Expert financial advice Keep up to date with our Finance expert, chartered accountant Ricardo Chaves from All Finance Matters.
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Readers Q&A
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. I am a Portuguese tax resident, but still registered as a tax resident in Sweden. Is this legal and can I be tax resident in both jurisdictions? If I want to have medical insurance in Portugal, what is required? Normally you should only be tax resident in a single country, however for various reasons there are situations where you can remain as residents in both jurisdictions. Obviously in this case you need to be very careful when submitting your yearly tax declarations. As a tax resident you will be required to submit your worldwide income in both jurisdictions. It is recommended that you speak with an accountant, to make sure that you do not pay tax twice on the same income. With reference to medical insurance, as you have the NIF with the Portuguese address, and the EU residency certificate (CRUE) you can register with the SNS (National Health System) and get the “Utente Number”. This registration made online or on your nearest Health Centre, will give you access to the Portuguese National Health System. If you also require having medical insurance to use in other countries, it will be needed to register with the social security in Portugal and obtain the S1 form from Sweden in order to transfer the international medical cover from Sweden to Portugal. If, however what you need is to have private medical cover, you will only require the Portuguese NIF to contract with a Portuguese insurance company. My daughter, who holds dual Portuguese and British nationality, has been living permanently in the UK. She has nothing in Portugal, not even a bank account. Because of Brexit does she legally need to currently appoint a Fiscal Representative and if not, what could be the consequences? Yes, anyone that lives outside the EU, needs to appoint a fiscal representative in Portugal. Theoretically she does not need one, because she has no tax affairs, neither any assets in Portugal that would pay tax, so the tax authorities not even need to contact her. But the law still requires appointing the fiscal representative and the consequences of not doing so, could result in a fine. Fines for not appointing the fiscal representative
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range from 75€ to 7.500€. Recently the tax authorities have determined that all holders of the Portuguese NIF that live outside the EU, should appoint a fiscal representative no later than 30-06-2022. I moved to Portugal in March 2020, but due to the lockdown I was only able to get my affairs in order with the Portuguese tax authorities in June 2020 and now have just realised that I was only classed as tax resident since that date. This means that as an NHR I will pay 10% on my pension for the next 10 years, instead of 0%. Can you help me to rectify this situation? In fact, all those that registered as tax residents after 31-03-2020, will be taxed at 10% on their pension income. To rectify this and change your address retrospectively, we would need some evidence that you were here prior to that date. The evidence could be an EU residency certificate, a rental contract, or the deed from a property purchase. If you do not have any of these, the tax authorities will not accept the change of the address retrospectively. If you have signed a promissory contract prior to 31-032020, this will only be valid if you have paid the IMT (property transfer tax) and the stamp duty, also prior to the cutoff date. This is normally only due prior to the deed, but if paid before, it means that the promissory contract becomes effective from that date and therefore could be used for this purpose. We moved from the UK to Tavira and want to take advantage of the NHR status, opening a Portuguese company to provide consultancy services to the UK and USA. What taxes and social security payments can we expect?
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If you are the director and the owner of the company and have more than 75% of the business, if the activity is listed as a professional activity, it falls under the Fiscal Transparency. Under the Fiscal Transparency the company does not pay corporate tax, apart from autonomous taxes. All the profits are taxed in the hands of the directors and as he has NHR, the tax rate on the profit can be taxed at the special rate of 20%, providing the activity is listed on the eligible NHR occupations. This means that the profits belong to the partner/ director and there are no dividends to withdraw. If the director does not draw dividends, the company will be owing him, as he already paid PIT on these profits, so they belong to him. Theoretically it means that on an estimated income of 100.000€, you will be paying 20.000€ tax. As the tax year in Portugal is the same as the civil year and the corporate tax is due normally in May, it means that your tax bill will be issued in May of the year following your billing. With reference to the social security charges, please note that all directors are supposed to have a salary or at least to contribute to the social security, under the minimum wage. However, as you are both retired and pensioners, providing you can arrange the P1 form from your country, we can apply for the exemption of social security contributions in Portugal. Otherwise, if not exempt, the year liability would be in the region of 3.235€ per director. Please feel free to send us the questions you may have to helpdesk@allfinance.pt. We will select some of these to be published.
“All those that registered as tax residents after 31-03-2020, will be taxed at 10% on their pension income. To rectify this and change your address retrospectively, we would need some evidence that you were here prior to that date. The evidence could be an EU residency certificate, a rental contract, or the deed from a property purchase”.
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