MARK
[ 00:00:00 ] Hey Portugal Junkies, it's Mark here. Your favourite Brit was not able to participate in this podcast and I think the effects were dire since Meredith had some technical challenges with audio and you'll hear them. Please don't fault us, we thought it would still be better to get you the info that you've been asking for about taxes in Portugal. Oh, and don't forget, the discussions in this podcast should not be mistaken for financial advice, at least from Meredith and me because we are definitely not financial advisors. Cheers for now.
MEREDITH
[ 00:00:32 ] Welcome back, Portugal Junkies. We have such an amazing episode and it's about a topic that everybody's asking about when we say, 'Hey, what do you want to talk about on the podcast?' Nine times out of 10, it's people asking questions about this amazing and energizing topic of taxes. And so we thought we would do actually a series of podcasts about this topic because it's impossible to give you information that would encompass everything you need to know in just one. And so we have invited our own Portuguese tax advisor, Rui Borges. Did I get it right?
RUI
[ 00:01:18 ] Perfect.
MEREDITH
[ 00:01:21 ] I got it right. I was practicing his name a couple of times before we recorded. But Rui, thank you. Thank you so much for joining us. And you guys will hear Rui a number of times on future podcasts because he's going to be coming back for a series of these on taxes and the impact and what you need to be thinking about and planning for, etc. So welcome, Rui. I'm so thankful.
RUI
[ 00:01:46 ] Well, thank you. Thank you for this opportunity and also for the privilege that is being part of your podcast. And it's a huge challenge and be part of it. It's great for me also.
MEREDITH
[ 00:02:05 ] We are very excited to have you on. And it's been our plan all of this time to start to have guests on the podcast, especially about topics like this, that there's no way I'm going to be able to tell people what to do. That's why we have people like you. And your background is 20 years of experience. You are a Portuguese speaker. CPA and the CEO and founder of GoalSeek. And you have a background in economics. You hold a master's degree in business administration. That's pretty impressive. And GoalSeek conducted 250 consulting sessions and filed taxes for over 320 clients last year, which I think you told me earlier that tax season just wrapped up. So you must be pretty tired right now.
RUI
[ 00:02:58 ] Well, it's always a tough season, but we survived. I love it. And one of the general information that we can start sharing is that the tax season in Portugal is from April 1st until June 30th.
MEREDITH
[ 00:03:16 ] And we've got like six or seven questions that we fielded from others that are listening to the podcast. And so, like I said, I feel like today is really about like the basics. So the first question is, will I pay taxes in Portugal if I already pay them in the United States?
RUI
[ 00:03:36 ] Well, the base idea is that as long as you are a tax resident in Portugal and to become tax resident, you need to spend in Portugal more than 183 days. This is the general rule. There are also some others. There are general conditions, but the general rule is as long as you have a residence permit in Portugal and also you spend here more than 183 days, you are required to file your worldwide income in Portugal and also be taxed in Portugal. What the countries have to mitigate the double taxation is the double taxation. You need an authorization agreement or treaties and with that there are the base rules for how each type of income can be treated in terms of taxes. One good example is interests. If you receive interests from U. S., you may be required to pay taxes here in Portugal, but you will also pay in U.S. But not the double, it's not the double taxation, it's just Portugal will tax you in in part or in part of of your income, and the US will tax you on the other part, and there are some limits also. But each case is one case, in terms of a double tax treaty isn't it? Only two countries in the entire world that has a double taxation situation in the US and like one other, no no no, this is this is a general uh even when you don't have this this double taxation uh agreement, uh there are if the country belongs to OECD and they also have a general rule for non-double taxation so but it's quite common every country with Portugal and Canada, u. s and canada so it's each country has a double taxation agreement and basically they are they are similar and we have special treaties with sweden for instance because sometimes they don't agree with the way we tax in the city the the new residents and they change the agreement but they don't agree with the way we tax the new residents and they change the agreement but they don't agree with the way we tax the new residents and they change the agreement but there are always some law to support the way the portuguese tax authorities tax the new citizens so a question came in from a listener i've heard they've discontinued the nhr tax benefit recently how will that affect me if i decide to retire in portugal and is this even worth exploring anymore now that It's eliminated, well it's true that the traditional non-habitual resident status is coming to an end. However, um still in 2024 if you can grant your residence permit here in Portugal and you become tax resident in Portugal and you can prove somehow that you initiate the process still in 2023 and there are some conditions you can still apply um and be accepted under the old non-habitual resident regime. The main implications is that instead of being exempt from any taxes in Portugal for foreign-sourced income, you may be required to pay taxes here in Portugal in some cases we have flat rates of 28 percent for Instance, one of the examples is, uh, interests again, um, are taxed in Portugal with 28 flat rate. And but uh, and the the pension, the the pension in is is taxed with progressive tax rates. One of the myth that the the people used to to say about Portuguese taxes when they see the brackets, they they look at the highest level and the highest level is 48 percent, yeah they will think well this is crazy I will not pay 48 of my income so what we have in Portugal is a progressive tax rate system. This means that each bracket of your income will apply to a different tax rate. And for higher um, we perform a simulation for imagine that you have 18 80 000 euros of income in one year so the the the tax rate that will apply is 35 percent so because because of this tax rate progressive system um and well finally you may pay about twenty thousand um euros for for this eighty eighty thousand uh of course it's a lot uh but in some cases you can also detect part of this in in your tax return in in u . So, it's it's it's a matter of analyzing uh each case, it's a situation.
