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. 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 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% in Portugal, or have a method of exemption, rather than under the usual progressive tax rates. Purpose of the legislation This legislation has been introduced to promote investment by encouraging taxpayers to relocate to Portugal. Its aim is to attract those with talent in high value added activities, as well as high net worth individuals and their families to Portugal, and it is particularly attractive to those who want to retire in the sun! 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, 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 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. Taxation Under this legislation, there is an option for income generated in Portugal from the value added activities described in the section below to be taxed at a flat rate of 20%. This is applicable to both salaries and self-employed income earned in Portugal from these value added activities. However, it is not a requirement to have a value added activity in order to obtain this special status. The residente não habitual taxpayer has a choice as to how other income from outside of Portugal is taxed, as follows: 1. Method of exemption: or As long as salary income is being taxed in another country, the option to exempt this income from Portuguese taxation can be selected, and so the income would only be taxed abroad. For self-employed income from value added activities, as well as dividends, interest, rental income and capital gains, provided such income could have been taxed under an existing Double Taxation Treaty or could have been taxed in another non-blacklisted jurisdiction in accordance with the provisions of the OECD, then this income can be exempted from Portuguese tax. As long as pensions are subject to tax under an existing Double Taxation Treaty or are not considered to be generated in Portuguese territory, these would not be taxed in Portugal.

3 2. Method of credit all worldwide income (with the exception of salary and selfemployed income generated in Portugal from valued added activities which is taxed at 20%) will be taxed under the normal IRS regime using the progressive tax rates and credits will be given for any tax paid abroad in accordance with Portugal s double taxation treaties. All other income paid by Portuguese entities or by other countries not meeting the criteria above would be taxed under the normal regime in Portugal. 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. 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 residentes não habituais will need to be completed. On this annex, the taxpayer will choose whether they want to be taxed according to the method of exemption or the method of credit. Activities that qualify as value added to be taxed at 20% in Portugal The following activities 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

4 Ophthalmologists Orthopedists Otolaryngologists Pediatricians Radiologists Other specialist medics University professors Psychologists 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 Investors, administrators and managers of companies benefiting from tax relief contracts in Portugal Senior personnel of companies If a person s Portuguese income is related to one of these activities within one of the sectors stated above, then this income can be isolated and taxed at a flat rate of 20%. This applies to income generated in the capacity of being an employee, self-employed or company shareholder.

5 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. 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 a high value added activity in Portugal on a self-employed basis Copy of the employment contract, if the taxpayer is to operate a high value added activity through a company as an employee Proof of value-added activity to be carried out and estimated annual earnings, if applicable. 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. 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 2013 tax year should do so within the 2013 tax year or by 31 March 2014 at the latest. After this date, the application will not be approved. The deadlines for submitting tax returns are 30 April 2014 for Phase 1 and 31 May 2014 for Phase 2. Further 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)