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0% income tax in Portugal for Non Habitual Resident after 2020

anotherone

anotherone

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Feb 14, 2020
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#1
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I have found a Wikipedia page stating that after 2020, holders of the portuguese NHR status will pay no income tax if they get their money from capital income, trusts, IP, Business of professional income, Employment income, Busioness or professional income from High added values activities.
According to the table of wikipedia. Only pensioners will lose their 0% income tax advantage since they will have to pay 10% income tax.
So, according to this table, it means that someone with a Cyprus company could live in Portugal without paying taxes for 10 years.

Can someone confirm?

Non-Habitual Resident - Wikipedia



Types of IncomeTaxation in Portugal on Income of national SourceTaxation in Portugal on Income from Foreign Source until 2020Taxation in Portugal on Income from Foreign Source after 2020Taxation In Portugal on Income from Blacklisted Jurisdictions
PensionsUp to 48%0%10%0%
Employment Income from High-Added Value Activities20%0%0%0%
Employment IncomeUp to 48%0%0%
Business or Professional Income from High-Added Value Activities20%0%0%0%
Business of Professional IncomeUp to 48%0%0%Up to 48%
Intellectual or Industrial Property Income16,5% or 28%0%0%16,5% or 28%
Capital Income28%0%0%35%
Rental Income25%0%0%25%
Capital Gains (Shares)28%0%0%28%
Capital Gains (Real Estate)14,5% - 28%0%0%14,5% - 28%
Trusts28%0%0%35%
 
#2
Whats the point in a program that lasts only 10 years? It is to me a clear tax trap. After 10 years Portugal will financially rape you. Then you need to consider what enhancement will have been made to EU Exit Taxation already in place within that 10 years. You could find yourself trapped and paying a lot more than you expected or EU rules rendering the program useless.

We discussed some of this below:

https://www.offshorecorptalk.com/threads/madeira-free-trade-zone-portugal.28889/
 
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#3
anotherone said:
I have found a Wikipedia page stating that after 2020, holders of the portuguese NHR status will pay no income tax if they get their money from capital income, trusts, IP, Business of professional income, Employment income, Busioness or professional income from High added values activities.
According to the table of wikipedia. Only pensioners will lose their 0% income tax advantage since they will have to pay 10% income tax.
So, according to this table, it means that someone with a Cyprus company could live in Portugal without paying taxes for 10 years.

Can someone confirm?

Non-Habitual Resident - Wikipedia



Types of IncomeTaxation in Portugal on Income of national SourceTaxation in Portugal on Income from Foreign Source until 2020Taxation in Portugal on Income from Foreign Source after 2020Taxation In Portugal on Income from Blacklisted Jurisdictions
PensionsUp to 48%0%10%0%
Employment Income from High-Added Value Activities20%0%0%0%
Employment IncomeUp to 48%0%0%
Business or Professional Income from High-Added Value Activities20%0%0%0%
Business of Professional IncomeUp to 48%0%0%Up to 48%
Intellectual or Industrial Property Income16,5% or 28%0%0%16,5% or 28%
Capital Income28%0%0%35%
Rental Income25%0%0%25%
Capital Gains (Shares)28%0%0%28%
Capital Gains (Real Estate)14,5% - 28%0%0%14,5% - 28%
Trusts28%0%0%35%
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CFC / Foreign Sourced is the keyword. The NHR program is the strictest when it comes to this of all of them. Your solution would not fly your income would be considered national sourced as your a*s is on the ground in PT. NHR only flies legally with real passive income. No your offshore is no real passive income.

Also PT has an extensive list of blacklisted countries. Couple years ago when i checked i think Malta was on there and maybe Cyprus too.
 
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#4
anotherone: that is my current idea as well. trade stocks and flip houses through cyprian company, tax free, and live under NHR in Portugal, Malaysia(MM2H) or Georgia(residence via investment). They all are territorial tax systems, with the portugal being only temporary(10y).

