any additional tax due will generally be taxed at the progressive tax rates. Exceptionally, residents may choose to have interest income from Portuguese bank deposits and bonds taxed at a flat rate of 28%. As a resident, you will also have to pay tax on interest received from other countries, and may be subject to withholding taxes in the country of origin. If the country of origin of the interest payments has a suitable tax treaty with Portugal, the amount of tax that can be charged by the country of origin is generally reduced to 10%. If the country of origin of the interest payments is covered by the EU Interest and Royalties Directive or the EU-Switzerland agreement the rate is reduced to 0%.

For a non-resident individual, interest income in Portugal is generally subject to a final withholding tax at a flat rate of 25%. However if the interest is sent to a country on Portugal’s blacklist of tax havens, the rate of withholding tax is 35%. Generally you will not have to pay Portuguese tax on interest from other countries, though you may be subject to withholding taxes in the country of origin. If the country of origin of the interest payments has a suitable tax treaty with Portugal, the amount of tax that can be charged by the country of origin is generally reduced to 10%. If the country of origin of the interest payments is covered by the EU Interest and Royalties Directive or the EU-Switzerland agreement the rate is reduced to 0%.

 

Rental income

For a residents and non-residents, rental income from Portuguese property is taxed at a flat rate of 28%, and must be reported on your annual tax return via the Declaraçao de Rendimentos Modelo 3. The taxable amount is calculated after deducting repair and maintenance expenses/costs from the gross rental income, producing the net rental income. As a resident, you will also have to pay tax on rental income from outside Portugal, and may be subject to withholding taxes in the country of origin.

 

Dividends

For a resident, dividend income in Portugal generally has final withholding tax of 28% deducted at source. It must be reported with all your other savings income on your tax return. Only 50% of the dividend amount paid by Portuguese companies is taxable under certain circumstances. You will also have to pay income tax on dividends received from other countries, and may be subject to withholding taxes in the country of origin. If the country of origin of dividend payments has a suitable tax treaty with Portugal, the amount of tax that can be charged by the country of origin is generally reduced to 15%.

For a non-resident, dividend income in Portugal has a final withholding tax of 25% deducted at source. However if dividends are sent to a country on Portugal’s blacklist of tax havens, the rate of withholding tax is 35%. You will not have to pay Portuguese tax on dividends from other countries; though you may be subject to withholding taxes in the country of origin. If the country of origin of the dividend payments has a suitable tax treaty with Portugal, the amount of tax that can be charged by the country of origin is generally reduced to 15%.   

 

Capital gains

For residents and non-residents, capital gains from Portuguese sources are taxed as ordinary income. The income must be reported on your tax return in a special schedule (Annex G) attached to your tax return. Certain capital gains are on taxable on a percentage of the gain, for instance only 50% of the gain from the sale of a property is taxable, and only 26.5% of the gain from the sale of shares. The sale of your home is exempt from tax provided the gain is reinvested within 36 months of the sale (or an amount equal to the gain was invested up to 24 months before the sale).

As a resident, you will also have to pay income tax on capital gains made in other countries.

 

 




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