Employment tax and PAYE in Portugal, Non Habitual Residence & more (2022)
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- Опубликовано: 18 окт 2024
- IMPORTANT - PLEASE READ REGARDING THIS CHANNEL
The content on this channel is for educational and information purposes only. It should not be relied on as advice, and you should always take qualified advice before making any changes to your personal position.
Whilst I have experience in the financial and tax industry, this channel is for recreational purposes and is not an advertisement for my business or services. Its purpose is to share quality information.
Whilst every care is taken as to the accuracy of the information in these videos, the information provided is based on the understanding of the rules at the time, and rules can change with little or no notice.
Whilst I cover a wide range of issues on the channel, in my professional role I specialise in tax efficient investments, UK and overseas pensions, estate planning, and wealth management for expatriates based in Portugal. Unfortunately, I do not offer visa or tax return services, nor can I assist US nationals.
Thank you for your support and understanding. I hope to continue to provide you with valuable information to help you with your life in Portugal. If you have any suggestions for content you would like to hear, please let me know
You have to think about income tax AND social security contributions aspects.
My assumption in this video is that you are watching in advance of your move to Portugal and therefore will be applying for the Non Habitual Residence (NHR) program.
1. TAX (Self-employment and employment)
Income tax
From a tax point of view, it is neutral between self-employment and employment
Myths
• Many think that because they’re paid from the UK, US etc., then income is tax free in Portugal.
• Also they’ve read that foreign source income under NHR is tax free which adds to their confusion.
Actual position
• The actual position is that employment and self-employment tax is generally determined by where you perform work.
• So a client can work for a UK company but if their work is performed solely in Portugal, they are taxed in Portugal.
• So what is the actual position about foreign source income? If you read about foreign sourced income being tax free, that is true but the key condition for being tax free in Portugal is that it MUST BE TAXED or POSSIBLY be taxed in the source country, but most tax treaties give the taxing right to the country of residence (Portugal) rather than source state.
Self-employed simplified reporting regime
Where self-employment and employment can differ, is how much income is reported.
With self employment, you can report your income in two ways:
• Accounting basis - this is the standard basis of accounting that is common in the UK, whereby you take your annual income, deduct any allowable expenses, and pay tax on the difference
• Simplified reporting - in this way, you declare set percentage of you income based on occupations classification.
o Only available if your income is less than €200k. pa
Rates
The default position is that you pay tax at scale rates.
If qualify as a “high valued activity” then you can qualify for a 20% flat rate of income tax, which is attractive compared with the standard scale rates of up to 48%.
2. Social security
The main principles are that a person is a member of the national insurance scheme in the country he or she works, and that one should only be a member of one national insurance scheme in one country at a time.
This means that a foreign worker who takes up work in Portugal should, as a rule, be regarded as a member of the Portugal social security system, and no longer be a member of the home country's national insurance scheme.
Employers must also pay employer's contribution on the employee's salary.
An exception is that a person posted from his or her employer to work temporarily in another EEA country can retain the membership in the home country's national insurance scheme for up to 24 months.
And even though the UK is not in the EU anymore, you can still use this exemption.
Unlike income tax, there IS a distinction between self-employment and employment here in terms of rates applicable.
Forming a company
• Dividends from companies are tax free under NHR if they may be taxed in the country from which they originate e.g. UK companies
• You will continue to pay corporation tax in country where company is based
• There are no social security contributions appliable on dividends
NHR List of High Added Value Activities
As per Ministerial Order 230/2019, in force as from 1 January 2020
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IMPORTANT - PLEASE READ REGARDING THIS CHANNEL
The content on this channel is for educational and information purposes only. It should not be relied on as advice, and you should always take qualified advice before making any changes to your personal position.
Whilst I have experience in the financial and tax industry, this channel is for recreational purposes and is not an advertisement for my business or services. Its purpose is to share quality information.
Whilst every care is taken as to the accuracy of the information in these videos, the information provided is based on the understanding of the rules at the time, and rules can change with little or no notice.
Whilst I cover a wide range of issues on the channel, in my professional role I specialise in tax efficient investments, UK and overseas pensions, estate planning, and wealth management for expatriates based in Portugal. Unfortunately, I do not offer visa or tax return services, nor can I assist US nationals.
*Thank you for your support and understanding. I hope to continue to provide you with valuable information to help you with your life in Portugal. If you have any suggestions for content you would like to hear, please let me know*
So useful, and so glad to find one specific to UK. Thank you for this & please keep them coming! I've subscribed
Thank you! Will do!
Hello Mark, good overview of common misconceptions regarding NHR regime, I hope it will shed some light on how people will approach to respond to them.
I e-mailed you, I look forward to hearing from you soon.
