The Truth About The US Portugal Tax Treaty (You'll Wanna Hear This)

The idea of double taxation and this tax The idea of double taxation and this tax treaty that the US and Portugal have is treaty that the US and Portugal have is treaty that the US and Portugal have is thrown out a lot. Let's talk about what thrown out a lot. Let's talk about what thrown out a lot. Let's talk about what that actually means. What is this double that actually means. What is this double that actually means. What is this double taxation treaty? taxation treaty? taxation treaty? >> Sure. Um yeah, so this is a document >> Sure. Um yeah, so this is a document >> Sure. Um yeah, so this is a document signed by the two countries to avoid signed by the two countries to avoid signed by the two countries to avoid people to paying tax twice on the same people to paying tax twice on the same people to paying tax twice on the same type of income. So that is the general type of income. So that is the general type of income. So that is the general idea. And many people do understand that idea. And many people do understand that idea. And many people do understand that because Portugal and the US signed this because Portugal and the US signed this because Portugal and the US signed this or any other country sign treaty with or any other country sign treaty with or any other country sign treaty with Portugal to avoid double tax double Portugal to avoid double tax double Portugal to avoid double tax double taxation. It means that they would not taxation. It means that they would not taxation. It means that they would not be liable to reporting income and paying be liable to reporting income and paying be liable to reporting income and paying income here income taxes here if their income here income taxes here if their income here income taxes here if their income is foreign source. That doesn't income is foreign source. That doesn't income is foreign source. That doesn't mean that at all. mean that at all. mean that at all. >> Okay. Good to clarify. >> Okay. Good to clarify. >> Okay. Good to clarify. >> This document is specifically state how >> This document is specifically state how >> This document is specifically state how every type of income should be taxed. every type of income should be taxed. every type of income should be taxed. Who has which country has the sole right Who has which country has the sole right Who has which country has the sole right of taxing uh which country has the first of taxing uh which country has the first of taxing uh which country has the first right of taxing or the second right of right of taxing or the second right of right of taxing or the second right of taxing. So that is That is what this taxing. So that is That is what this taxing. So that is That is what this document is. So basically for example document is. So basically for example document is. So basically for example one one example I can remember is one one example I can remember is one one example I can remember is capital gains from property.

capital gains from property. capital gains from property. >> Okay. >> Okay. >> Okay. >> So let's say we have property in the US. >> So let's say we have property in the US. >> So let's say we have property in the US. >> Mhm. >> Mhm. >> Mhm. >> So they generate if you sell the >> So they generate if you sell the >> So they generate if you sell the property, they will generate capital property, they will generate capital property, they will generate capital gains from property. gains from property. gains from property. >> Mhm. >> Mhm. >> Mhm. >> And but this if you are you are >> And but this if you are you are >> And but this if you are you are Portuguese tax resident, this gains are Portuguese tax resident, this gains are Portuguese tax resident, this gains are also liable to taxation here. also liable to taxation here. also liable to taxation here. >> Okay. >> Okay. >> Okay. >> So what you can do what you have to do >> So what you can do what you have to do >> So what you can do what you have to do is to balance the income tax credits is to balance the income tax credits is to balance the income tax credits between between the two jurisdictions between between the two jurisdictions between between the two jurisdictions and you are left with the highest. and you are left with the highest. and you are left with the highest. >> Okay. >> Okay. >> Okay. >> So that is the outcome you are looking >> So that is the outcome you are looking >> So that is the outcome you are looking for when you were using the treaty. You for when you were using the treaty. You for when you were using the treaty. You are not supposed to pay tax twice. You are not supposed to pay tax twice. You are not supposed to pay tax twice. You are supposed to be left with the highest are supposed to be left with the highest are supposed to be left with the highest uh liability between the countries. But uh liability between the countries. But uh liability between the countries. But one thing is very interesting on the US one thing is very interesting on the US one thing is very interesting on the US tax um treaty specifically is on the tax um treaty specifically is on the tax um treaty specifically is on the bottom of the document bottom of the document bottom of the document >> Uh-huh. >> Uh-huh. >> Uh-huh. >> um there is a disclaimer saying that the >> um there is a disclaimer saying that the >> um there is a disclaimer saying that the US reserves the right of tax to tax US reserves the right of tax to tax US reserves the right of tax to tax their citizens as if the treaty was their citizens as if the treaty was their citizens as if the treaty was never into force. never into force. never into force. >> So, what's the point? >> So, what's the point? >> So, what's the point? >> So, that's very funny. >> So, that's very funny. >> So, that's very funny. >> So, that is why you guys have to file >> So, that is why you guys have to file >> So, that is why you guys have to file taxes both in Portugal and the US.

