FINANCE Finance news from Ricardo Chaves.

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Keep up to date with our Finance expert, chartered accountant Ricardo Chaves from All Finance Matters. Readers Q&A

Each month we receive different questions from our readers, although some of these questions are related to specific situations, sometimes the answer may help you to better understand the tax system in Portugal and answer the queries from other readers.

QWe probably have to move back to

Switzerland at the end of this year. We will keep the house, the apartment, the boat and the car. Is that possible for a nonresident?

There is no problem in having those assets in Portugal, while being a non-resident. Once you are ready to move, you need to change your address at the tax office. If the new address does not belong to the EU, then you are obliged to appoint a fiscal representative. The tax bills referring to the properties (IMI council tax) will be sent to the address registered at the tax office or to the address of your fiscal representative. Please note that the vehicle tax and boat tax are not issued automatically. You need to issue theses taxes each year at the tax office (currently closed due to Covid) or at the tax portal. To make it easier and assure that you don’t miss the payment deadline, we advise to appoint a fiscal representative who will take care of that on your behalf. Please note that if you decide to move during the year, you will still need to submit the IRS tax declaration for the months that you were resident (from 1st of January 2021 untill date of departure). The IRS will need to be submitted from 1st of April 2022 to 30th of June 2022.

QI am currently considering moving

back to the UK. What are the consequences about the taxes we will pay in Portugal, what are the consequences if we want to sell our house when we are not resident, what are the other administrative consequences?

If you decide to move back to the UK, you need to change your address at the tax office and appoint a fiscal representative. The fiscal representative can be an individual or a company resident in Portugal. In terms of capital gain taxes when selling your property, you will be liable for tax on the full gain at 28%. If you were to sell while you were resident and only change the address after the sale, you would normally pay a lot less tax. In fact the capital gain tax for residents, is only levied on half of the gain, at the progressive tax rates. So even if you make a big gain and pay the maximum tax rate, as this is levied on half of the gain, it is less than 28%.

QI am a Portuguese resident and

currently self-employed as I teach some yoga classes. I will start working for a real estate company next month as an independent consultant. Can I just open a second activity as self-employed? What is the limit for the IRS and social security payments? Would it be worth registering a company just for this activity?

I suggest that you start as self-employed and then when things progress and you become more successful, you set up the company. The reason is that there are costs associated with the company set up, also the accountancy fees are higher and as a director of the company you are obliged to pay social security each month. You can add that activity code to your selfemployment register at the tax office and continue working as you have been doing with your yoga activity. As you may be aware, there’s a social security exemption but just for the first twelve months of activity. The social security payments are assessed each quarter based on the declaration you need to submit each quarter. Depending on your income, you may pay the minimum of 20€ per month or an average of up to 15% of your gross income for the quarter. In terms of VAT, please note that the threshold is very low, only 12.500€ per year and this is from the combined income of all selfemployment activities. Therefore, if you start earning commissions as a real estate and surpass this threshold then all your income, including the yoga classes, will start to charge VAT from February of following year. This is because you will only change your VAT status in January of next year, and not during the year when you surpass the 12.500€ threshold. Obviously, this means that you will need to start paying VAT on your sales, but will also start deducting VAT on your purchases. It also means that you may need to employ an accountant to deal with your VAT declarations. Finally, in terms of IRS threshold, this is not an easy concept, but we will try to give you some examples depending on your income. For instance, for a single person, unmarried and with no children, if you invoice 6.000€ per year, your IRS liability can be as much as 625€. However as you have tax allowances you will pay no tax in most cases. If for instance you invoice 12.499€, in the same circumstances, your tax liability can be in the region of 1.500€. Again as you may have tax deductions, such as medical expenses and others, you can a lower amount of tax. For the tax deductions, it is essential that you ask for the relevant invoices with your fiscal number and register them at the tax portal, in the adequate sections, before February 15th of each year.

If you own a property and this is deemed as your main residency, you may apply for exemption on Q We moved from the UK to Tavira in March. We have NHR, what are the IMI (Council the tax benefits available if I own a property, as I Tax). Depending am planning to purchase one within the next few on your income months. If you own a property and and on the tax this is deemed as your main valuation of residency, you may apply for exemption on the IMI the property, (Council Tax). Depending on your income and on the you may tax valuation of the property, you may have a 3-year have a 3-year exemption. Besides this, the other exemption. exemption can be the capital gain taxes when you sell. However, this is only applicable in case the house you purchase is used only as your main residency and when you sell it, you will need reinvest the full proceedings of the sale, into another main residency, anywhere in the EU. Please feel free to send us the questions you may have to helpdesk@allfinance.pt. We will select some of these to be published.