Finance
QUESTIONS & ANSWERS
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Each month, Ricardo Chaves of All Finance Matters gives an insight into the legalities governing tax and general financial matters
ach 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. If you also have some questions regarding tax in Portugal, please feel free to send it to us. Q I am a French citizen with a Portuguese NIF (Tax number) and I currently live in Switzerland. I own a property in Tavira, which I rent for tourists. What are the tax implications? I heard that I only pay tax after a certain level of income, is this correct? What about the VAT? If you rent your property to tourists, you need to have a rental license. For this, is necessary that you are registered at the tax office as a sole trader. The effective tax rate as sole trader, in the simplified regime, for a non-resident Property Owner will be 8.75%, for apartments and villas and 3.75% for hostels, etc. As a non-resident there is no threshold for this tax (IRS), so you will pay 8.75% of your gross income, even if you only have 1.000¤ of rentals. The only threshold that exists is for VAT. If you are registered as a sole trader, the threshold for VAT for 2020 is 11.000¤ and this will increase to 12.500¤ in 2021. See below how the VAT threshold works: - If you were a sole trader registered before 01-01-2020 and VAT exempt in January 2020, you will have a VAT threshold of 12.500 in 2020 - If however you are registering now you will have a threshold in 2020 of 11.000¤, which will be calculated pro-rata considering the number of months (if registered in July, the threshold will be 11.000/12 months X 6 months = 5.500). Q I am a Non-Habitual Resident since 2017 and recently I read that the NHR pensions will start to be taxed since 01-04-2020. Does this mean that my pension will start to be taxed in Portugal from now on? No, your pension will carry on being tax exempt. There was a change in the Non-Habitual Residency scheme, but this only affects the pensions of those that obtained residency after the 1st of April 2020. Please note that if you are reading this and became resident prior to 01-04-2020, you can still apply for the NHR scheme, under the old rules. The same applies to those that bought or rented a property in Portugal before the 1st of April and are not yet Residents, as it may be possible to backdate your NHR application, to avoid the new 10% tax on pension. Q I am 67 years old and just sold my property in
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Portugal. This was my primary habitation and I sold it for the value of 300,000 euros. This house was purchased in 2014 for 220,000 euros and I had a mortgage to buy it. The debt to the bank at time of sale was 30,000 euros. How much do I need to reinvest, to avoid paying taxes in Portugal. First in order to make sure that this was your primary habitation, you need to check if the address of the house is the address registered at the Portuguese tax office. If this is not the case, you should change it at least 6 months prior to the sale. If you noticed this to late, please be aware that the change of address in some cases can be done retrospectively. In terms of the amount to reinvest, it works like this: 300.000¤ - 30.000¤ = 270.000¤ So, it’s the proceedings of the sale, minus the mortgage redeemed at the time of deed. The mortgage is only considered if taken prior to 2015 and for the purpose of purchasing the asset. Q I am currently moving from Sweden to Portugal and would like to become Non-Habitual Resident. Can you please let me know what will be the taxation on my salary, as I will need continue working in Sweden as a public teacher? Salaries and other income arising from governmental employment shall be taxed only in the country of origin. This means that as a Non-Habitual Resident, you will have to declare this income in Portugal, but will not be liable for any tax; the tax should only be paid in Sweden. Q For many years I rented my property in Albufeira for tourists. Last year I decided to move to Portugal and sold that property to buy a bigger one. My accountant has informed me that because the property was on Local Lodging, I cannot use the new property as reinvestment. Can you help? In fact, when the activity is registered at the tax office, the property is assumed to have been transferred to your Alojamento Local Business. This is a rule and means that although the property is still in your name, it is not on the personal sphere, but on the business sphere. So, if the sale occurs when the property is in the business, there is no possibility of reinvestment, as this is only allowed if the property is the permanent address of the taxpayer. However, there are two issues to be considered in this case: Provided that the assumptions referred to in article 34 of the VAT Code are met, a taxpayer may cease his activity retrospectively, by submitting a declaration of termination which, due to being delivered after the deadline provided for in article 33 of the same code, will be subject to the respective fine. The IRS Code does not (yet) determine the number of
August 2020