taxes both in Portugal and the US. taxes both in Portugal and the US. >> Mhm. >> Mhm. >> Mhm. >> Because you are treated as a US tax >> Because you are treated as a US tax >> Because you are treated as a US tax resident as well. resident as well. resident as well. >> Right. Mhm. >> Right. Mhm. >> Right. Mhm. >> Yeah. This doesn't prevent you from >> Yeah. This doesn't prevent you from >> Yeah. This doesn't prevent you from using properly the the credits. using properly the the credits. using properly the the credits. >> Okay. >> Okay. >> Okay. >> It just It's just more paperwork. >> It just It's just more paperwork. >> It just It's just more paperwork. >> Okay. >> Okay. >> Okay. >> Basically. >> Basically. >> Basically. >> So, it's possible that if someone has >> So, it's possible that if someone has >> So, it's possible that if someone has been living here for a couple years, been living here for a couple years, been living here for a couple years, they kept their home in the US, now they kept their home in the US, now they kept their home in the US, now they've decided to sell it. they've decided to sell it. they've decided to sell it. They obviously have to claim it on both They obviously have to claim it on both They obviously have to claim it on both sides, and it's possible that they will sides, and it's possible that they will sides, and it's possible that they will be paying capital gains here in be paying capital gains here in be paying capital gains here in Portugal. Portugal. Portugal. >> Yes, there It is possible. >> Yes, there It is possible. >> Yes, there It is possible. >> [snorts] >> [snorts] >> [snorts] >> So, um I do know there is a big uh >> So, um I do know there is a big uh >> So, um I do know there is a big uh benefit uh in the US side for benefit uh in the US side for benefit uh in the US side for non-recognition of those gains if this non-recognition of those gains if this non-recognition of those gains if this was for a long time and the past you was for a long time and the past you was for a long time and the past you were primary home. were primary home. were primary home. >> Okay. >> Okay. >> Okay. >> Uh there's a set of criteria to do that, >> Uh there's a set of criteria to do that, >> Uh there's a set of criteria to do that, but if you if you are able to do that, but if you if you are able to do that, but if you if you are able to do that, you can if you were a single person, you you can if you were a single person, you you can if you were a single person, you can wave 250k from taxation if as a can wave 250k from taxation if as a can wave 250k from taxation if as a couple, you can double it. So, you can couple, you can double it. So, you can couple, you can double it. So, you can have a pass on the US side on that have a pass on the US side on that have a pass on the US side on that of that, but on the Portuguese side, the of that, but on the Portuguese side, the of that, but on the Portuguese side, the gains are liable to taxation.