MEREDITH
[ 00:09:35 ] Do you think that we have any kind of answer for someone who may have been interested um because they saw the tax break right, they saw that that was in place, it's working well, yeah, because e part of todas estas tablas por situations no longer in place, that's obviously going to impact the amount of income um that someone coming over here and retiring like. What do you think? What is your response to that? Do you feel like um financially, it still makes sense for someone, especially coming from the U. S., well, is that too general?
RUI
[ 00:10:12 ] Yeah, yeah, but my my understanding, and what clients most of the time share with us is that the cost of living in U. S. it's really high, and in most one of the big expenses that a citizen in U.S. s face is with health care and health care is really cheap here in portugal even if you go to a private hospital it's nothing comparing with you with with you and the public health care system is also really it's not perfect but for important disease they are well prepared so the cost of living is something that you should you should not keep thinking as a u . s citizen because the cost of living the real estate it's increasing a lot it's true but even even even you know increase even with the higher values it's still a competitive price and the food the grocery the utilities are really cheaper than u .
MEREDITH
[ 00:11:36 ] s in general i like that perspective so much because um you know it's the holistic picture that people i feel like need to look at um and again i've often said on the podcast that you know it's the holistic picture that people i feel like need to look at um and again i've that you know it's the holistic picture that people i feel like need to look at um and again i've that you know i feel like need to look at um and again i've been talking about this for like 10 years and but i think this её the causal RIGHT that you know it's the holistic picture that you know it's the holistic picture that people i feel like we've become people with we've become it's the opposite you know there's a much more we've become people with a much more i feel like everyone's facing that unstoppable How about us? I missed the boat. I missed out on NHR. I guess I'm throwing that plan out the window. But the way that you just positioned that to me, it makes a lot of sense because I have experienced what the difference of the cost of living is here and the holistic experience that you're getting. And again, this all goes back to whatever somebody is wanting in retirement or in moving here even before they're retired and what the cost of that is in comparison. And so it kind of offsets something like, oh, I've missed out on the tax break, right? Like that's the real high-level 10,000 foot view to me of what they should be thinking about. And I also say and reiterate again that everybody's situation is going to be different. And that's why working with someone individually and strategically thinking about how is best to manage the tax implications. It's so important and on both sides, right? Someone like you in Portugal and working with someone who is familiar with international tax situations in America as well. Because if I remember correctly, you have to file in the US first and then file typically in Portugal, right?
RUI
[ 00:13:39 ] Yeah. It depends where you will request the tax credit because typically what happens is you are taxed. In one of the countries. And then you can ask tax credit. So, in case, for instance, the NHRs, they have a flat rate of 10% here for private pensions or social security pensions. So they cannot offset anything or they cannot request any tax credit from you. The taxes they pay in the US, they will pay 10% point. Yeah. Yeah. So they can use the tax amount they pay here in Portugal to request tax credit in the US. On these situations, we used to recommend, well, file first in Portugal and then you can enter in the US because you will request this tax credit. Of course, there are other ways to do it because you can on next year when you are filing, you can inform in the US the amount that you paid here in Portugal. Okay. But still about the NHR, the good news are there was a change in the government of Portugal. We had a socialist party. And right now we have a democratic, social democratic party in power. And they are bringing back the NHR, but not in the same, with the same conditions. According to the information that we have that is not a lot. And the idea is that it will give benefits most for digital known models for the eight visas for these, you may keep having some benefits. For for pensions, probably this will not be available anymore.
