Portugal: Special tax regime for inbounds
The awaited special tax regime for inbounds has been published. Against expectations, the new regime is backdated as of January 1, 2009. Therefore, applicable to all expats that came to Portugal this year.
We hereafter summarize the main orientations of this concept introduced in the Portuguese Personal Income Tax legislation.
Who may benefit
Individuals that qualify as tax residents under Portuguese domestic rules and that have not been taxed as Portuguese tax residents in the five preceding tax years. The Government will issue a Ministerial Order to specify which professional activities will benefit from this regime.
This regime is applicable for a period of 10 consecutive years.
The individual must be registered at the local tax office specifically for this regime.
Employment and self-employment income that benefit from this regime will be taxed at the flat 20% tax rate. Only the income related to the Portuguese duties or that is paid by a Portuguese entity will be taxable in Portugal.
Foreign employment income and pensions will be exempt, as long as:
· Individuals are taxed according to a Double Tax Treaty entered into between Portugal and another Contracting State;
· Individuals are taxed in another State with which Portugal does not have a Double Tax Treaty, as long as the income is not considered as obtained in Portugal according to our internal legislation.
Foreign self-employment income and other types of foreign income derived from abroad, are also exempt as long as:
· the income is taxed in another State according to a Double Tax Treaty entered into between Portugal and another Contracting State;
· Such income is taxed in the other State, territory or region in accordance with the OECD Model Tax Convention, interpreted in accordance with the reservations made by Portugal, as long as those States, territory or regions are not considered tax havens by our internal legislation.
Such exempt income will be considered to determine the tax rate applicable to other Portuguese sourced income.