gains are liable to taxation. gains are liable to taxation. >> Okay. >> Okay. >> Okay. >> You do have an exclusion of 50% that is >> You do have an exclusion of 50% that is >> You do have an exclusion of 50% that is included on the law for for everyone, included on the law for for everyone, included on the law for for everyone, but if you're not under NHR or if you but if you're not under NHR or if you but if you're not under NHR or if you see, see, see, >> Mhm. >> Mhm. >> Mhm. >> you will pay taxes on the progressive >> you will pay taxes on the progressive >> you will pay taxes on the progressive rates, but you will achieve exemption if rates, but you will achieve exemption if rates, but you will achieve exemption if you have one of those benefits. you have one of those benefits. you have one of those benefits. >> Okay. So, it's important to understand >> Okay. So, it's important to understand >> Okay. So, it's important to understand that the standard is you'll probably be that the standard is you'll probably be that the standard is you'll probably be paying, but there are some extensions paying, but there are some extensions paying, but there are some extensions that do exist. that do exist. that do exist. >> Yeah, there are reliefs as an NHR or if >> Yeah, there are reliefs as an NHR or if >> Yeah, there are reliefs as an NHR or if you see. you see. you see. >> Okay. Now, if someone has an income, if >> Okay. Now, if someone has an income, if >> Okay. Now, if someone has an income, if they're maybe like here on a remote they're maybe like here on a remote they're maybe like here on a remote worker job, what does that look like as worker job, what does that look like as worker job, what does that look like as far as the treaty? Like how can they in far as the treaty? Like how can they in far as the treaty? Like how can they in their mind be able to plan for taxes on their mind be able to plan for taxes on their mind be able to plan for taxes on both sides? both sides? both sides? >> It It depends on the nature of the >> It It depends on the nature of the >> It It depends on the nature of the income. Uh for example, one can be a income. Uh for example, one can be a income. Uh for example, one can be a contractor or, you know, can have wages. contractor or, you know, can have wages. contractor or, you know, can have wages. So, basically, they have So, basically, they have So, basically, they have it depends on the the structure they it depends on the the structure they it depends on the the structure they have. Um if they purely have a foreign have. Um if they purely have a foreign have. Um if they purely have a foreign structure or if they are set to work in structure or if they are set to work in structure or if they are set to work in Portugal, Portugal, Portugal, >> Mhm. >> Mhm. >> Mhm. >> you know, have Portuguese wages or, you >> you know, have Portuguese wages or, you >> you know, have Portuguese wages or, you know, self-employment Portuguese know, self-employment Portuguese know, self-employment Portuguese self-employment income.

self-employment income. self-employment income. >> Mhm. >> Mhm. >> Mhm. >> So, depending on the source, and that >> So, depending on the source, and that >> So, depending on the source, and that should be defined on planning. should be defined on planning. should be defined on planning. >> Mhm. >> Mhm. >> Mhm. >> Depending on the source, you should be >> Depending on the source, you should be >> Depending on the source, you should be prepared to pay first where the source prepared to pay first where the source prepared to pay first where the source is. is. is. >> Okay. >> Okay. >> Okay. >> Basically, and this is very, very, you >> Basically, and this is very, very, you >> Basically, and this is very, very, you know, very general. know, very general. know, very general. >> Right, of course. >> Right, of course. >> Right, of course. >> You know? But, uh you should be prepared >> You know? But, uh you should be prepared >> You know? But, uh you should be prepared to pay first at the source and then move to pay first at the source and then move to pay first at the source and then move the credits to the secondary the credits to the secondary the credits to the secondary jurisdiction. jurisdiction. jurisdiction. >> Okay. So, is that normal that someone if >> Okay. So, is that normal that someone if >> Okay. So, is that normal that someone if they're an American citizen, but they're an American citizen, but they're an American citizen, but residing here in Portugal, they probably residing here in Portugal, they probably residing here in Portugal, they probably will file first in the US and then will file first in the US and then will file first in the US and then second in Portugal? Is that the normal second in Portugal? Is that the normal second in Portugal? Is that the normal way or way or way or >> It depends. Generally, for my NHR >> It depends. Generally, for my NHR >> It depends. Generally, for my NHR clients, what they want to achieve is to clients, what they want to achieve is to clients, what they want to achieve is to achieve, of course, the exemption. achieve, of course, the exemption. achieve, of course, the exemption. >> Yeah. >> Yeah. >> Yeah. >> Yeah, so basically, if they plan well, >> Yeah, so basically, if they plan well, >> Yeah, so basically, if they plan well, all their income sources will be foreign all their income sources will be foreign all their income sources will be foreign source, source, source, >> Mhm. >> Mhm. >> Mhm. >> US source. >> US source. >> US source. >> Mhm. >> Mhm. >> Mhm. >> So, what you want to show to Portugal on >> So, what you want to show to Portugal on >> So, what you want to show to Portugal on that matter is if you are in the that matter is if you are in the that matter is if you are in the specific situation, is that you have specific situation, is that you have specific situation, is that you have filed in the US first, paid all your tax filed in the US first, paid all your tax filed in the US first, paid all your tax due in in the US, and then you're filing due in in the US, and then you're filing due in in the US, and then you're filing in Portugal and claiming the exemption. in Portugal and claiming the exemption. in Portugal and claiming the exemption. So, that could be the most streamlined So, that could be the most streamlined So, that could be the most streamlined way to do that.