MEREDITH
[ 00:15:43 ] Projected in HR, you were just referencing have to do with certain.
RUI
[ 00:15:48 ] um industries yes types of jobs that would be or would be filled by someone coming here on a d8 or i feel like i read something where it was very specific about certain industries that someone might be working in to attract that kind of talent to portugal is that right uh correct the point is uh the socialist party who was in power until end of the last year what they did they they cancel this nhr and they present an alternative for these startups and for this innovation areas however the point was they approved the law but they never present details about how we can apply we are still using the the old nhr and this is the only way to apply for any any tax benefit in portugal right now as we have now a new party in in power um they they will not continue this this this this transition or this new nhr more linked with innovation and with this with these startups they will bring a new innovation over and ein more uh oriented to to this uh dates we we have some clients they are just wondering about uh what would be the next step in waiting for for this for for news and to to be sure they they do not um they do not commit any mistake on a date and this might be a little bit we've talked about it a little bit with what
MEREDITH
[ 00:17:39 ] You just said on a D8 visa, if I'm doing contract work remotely for a U. S. company, what are those tax liabilities in Portugal? Is that the progressive scale that you were were referencing earlier?
RUI
[ 00:17:55 ] Yes, but important thing according to the Portuguese tax law, uh, you cannot be an employee from Portugal to a U. S. company so the U.S. s company must have a kind of representative here in portugal must pay social security for you and must withhold some taxes from you monthly and be be a tax representative of the company but so but there is an alternative you can use what we call eor employer employer of record this means that it's a kind of company in portugal established in established in portugal and they resell your service they are your employer here in portugal and they resell your they they invoice your cost to the company if you are under the d8 program you will end with a high value activity and this d8 may may still have these benefits next next years for with this new nhr and if you are under these high value activities you may face a 20 20 flat rate of taxes what what is interest um and um one alternative is to be a self-employed or to register here and as a self-employed there are important or relevant incentives to be a contractor or a service provider from Portugal and because you are not taxed for your full amount of income, you are taxed only in 75 percent under what we call a simplified regime, and you have some incentives on the very first and second year. And so it's uh it's interesting to explore this this this possibility as well.
MEREDITH
[ 00:20:11 ] It sounds like that's what we were talking about too-where it's like once you get established here and you decide that you want to build some sort of business here, there's definitely tax incentives to doing that as a self-employed situation in Portugal. Cool yeah absolutely so far I'm following you, I hope everybody is taxed too. Me, I'm like, it's like the worst time of year for me when it's tax season and we're trying to do our taxes in the U.S. I can't you add on the level of Portugal now I'm like so, thank you. Um, how does social security tax if it's if it exists work in Portugal? So first of all there was a question about the idea of social security in Portugal and if you pay social security to both countries, can you get social security benefits from both when you're retired?
RUI
[ 00:21:01 ] Uh, well, there are also agreements between the countries in terms of social security. So, typically, you will receive in proportion with a pro-rata based on the amount that you make in contributions from one country to the other or in the other, in terms of pension. What you can expect has benefit here in Portugal if you have... First, I think it's important to understand social security contributions are only linked with yours with salary and with service provided. This means that imagine that you have a rental income or interests or pass any other passive income, you don't need to to to pay any social security contribution. The only social security only applies for this for this independent self-employed and salaries... What in Portugal the social security covers is any disability that that you have. You might have illness, maternity leaves, also the pension. And one important thing that is not really linked with social security and for many expats it's not common: healthcare system is not linked with social security. You can use the healthcare system without having any contribution for social security; they are completely different things.
MEREDITH
[ 00:22:42 ] What is the process for filing tax returns as a U. A citizen who has moved to Portugal, is it an online process? Do you recommend a tax accountant, of course. What are the deadlines? I think we talked about that a little bit, but can your visa be affected if you don't stay committed to Portugal currently on taxes?
