Following the signing of this agreement, the window of opportunity to achieve compliance closes before it is too late. If a foreign financial institution reports your information to the United States and you are audited or investigated before you have the opportunity to comply with the regulations, the penalties can be very high. Reach more than 100% of the value of your foreign account. In addition, there is a tax treaty between the United States and Portugal that ensures that you are not taxed twice or other worrisome situations. There will also be more information about this in this article. In addition, there are often credits that can be very helpful in determining your total tax liability if you qualify. *Whether or not a country has entered into a FATCA agreement does not affect whether you, as an individual or company, are required to report your accounts abroad. Simplified scheme: undertakings with a total turnover of less than EUR 149 639,37 in the previous year; and (b) have not chosen to be valued in accordance with the above-mentioned general regime, are subject to the simplified tax regime. Under this scheme, taxable income is calculated as follows: – 20 % of turnover from the sale of goods; more – 70% of gross income from other sources Portuguese residents are subject to the taxation of their worldwide income at progressive marginal tax rates, and certain types of income are taxed at flat rates (between 10 and 28%), and non-residents are subject to Portuguese tax on their Portuguese income at the applicable rates (between 10 and 28%), depending on the type of income earned. A double taxation convention may provide for a derogation from these provisions.
Global capital gains realized by resident companies are included in taxable income and are taxed at a flat rate of 26.5%. The result is the difference between the proceeds of sale and the acquisition cost, which can be updated using official inflation coefficients. If the proceeds of the sale are reinvested in other fixed assets, 50% of the realized profit (less associated losses) is excluded from tax. For this purpose, reinvestments made during the previous year, the sales year and the following two years are taken into account. The rules for taxing interest follow the same general rules as dividends. For example, if a person from Portugal is a resident of the United States, the United States may tax it on interest income. Similarly, if the company paying the interest is a Portuguese company, Portugal can also tax it – but the interest rate is limited to 10%. For example, if Martha is originally from Portugal and moves to the United States and receives interest income from a Portuguese company, the United States may tax her on interest income. Payments between resident companies are generally subject to withholding tax.
Rates range from 15% to 25%. If payments are made by residents to non-residents, the tax rate may be reduced if there is a double taxation agreement. The FATCA 8/2015 agreement was signed specifically for Portugal. In addition to the Portuguese national regulations that provide for relief from international double taxation, Portugal has concluded double taxation treaties with more than 70 countries/jurisdictions in order to avoid double taxation and allow cooperation between Portugal and foreign tax authorities in the application of their respective tax laws. There is no minimum threshold/number of days that exempts the employee from the obligation to file and pay taxes in Portugal with respect to Portuguese working days. However, the application of a double taxation agreement may stipulate that the employee has no obligation to register if he spends less than 183 days in Portugal and his income is not paid or credited to a Portuguese entity on the basis of European Union (EU) rules and bilateral social security agreements. For business travelers with an extended duration, an exemption from social security contributions may apply. The payment of dividends between companies established in Portugal is totally exempt from participation if the beneficiary of the dividends is a company that has held at least 10% of the share capital of the distributing company for a period of at least one year. If these conditions are not met, 50% of the dividend amount is excluded from tax (i.e. only 50% of the dividend amount is subject to tax). Capital gains – Capital gains resulting from the sale of the principal residence of a natural person are exempt from tax if the proceeds are used to acquire another permanent residence in Portuguese territory.
Only 50% of the profits from the sale of real estate are taxable. Capital gains from the sale of real estate are taxable at a rate of 10%. Capital gains on shares are excluded from tax if they are held for more than 12 months (the exclusion does not apply if more than 50% of the company`s assets are in the form of real estate in Portugal). This is a very important aspect of tax treaties – the difference in the use of the term can and should. Article 6 refers to the fact that income from immovable property may be taxed in the other State. In other words, a person can be subject to tax in both countries – although the double taxation aspect of the treaty would prevent double taxation. Other contracts use the word should and usually clarify it with the word “only”, as in should only be taxable in the country. Gains from the sale of shares by qualified holding companies (SGPS) are not subject to tax. However, capital losses resulting from the sale of shares, as well as interest on loans used to purchase shares, are not deductible for CRI purposes at the SGPS level. As mentioned above, residents of Portugal are required to pay taxes on world income, while non-residents are only taxed on income from Portugal. There are three different VAT rates (for transactions considered to have been made in mainland Portugal): Download one of our free tax guides for US expats for an in-depth look at the Portuguese tax issues that may affect you the most! Residence – A natural person resides if they reside in Portugal for 183 days or more in a calendar year or if they have a residential dwelling that is a permanent residence on December 31 of a given calendar year. Social security contributions – The employee contributes 11% of the gross monthly salary and employers pay 23.75%.
A different regulation applies to the members of the Board of Directors. If the company paying the interest is based in Portugal, the company can also tax it – but this is limited to 10% (Martha should be able to apply foreign tax credits paid in the United States to offset the tax on the interest it pays in Portugal) On the contrary, a person is required to report gross income as well as expenses in an Appendix E. . . .