way to do that. way to do that. >> Mhm. >> Mhm. >> Mhm. >> But, perhaps, if you're not under NHR or >> But, perhaps, if you're not under NHR or >> But, perhaps, if you're not under NHR or if you have at least one income in if you have at least one income in if you have at least one income in Portugal, Portugal, Portugal, >> Mhm. >> Mhm. >> Mhm. >> it would be better to file an extension >> it would be better to file an extension >> it would be better to file an extension in the US to October. in the US to October. in the US to October. >> Mhm. >> Mhm. >> Mhm. >> Mhm. >> Mhm. >> Mhm. >> File and pay here, >> File and pay here, >> File and pay here, >> Mhm. >> Mhm. >> Mhm. >> and then move the information to the US. >> and then move the information to the US. >> and then move the information to the US. >> Okay. And once you set it up and then >> Okay. And once you set it up and then >> Okay. And once you set it up and then move here, are you kind of stuck, like move here, are you kind of stuck, like move here, are you kind of stuck, like you can't restructure? you can't restructure? you can't restructure? >> No, you can. You are able to >> No, you can. You are able to >> No, you can. You are able to restructure. Um and this I'm talking restructure. Um and this I'm talking restructure. Um and this I'm talking about choices that can do that can uh about choices that can do that can uh about choices that can do that can uh you can do differently every year on the you can do differently every year on the you can do differently every year on the tax return. tax return. tax return. >> Okay. >> Okay. >> Okay. >> So, yeah. So, depending on how things >> So, yeah. So, depending on how things >> So, yeah. So, depending on how things go, if you change structurally, if you go, if you change structurally, if you go, if you change structurally, if you change planning, you can move you can change planning, you can move you can change planning, you can move you can adjust accordingly. adjust accordingly. adjust accordingly. >> Is there anything else that you see with >> Is there anything else that you see with >> Is there anything else that you see with clients that there's a misconception of clients that there's a misconception of clients that there's a misconception of what this treaty means? what this treaty means? what this treaty means? >> I think this >> I think this >> I think this not thinking that they have to file not thinking that they have to file not thinking that they have to file taxes in Portugal because all their taxes in Portugal because all their taxes in Portugal because all their income sources are in the US. I think income sources are in the US. I think income sources are in the US. I think this is the biggest one. this is the biggest one. this is the biggest one. >> So, no matter what actually, you have to >> So, no matter what actually, you have to >> So, no matter what actually, you have to file here. I mean, if you're a resident file here. I mean, if you're a resident file here. I mean, if you're a resident here, you file here. It doesn't mean here, you file here. It doesn't mean here, you file here. It doesn't mean you're you'll be paying, but you always you're you'll be paying, but you always you're you'll be paying, but you always have to file.

have to file. have to file. >> Yes, always have to file. Always have to >> Yes, always have to file. Always have to >> Yes, always have to file. Always have to If you are a registered taxpayer in If you are a registered taxpayer in If you are a registered taxpayer in Portugal, always have to file. And if Portugal, always have to file. And if Portugal, always have to file. And if you were not a registered taxpayer in you were not a registered taxpayer in you were not a registered taxpayer in Portugal, but you perhaps have Portugal, but you perhaps have Portugal, but you perhaps have Portuguese source income, you do have to Portuguese source income, you do have to Portuguese source income, you do have to file. file. file. >> How do you become a registered tax >> How do you become a registered tax >> How do you become a registered tax resident? resident? resident? >> That that is a tricky one because >> That that is a tricky one because >> That that is a tricky one because usually, you know what the law says? usually, you know what the law says? usually, you know what the law says? You can be deemed a tax resident if you You can be deemed a tax resident if you You can be deemed a tax resident if you spend more than 183 days in the country spend more than 183 days in the country spend more than 183 days in the country or if you establish your primary home in or if you establish your primary home in or if you establish your primary home in Portugal. Portugal. Portugal. >> Okay. >> Okay. >> Okay. >> But that is not automatic. So, generally >> But that is not automatic. So, generally >> But that is not automatic. So, generally and until now, finances works on a and until now, finances works on a and until now, finances works on a self-registration basis. So, generally self-registration basis. So, generally self-registration basis. So, generally people become a taxpayer in Port a tax people become a taxpayer in Port a tax people become a taxpayer in Port a tax