As for taxation, Portugal will tax the income if it has not been taxed in the source country. But since Cyprian companies are equity based and they distribute dividends instead of profits, which should be taxed through personal income, i think this is possible. But I am still looking up info, as you can see from the topics I am creating here :D

One issue I see right now is that if the director of the Cyprian company is not Cyprian tax resident, the company is NOT considered Cyprian tax resident company either and so it will tax only income sourced from Cyprus, but not global income. So if the trading would be considered foreing income to Cyprus, I think I as the director living in Portugal, for example, would have to tax it somehow...but I do not have enough information right now on any of this. There might be a bypass through UAE which has double taxation treaty with portugal since 2011. but that is getting too complicated for me so I am hoping it will work with just cyprus.

in the end, it is all about living in, or being tax resident of, a country with territorial tax system and doing business in the coutry where the type of business you do is tax exempt.

ps: there is always the possibility of doing business in tax exempt country and withdraw profit only when needed, tax them locally and use them for the purposes you withdrew them, but the rest of the profits are safe in the company. no need to take them out in order to be taxed.
 
#6
it is certainly not great, but it is more about where do you want to actually live? i could live in cyprus and pay under 3% for healthcare from my capital gains income and be done with taxes and everything else but even though i have not been there yet, cyprus just does not attract me as a place i would want to live in. as i am in eu, residency n portugal is not an issue, it is just about the territorial tax regime under their NHS program that interests me. otherwise i would not be tax resident there and hence could not live there more than half a year.

...heck, i pay 0% taxes where i live right now, in freaking eu, it's not like it is imposible but as i have said, it is more about where do you actually want to live. anyone can go and live in tax heaven but who actually wants to live there? not many. so some kind of compromise has to be made.
 
#7
glengoolie said:
it is certainly not great, but it is more about where do you want to actually live? i could live in cyprus and pay under 3% for healthcare from my capital gains income and be done with taxes and everything else but even though i have not been there yet, cyprus just does not attract me as a place i would want to live in. as i am in eu, residency n portugal is not an issue, it is just about the territorial tax regime under their NHS program that interests me. otherwise i would not be tax resident there and hence could not live there more than half a year.

...heck, i pay 0% taxes where i live right now, in freaking eu, it's not like it is imposible but as i have said, it is more about where do you actually want to live. anyone can go and live in tax heaven but who actually wants to live there? not many. so some kind of compromise has to be made.
Click to expand...
There are other option in Europe if you have money. Gibraltar, Monaco, Andorra
 
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#8
glengoolie said:
it is certainly not great, but it is more about where do you want to actually live? i could live in cyprus and pay under 3% for healthcare from my capital gains income and be done with taxes and everything else but even though i have not been there yet, cyprus just does not attract me as a place i would want to live in. as i am in eu, residency n portugal is not an issue, it is just about the territorial tax regime under their NHS program that interests me. otherwise i would not be tax resident there and hence could not live there more than half a year.

...heck, i pay 0% taxes where i live right now, in freaking eu, it's not like it is imposible but as i have said, it is more about where do you actually want to live. anyone can go and live in tax heaven but who actually wants to live there? not many. so some kind of compromise has to be made.
Click to expand...
In which country you pay 0% ?
 
#10
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#11
glengoolie said:
doing some research, the 0% tax on foreign income is complete bs. yes, you can have some exepmtion on very specific type of oncome but in reality you won't. the entire thing is literally a scam. this is good overview, hard to actually find any good ones on the entire internet:
https://www.portugalglobal.pt/en/investinportugal/fiscalsystem/paginas/personalincometaxirs.aspx
So far, 0% CGT, a real 0%, is possible only in Cyprus as individual, not via company.
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0% CGT in Cyprus also for active trading of forex, stocks and futures ?
 
#12
stocks yes, forex no. futures no.

