Fiscal law for residentes não habituais

Transcription

1 Fiscal law for residentes não habituais Introduction This law, Decreto Lei n.º 249/2009, for the taxation of residentes não habituais came into effect on 1 January It was approved by Parliament and published on 23 September It was supplemented by Portaria n.º 12/2010 dated 7 January 2010 which defined the approved activities which can benefit from this new legislation. Instructions were provided to the Finanças on 6 May 2010 via Circular 2º/2010 in relation to the application of this law in practice. Lei 64-B/2011 and Lei 20/2012 have amended the legislation concerning the taxation of residentes não habituais. Updated instructions were provided to the Finanças on 3 August 2012 via Circular 9º/2012. This law gives newcomers to Portugal the opportunity to be taxed in a manner different from other residents of Portugal if their earnings relate to certain scientific, artistic or technical activities carried out in Portugal and abroad. The law has also been extended to investors, managers and administrators of companies which add value to Portugal s economy. Such newcomers will have the opportunity to apply for the residente não habitual status in Portugal. This means that a person is resident in Portugal and thus has an obligation to report his earnings and pay his taxes here, as is the case for all other residents of Portugal. However, specific categories of income will attract the option to be taxed at a flat rate of 20%, rather than under the usual progressive tax rates. Purpose of the legislation This legislation has been introduced to promote investment in Portugal by encouraging qualified persons with know-how to relocate to Portugal, and thus bring new economic projects to Portugal. Such persons will provide added value to the economy in Portugal by working in Portugal, whether it be on a project basis or not, within their field of expertise.

2 Who qualify? A person would need to meet one of the following criteria in order to obtain the status of being residente não habitual : 1. It is applicable to newcomers to Portugal with specialist know-how related to one of the activities detailed in the following section, i.e. when a person first obtains their resident fiscal number, an application can be made to be classed as residente não habitual. Under this option, a person would have no prior history of being a tax resident in Portugal. 2. If a person already has a fiscal number as a non-resident in Portugal, then when that person becomes a resident in Portugal, they can apply to be a residente não habitual. However, that person must not have submitted tax returns in Portugal as a tax resident in any of the preceding 5 years. 3. Unfortunately, this option is not available to existing residents in Portugal who have a history of submitting tax returns in Portugal. The application is valid for 10 years, with 2010 being the first year that a person could apply for this status and thus use it in their 2010 tax return. There was, however, an exception for those who became resident between September and December 2009, they could also apply for this special status. Should a person leave Portugal for a period of time and thus become non-resident in Portugal, then that person would not lose this status of being residente não habitual. On their return to Portugal, they can recover this residente não habitual status for the remainder of the 10 year period. Activities that qualify The sectors that qualify under this new legislation are: Industry Tourism Services related to IT Agriculture Investigation and development Production, news and information technologies Natural energy and environment Telecommunications

3 The following activities within these sectors qualify for this option: Architects Engineers Geologists Artists of theatre, ballet, cinema, radio and television Singers Sculptors Musicians Painters Auditors Fiscal consultants Dentists Medical analysts Surgeons Naval doctors General practitioners Physiotherapists Gastroenterologists Ophthalmologists Orthopedists Otolaryngologists Pediatricians Radiologists Other specialist medics University professors Physiologists Archeologist Biologists and specialists in life sciences Computer programmers Consulting and other activities related to information technology Management and operation of IT equipment Activities related to information services Data processing, hosting and other related activities, including WEB portals Activities related to news agencies Scientific research and development Research and development in relation to natural and physical sciences Biotechnology research and development Designers

4 Investors, administrators, senior managers and managing directors of companies involved in the sectors detailed above If a person s income is related to one of these activities within one of the sectors stated above, then this income can be isolated and treated differently from income under the usual fiscal laws, which is taxed at progressive tax rates. This applies to income generated in the capacity of being an employee, self-employed or company shareholder. Taxation Under this legislation, there is an option for income from the activities described above to be taxed at a flat rate of 20%. The residente não habitual taxpayer has a choice as to how their income is taxed, as follows: 1. All worldwide income generated from applying their know-how to approved activities set out above (category A income which is from employment and category B income from self-employment) can be isolated and taxed at a flat rate of 20%. This means, for example, that a person could live and work in Portugal, thus applying their know-how in Portugal, whilst still owning a company in the UK, from which they generate income related to applying this know-how. All this income can be taxed at a flat rate of 20%. All other income including bank interest from outside of Portugal, dividends, pension, capital gains, rental income and any other earnings will be taxed under the normal IRS regime using the progressive tax rates; or 2. Alternatively, only income generated in Portugal from applying their know-how to approved activities will be taxed at a flat rate of 20%. Any income earned overseas from applying their know how can either a) be taxed under the normal IRS regime using the progressive tax rates (along with other income, such as interest, dividends, pension, capital gains, rental income and any other earnings) and credits given for any tax paid abroad, or b) declared, but not taxed, in Portugal and thus tax is only paid in the overseas country in which the income was generated. All other income including bank interest from outside of Portugal, dividends, pension, capital gains, rental income and any other earnings will still be taxed under the normal IRS regime using the progressive tax rates. It is recommend that prior to choosing an option, tax simulations are prepared under both scenarios to determine which is the most favourable tax option.

5 The residente não habitual taxpayer will submit their tax return under Phase 1 or Phase 2 (depending on their categories of income), completing the usual annexes. In addition, Annex L which relates to know-how income will need to be completed. The know-how income will be split into the following categories: Income obtained in Portuguese territory, identifying whether the taxpayer was an employee, self-employed on the simplified or general system or a shareholder of a company. Income obtained from countries outside of Portugal. On this annex, the taxpayer will choose whether they want the overseas income from knowhow to be isolated and taxed at 20% or whether it is to be added to any other income such as dividends, interest, pension and capital gains and taxed under the normal IRS procedure, with credits for tax paid abroad given. How to apply for this status Although the law was effective from 1 January 2010, anyone who became resident from September 2009 onwards (when the Decreto Lei 249/2009 was published) could apply for this residente não habitual status. There is no specific form to complete to apply for this status, as the request will be specific to the individual taxpayer. The application has to be made in writing in a letter format, detailing the activity to be carried out and the capacity in which the taxpayer will operate. The letter will also need to enclose the following information: Copy of residency certificate Copy of passport Copy of fiscal number Copy of the Início de Actividade, if the taxpayer is to operate on a self-employed basis Copy of the employment contract, if the taxpayer is to operate through a company as an employee Summary of value added activity to be carried and estimated annual earnings Declaration from the taxpayer that he has not been a resident in Portugal within the previous 5 years. If the tax office has any reason to doubt this declaration, they can ask for a certificate/letter from the tax authority of the country(ies) in which he has been living confirming that he has been resident there for the last 5 years, or proof tax submissions for the previous 5 years in the last country(ies) in which he resided Confirmation of not submitting tax returns as a resident in Portugal during the previous 5 tax years.

6 The application has to be processed and approved by the Central office in Lisbon. If the application is successful, the central office will change the status of the taxpayer to residente não habitual on their online system. The taxpayer can, therefore, log-on to the Finanças website to see what their approved status is. Those wishing to apply for the 2012 tax year should do so within the 2012 tax year or by 31 March 2013 at the latest. After this date, the application may not be approved. The deadlines for submitting tax returns are 30 April 2013 for Phase 1 and 31 May 2013 for Phase 2. Further information This is the information that we have available to date. We enclose a copy of the documents that have been issued in Portuguese to the individual Finanças offices for your information. If you have any questions or would like us to make an application for this status on your behalf, please do not hesitate to contact Georgete Klisiaris on (+351)