register tax resident in Portugal when register tax resident in Portugal when register tax resident in Portugal when they apply Portuguese address to their they apply Portuguese address to their they apply Portuguese address to their NIF for the first time. NIF for the first time. NIF for the first time. >> Okay. So, that is >> Okay. So, that is >> Okay. So, that is >> So, just having the NIF doesn't make you >> So, just having the NIF doesn't make you >> So, just having the NIF doesn't make you a right? Cuz I know that some people a right? Cuz I know that some people a right? Cuz I know that some people have gotten their NIF, but they haven't have gotten their NIF, but they haven't have gotten their NIF, but they haven't moved here yet, but it's like you have moved here yet, but it's like you have moved here yet, but it's like you have your NIF, you move here, you have your your NIF, you move here, you have your your NIF, you move here, you have your residency here, that's when you should residency here, that's when you should residency here, that's when you should then then then >> Yeah, so so that's that's a >> Yeah, so so that's that's a >> Yeah, so so that's that's a long chain of processes because you do long chain of processes because you do long chain of processes because you do have to get the NIF for the immigration have to get the NIF for the immigration have to get the NIF for the immigration process.

process. process. >> Mhm. >> Mhm. >> Mhm. >> But uh at this stage, you have a >> But uh at this stage, you have a >> But uh at this stage, you have a non-resident NIF. non-resident NIF. non-resident NIF. >> Okay. >> Okay. >> Okay. >> So, if you if you look into the paper >> So, if you if you look into the paper >> So, if you if you look into the paper you receive, you will see your home you receive, you will see your home you receive, you will see your home address on it. address on it. address on it. >> Mhm. >> Mhm. >> Mhm. >> And then you get the visa, you get you >> And then you get the visa, you get you >> And then you get the visa, you get you come here, you get the residency permit, come here, you get the residency permit, come here, you get the residency permit, and then when you receive the card, then and then when you receive the card, then and then when you receive the card, then you're able to register as a tax you're able to register as a tax you're able to register as a tax resident. resident. resident. >> And if someone goes through the process, >> And if someone goes through the process, >> And if someone goes through the process, let's say in the middle of the year, but let's say in the middle of the year, but let's say in the middle of the year, but then so they've got their NIF, it's then so they've got their NIF, it's then so they've got their NIF, it's their home address in the US, then they their home address in the US, then they their home address in the US, then they become a resident here in let's say like become a resident here in let's say like become a resident here in let's say like October of a year. So that's when their October of a year. So that's when their October of a year. So that's when their tax residency starts. So technically for tax residency starts. So technically for tax residency starts. So technically for that year, they don't have to file. that year, they don't have to file. that year, they don't have to file. >> Oh, they do have to file. >> Oh, they do have to file. >> Oh, they do have to file. >> Okay, tell me. >> Okay, tell me. >> Okay, tell me. >> Yeah, there is the possibility of filing >> Yeah, there is the possibility of filing >> Yeah, there is the possibility of filing a partial year. In Okay. certain year. a partial year. In Okay. certain year. a partial year. In Okay. certain year. So you do you have to point out the date So you do you have to point out the date So you do you have to point out the date on your tax return in which you started, on your tax return in which you started, on your tax return in which you started, you know, you register as a tax you know, you register as a tax you know, you register as a tax resident. And then you have to disclose resident. And then you have to disclose resident. And then you have to disclose all the income earned or paid to you all the income earned or paid to you all the income earned or paid to you from that date until December 31st. from that date until December 31st. from that date until December 31st. >> Ah, okay. So you still should be doing >> Ah, okay. So you still should be doing >> Ah, okay. So you still should be doing something as far as like filing and something as far as like filing and something as far as like filing and Okay. Now that you know about this Okay. Now that you know about this Okay. Now that you know about this treaty and what it really means, we treaty and what it really means, we treaty and what it really means, we actually have another video for you that actually have another video for you that actually have another video for you that goes into more detail about how you goes into more detail about how you goes into more detail about how you should file Portuguese taxes. So check should file Portuguese taxes. So check should file Portuguese taxes. So check that out here.