RUI
[ 00:23:02 ] Yeah, I will start with your last question: yes, it can be affected so you should during the year and you should follow the and the rules of your country, the country where you are a new resident. The following the filing period is from April 1st until June 30. um it's not an easy process uh typically we we receive some clients they use turbo tax from us or they do their own taxes here in portugal our recommendation is to use the service of an accountant because they they will um they will find um if you've you have a good one they will find the the best way to file and to reduce the taxes that you will pay because we have some we have some liberty or some some possibilities when filing we can for some for some income we can use progressive tax rates or we can use flat rate we can if we inform that taxes were paid in u . You may be exempt if you do not inform. You will pay taxes here in Portugal, if you do, with someone with an accountant. The other advantage is that when you receive the the taxes to pay, they can look at it in a critical way and they can request some some some explanations from the tax authorities. We have some clients work for us that have to pay taxes in Portugal because uh some of the things uh, is that there are some things in the work podcast right?
MEREDITH
[ 00:25:29 ] And you're listening because you have at least considered potentially moving abroad or moving abroad to Portugal this is definitely something that you don't want to mess with. Right, you need to know up front what the implications are and I think you also need to have someone that you're building a relationship with that helps you not only through the process of getting here but once you get here understanding how to make sure that we are abiding by the rules of the country. I mean we do a lot of discussion about this on the pod about assimilation and we're, you know, not being here To change anything right, not like you could change the tax tax regime but it's also respect you know for me it's like don't you're You're not here to try to get around something. You want to work with someone who will best help you do what you need to do tax-wise legally, but also benefit you as much as possible. And I think that that's a form of respect for the country that you're living in. I think it's so important that you get a handful of people that are more knowledgeable about this stuff than you as your team. And that's exactly how I feel about you for us. And I'm glad to share you with everyone. And I'm just so happy that you were able to come on the podcast for today. I know this was a very basic and maybe not even. I mean, now as I get into it, I mean, it got a little complicated already. And I think that that just shows that we'll do a series. We will have you back, Hui. And we'll keep digging into these more complicated questions. About taxes, because I think that they could be ongoing for a while, especially with people that are new to the podcast or new to this idea of even thinking about moving. So I would ask one more question, and I think it's very important. So what are the services that you can provide and how do people reach you? Because that's really part of what we wanted to share with people today is we personally, have worked with Hui. So we have that relationship. This is not some random person that we're throwing on the podcast. And so we feel very comfortable connecting people to you. And so what is the best way? What is the best way for them to find you and start their own individual conversation with you?
RUI
[ 00:28:13 ] Well, our first contact typically is a consulting session. And this. Is what we mostly do during the during the year. Then we support people who want to establish as a self-employed service provider from Portugal. We take care of the full process, taxes, Social Security, and we file also VAT for the clients. And then we have the taxes and we are focused in individual taxes. We don't work with company taxes and and we used to say that we sell technical information, technical services, but we we also sell peace of mind. They are peace of mind with their taxes in Portugal. The best way to contact us is we have a website www . goalseek . pt. www . There you can find a button where you can contact us and we are pretty easy to be reachable and we are something is not sometimes common in Portugal. You send an email and you wait maybe two, three days with us. You receive an email. We have a rule in three hours. Our client must receive an answer, even if it's just well, we don't know. We will contact you later, but we try always to be in contact with the client because sometimes they are in panic. They just need to someone to say, 'Well, be calm, that we will find a solution.'
MEREDITH
[ 00:30:06 ] Well, thank you so, so much. This is the again, the first of many that I'm sure we are going to have. I hope so. And I'm very excited because we get to share you because I'm just I'm really, really happy that we have. Developed such a friendship and I just I just trust you and I'm I'm just excited that you're helping us to kind of get this information out to people and hopefully in a consumable way. I mean, and we can again, I'm going to make a call to the the podcast listeners: that if you have follow-up questions for who we or us or need a clarification for the next series, right? The next part in the tax series that we're going to do together again, message, email on the social media, whatever you however you want to reach out to us, but send us the questions, we'll collect them. And that gives us the opportunity to really answer the questions that the listeners really want to know. So, yeah, of course, you guys for listening. Thank you for joining. And I'm sure you guys will definitely hear him on the podcast soon. Thank you guys so much. Talk to you. Later. Listen up, future expats for more content about our move, the visa process, Portuguese culture and destinations and tons of support resources for your own decisions and potential move abroad. Follow us on Instagram and TikTok at Portugal Junkies.
SPEAKER_3
[ 00:31:38 ] Stay in touch and help us reach more people by subscribing here and following us there.
MEREDITH
[ 00:31:43 ] Cheers, y'all.