Dividends received by NHR individuals in Portugal are subject to the same tax rules as for other residents.
Under Portugal's Non-Habitual Resident (NHR) regime, the treatment of dividends is as follows:
Treatment of Dividends Under the NHR Regime
1. Taxation of Dividends for NHRs
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Exemption on Foreign Dividends: Under the NHR regime, dividends received from foreign sources are generally exempt from Portuguese income tax, provided that certain conditions are met. Specifically, the income must be subject to tax in the country of origin or the source country, and the NHR must prove that the income is indeed taxable there.
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Portuguese Dividends: Dividends received from Portuguese sources are taxed at a flat rate of 28%. This rate applies directly to the dividends without special exemptions under the NHR regime.
2. Requirements for Foreign Dividend Exemption
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Substantial Taxation Requirement: For the exemption of foreign dividends, the NHR must show that the income has been subject to a reasonable level of taxation in the source country. This is often confirmed through a tax residency certificate or similar documentation.
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Application of Exemption: To benefit from the exemption, it is crucial to declare foreign dividend income in the Portuguese tax return and demonstrate that it qualifies under the NHR rules. Failure to provide proper documentation or incorrect declarations can result in the loss of the exemption.
3. Double Taxation Agreements (DTAs)
- DTA Benefits: Portugal has a network of double taxation agreements with various countries that can affect the treatment of dividends. These agreements may reduce or eliminate taxes on dividends paid from one country to another, depending on the terms negotiated between the countries involved.
4. Tax Planning and Compliance
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Documentation: Proper documentation is essential for claiming the exemption on foreign dividends. This includes keeping records of the dividend payments, tax certificates from the source country, and proof of tax paid abroad.
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Professional Advice: Consulting with a tax advisor or specialist is advisable to ensure compliance with both Portuguese tax laws and the requirements of any applicable DTAs.
Summary
Under the NHR regime, dividends from foreign sources can be exempt from Portuguese income tax if they are taxed in the source country and meet certain conditions. Portuguese dividends are taxed at a flat rate of 28%. Proper documentation and compliance with tax regulations are crucial to benefit from these provisions.