Thank you for your comment Giuseppe and I will reply to your email this evening. With kind regards. Mark
@@taxfinancialadviceinportug4745 Thank you. I replied you back. I look forward to hearing from you soon.
@@giuseppe6856 Thank you Giuseppe - I will reply this evening. With kind regards. Mark
Thanks for this Mark, very useful I think I may be in touch (have seen you’ve put down your contact details!). Much appreciated.
You're welcome James and sorry for the delay in replying to your comment - for some reason I missed this when you originally posted. Best wishes. Mark
Hi Mark, I have the NHR and I am living in Portugal. I was just wondering - if I am employed by an Irish company (while working remotely) and I being taxed in Ireland, what are the things I need to look at in terms of taxes each year in Portugal?
Hi Jam Bon. You need to think about 1. income tax and 2. social security. The Irish position is more complicated that other countries as you have the concept of ordinarily resident unlike other countries. I would suggest you speak with a local Accountant to guide you through this - if you need a recommendation, just email me. Best wishes. Mark
Hi Mark, if I move to Portugal and the property is my main residence but travel to the UK to work for 2/3 of the month, will I pay UK or Portuguese tax on the income?
Hi James. If you are becoming Portuguese tax resident then you will pay tax on your worldwide income and gains here. However, when it comes to employment tax, you pay tax in the jurisdiction you perform the work i.e. 3/12ths of the year is spent in the UK so 3/12ths of your income will be taxed there. Best wishes. Mark
Hi Mark, im wondering. How does my employeer know i have the NHR status and pay the 20%? Or is this for end of the year? This might be a stupid question. Im not sure who pays the employee tax in Portugal, as i just moved here.
Hi Sup V. As a general rule, the employer will pay you gross, so no tax deducted. You will then declare your income here and pay the tax yourself. Kind regards. Mark
Hi Mark,
Re: confused about tax free allowance in Portugal
Could you please confirm which is the case: tax free allowance or no tax free allowance in Portugal, or maybe its conditional on ones circumstances?
I have watched all your videos and especially Employment Tax and PAYE in Portugal. You didn’t mention if there is a tax free allowance in Portugal. But in another Expats Portugal webinar a Portuguese expert said there is a ta free allowance of €4104 per annum. But there is no mention of a tax free allowance on the Portuguese IRS website i.e. the page which lists the progressive tax rates. I’m a simple UK pensioner researching a permanent move to Portugal and every Euro counts especially if I’ll be paying tax on my UK pension (Irish i.e. EU passport by the way). Many thanks.
Hi Steve. Yes there is indeed a personal allowance applying to pension and employment income only and you are correct in that it is €4,104. You will also benefit from the lower tax rate - flat 10% - for 10 years under the Non Habitual Residence program which you will qualify for as a new resident to the country (as long as you haven't been tax resident here in the last 5 years). Best wishes and good luck for your move. Mark
@@taxfinancialadviceinportug4745 Hi Mark,
Re: Zoom consultations?
Many thanks for your reply. I saw the latest video too. Do you offer video consultations via Zoom as I would like to clarify a couple of other things, and if so what would your fee be. Thanks again. Steve Price.
@@steveprice9462 Hi Steve. Yes we offer free initial consultations. If you would like to arrange one, just email me at mark.quinn@spectrum-ifa.com with some days and times that work for you and I will send an invite. With kind regards. Mark
Hi Mark, another very insightful video. Is there any tax exemptions when it comes to investing a percentage of your salary into a pension as is the case in UK?
Hi L. Thank you for your comment and I'm glad you found the video useful. Yes there are exemptions and I will put some information on this in the description over the next day or so. Best wishes. Mark
@@taxfinancialadviceinportug4745 Thanks for the reply Mark and I look forward to your response. Been searching Portugal pension options online and haven’t been able to find any good information so your guidance will be much appreciated. Thanks
Hi @Mark, just wondering if you are still planning on adding the tax exemptions for pension to the video description? Also, if you know anything regarding pension providers also that would be great. My online searches are coming up very unfruitful. Thanks I appreciate all your advice and guidance!
@@living_life_laura I'm sorry L. I'll do this asap. Mark
@@living_life_laura Hi again L. You are able to benefit from a 20% tax break based on contributions to retirement saving plans called " Plano Poupança Reforma [PPR]" but the limits are very low. For those younger than 35, EUR 400, between 35 and 50 years old: EUR 350, and over 50 years old: EUR 300.
Hello Mark, I applied for NHR and got "Rejected (Draft Decision)". Can you guide?
Hi. I would like to help but you really need the assistance of a local Accountant who can investigate with Financas why exactly you were declined. Good luck and best wishes. Mark
Thank you for sharing. Great overview
You're welcome - i'm glad you found it useful :-)