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Discussion Starter · #1 · (Edited)
Dear Portugal experts,

I'm a young working man, heavily playing with the thought of buying a holiday home in Portugal. Therefore I have two questions:

1) When I retire (probably in around 30 years), there is a good chance, that I would want to permanently move to Portugal. With this step, I would involuntarily become a tax resident in Portugal. Will then the portuguese taxman force me to declare the assets I own in my home country (like property, bank accounts, etc) ? See Modelo 720 in Spain :-( The killer-law of privacy

2) If I then rent out my apartment in my home country, where will I have to pay the tax on rental income ? In my home country (10%) or in Portugal (23%?) ?

3) If I decide then to sell my apartment, would I have to pay capital gains tax in Portugal, bearing in mind that in my home country, I wouldn't have to pay such a tax (because I am holding the property for longer than 5 years). And how much will it be ? If I bought it for ~30 000 EUR, now it's worth around 60 000 and in 30 more years it might be worth over 100 000 EUR ? Do I have to pay tax on 70 000 EUR income ??? Sounds quite ridiculous...

Many thanks!
 

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1) You declare worldwide income, not assets.

2) Usually, you first pay tax in the country where the property is located and then again in Portugal. You may be able to get an allowance against the tax already paid, so you pay the higher rate overall spread between the two countries.

3) Much as answer 2, so tax would be due in Portugal on the gain. There may be indexation allowances available that would reduce the taxable gain.
 

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I know that you are, sensibly, considering Portugal, but should you consider Spain at some point in the future, please be aware that the Spanish Modelo 920 mandates all financial residents to declare their worldwide assets (over a certain amount) on pain of VAST fines if not complied with.
 

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Discussion Starter · #4 ·
1) You declare worldwide income, not assets.

2) Usually, you first pay tax in the country where the property is located and then again in Portugal. You may be able to get an allowance against the tax already paid, so you pay the higher rate overall spread between the two countries.

3) Much as answer 2, so tax would be due in Portugal on the gain. There may be indexation allowances available that would reduce the taxable gain.
Many thanks, Richard! A quick, clear and straight-forward answer! I am not questioning anything you said, it sounds perfectly competent, however:

1) Thanks, I'm perfectly fine with that!

2) This is what I was afraid of, and what makes me quite anxious. My current understanding was, that this scenario should be prevented by double taxation treaties. I was hoping, that one country can't force you to pay a tax, which you have already paid in another country. Of course, I would first pay the tax in my home country. Then, I was hoping to be able to tell the portuguese taxman, that I've already paid this tax and they should leave me alone.
From your answer, I understand, that I would only have to split the tax between 2 countries, but finally, I am ending up with paying the higher rate anyway, so that's pretty screwed up and might be quite the only reason to make me chose another country, instead of Portugal :-/ Please kindly advise. I was hoping for a more favorable situation...

3) Yes, understood. However, is it possible to find a way around it ? I thought of the following: If I would ever decide to sell my apartment in my home country, I could leave Portugal and go back home for 6 months. This should make me again a tax resident of my home country. Then I could make the sell, pay no tax for it, as I won't be due to any tax for this transaction in my home country. Then I could move back to Portugal. Would that work, please ?

Many many thanks in advance!
 

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If you don't want to pay taxes in two countries, don't earn income or gains that are taxable in two countries. I would suggest that it might be easiest to sell your property in your 'home' country before you move to Portugal.
 

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Discussion Starter · #6 · (Edited)
Thanks, but that's a NO GO for me. Too many friends and advantages to leave behind...
I'd need some out-of-the-box thinking to solve this problem...

Also, as I mentioned... My plan is for a phased move. While I'll be working, I can go to
Portugal for maximum 2 months per year. When I retire, which will be in many many
years, from the current perspective, I'd probably be spending there something between
4 and 9 months per year. Thanks for you answers! I'm delighted about your aid and
support!
 

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1) You declare worldwide income, not assets.

2) Usually, you first pay tax in the country where the property is located and then again in Portugal. You may be able to get an allowance against the tax already paid, so you pay the higher rate overall spread between the two countries.

3) Much as answer 2, so tax would be due in Portugal on the gain. There may be indexation allowances available that would reduce the taxable gain.
Doesn't the NHR scheme cover this?

If no Portuguese income was involved in the original purchase, and the gain is taxable in the source country, then no tax should be payable in Portugal.
 

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Doesn't the NHR scheme cover this? ...
I'm not sure it does but there's no guarantee that the NHR scheme will still exist in 30 years time!


... If no Portuguese income was involved in the original purchase, and the gain is taxable in the source country, then no tax should be payable in Portugal.
Agreed, unless you're a Portuguese (tax-)resident at the time of sale in which case it becomes a Portuguese gain and therefore subject to Portuguese tax too.
 

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Agreed, unless you're a Portuguese (tax-)resident at the time of sale in which case it becomes a Portuguese gain and therefore subject to Portuguese tax too.
I think that's a "Eurocentric" view.
EU capital gains are taxable (not covered bt NHR) in Portugal for Portuguese tax residents because they are not taxed by the source country in accordance with EU law. Capital gains from non EU countries that are subject to tax in the country of origin, are covered by NHR and therefore not taxable in Portugal.
 

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I think that's a "Eurocentric" view.
EU capital gains are taxable (not covered bt NHR) in Portugal for Portuguese tax residents because they are not taxed by the source country in accordance with EU law. Capital gains from non EU countries that are subject to tax in the country of origin, are covered by NHR and therefore not taxable in Portugal.
I am not aware of any distinction being made between a capital gain being made in any EU country and everywhere else worldwide. Portugal taxes its tax-residents on worldwide income (& gains etc).

Normally, only gains on real estate will (also) be taxed in a country other than that of tax-residence.

A Portuguese tax-resident making a capital gain on real estate located in, say, the UK will be liable to capital gains taxation in the UK first (under UK rules) and then Portugal second (under Portuguese rules) and vice versa.

Income and capital taxes are a matter for the individual countries not for the EU.

The realisation of profit on overseas real estate by a Portuguese tax-resident is still (imho) considered to have been obtained on Portuguese territory, as per Art. 18., n. 1 of the CIRS of the Personal Income Tax (IRS) Code, because of tax-residency in Portugal.
 
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