The term “Securities” is defined as shares, bonds, debentures, founders’ shares and other securities of companies or other legal persons, incorporated in Cyprus or abroad and options thereon. Two Circulars have been issued by the Tax Department clarifying that the term also includes among others, options on Securities, short positions on Securities, futures/ forwards on Securities, swaps on Securities, depositary receipts on Securities (ADRs, GDRs), rights of claim on bonds and debentures (rights on interest of these instruments are not included), index participations only if they result on Securities, repurchase agreements or Repos on Securities, units in open-ended or closedended collective investment schemes. The redemption of participation or share in an open or closed-ended collective investment scheme constitutes a disposal of Securities.
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source: https://www2.deloitte.com/content/dam/Deloitte/cy/Documents/tax/CY_Tax-Facts-2020EN_Noexp.pdf

although you might have to pay for healthcare, 2,65% on income up to 180k so that is 397,5€ a month. i am still unsure about this if you are a stock investor, like i am. because capital gains is exempt from income taxation, therefore your taxable income is 0.
 
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#13
here: Cyprus GHS
they list Income earners (e.g. rent, interest, dividends) so I would assume that your untaxed income will be subject to this tax.

so if you are doing well, 400€ a month for health insurance, which does not cover you outside of Cyprus, is pretty high, in my opinion. As you can see in the link, they just moved it in 2020 from 1.7% to 2.65%, from 255€ a month to almost 400€ a month.
 
#14
although it just occurred to me that you can simply purchase stocks at the end of the year from all your profits from that year, which will make your income effectively 0 so you would pay 0 on the health insurance.
 
#15
I agree with @Konstanz. I have contacts lawyers in Portugal and they told me there nothing such as the 0% NHS in Portugal, it is more like a vague legislative loophole. This means that you may settle in Portugal thinking that you will never pay a dime and then, after several years you may be forced to pay taxes in Portugal. I think that Portugal is a major tax trap. Anyways, Portuguese have changed the law and retired people have to officially pay 10% income tax
 
#16
anotherone said:
I have found a Wikipedia page stating that after 2020, holders of the portuguese NHR status will pay no income tax if they get their money from capital income, trusts, IP, Business of professional income, Employment income, Busioness or professional income from High added values activities.
According to the table of wikipedia. Only pensioners will lose their 0% income tax advantage since they will have to pay 10% income tax.
So, according to this table, it means that someone with a Cyprus company could live in Portugal without paying taxes for 10 years.

Can someone confirm?

Non-Habitual Resident - Wikipedia



Types of IncomeTaxation in Portugal on Income of national SourceTaxation in Portugal on Income from Foreign Source until 2020Taxation in Portugal on Income from Foreign Source after 2020Taxation In Portugal on Income from Blacklisted Jurisdictions
PensionsUp to 48%0%10%0%
Employment Income from High-Added Value Activities20%0%0%0%
Employment IncomeUp to 48%0%0%
Business or Professional Income from High-Added Value Activities20%0%0%0%
Business of Professional IncomeUp to 48%0%0%Up to 48%
Intellectual or Industrial Property Income16,5% or 28%0%0%16,5% or 28%
Capital Income28%0%0%35%
Rental Income25%0%0%25%
Capital Gains (Shares)28%0%0%28%
Capital Gains (Real Estate)14,5% - 28%0%0%14,5% - 28%
Trusts28%0%0%35%48
Click to expand...
48% pension tax! ouch I really hate this financial system
 
#17
tl;dr Portugal's NHR is truly only for people with passive income. Retirees and investors that have their affairs set up with complete autonomy without any need for their input. So it's not a scam but it is tailored to very specific group of people.

Active people will get screwed, for sure. But I don't think Portugal is actually hiding it or anything like that. I think the program just got misunderstood through bad PR.

And tue to pressure from UK, the simply had to pose tax on pensioners so UK would not be bleeding out retirees and their hard earn money for free.
 
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