Emigrants: Double Taxation on Real Estate Income
Mundo Português publishes article "Emigrants: Double Taxation on Real Estate Income" in the 10/30/2020 edition by Vanessa Mendes, CEO of Be Wise Consultant.
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30 of October 2020.
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“(…) I was informed that I had to pay IRS on the dividends I received in Portugal, however, at the same time, I have already paid taxes in Luxembourg on those same dividends, it is not fair! …”
We would like to start by thanking you for the email you sent us, the questions raised being quite relevant, so we will, in the best way, clarify your doubts.
Of the multiple questions presented, it is not possible to answer all of them in this space, as we have reiterated.
In this context, it will always be important to turn to a lawyer or tax advisor so that your doubts are properly clarified.
Following your question, it is important for us to address two distinct but related issues:
1st) the incidence of the tax, in the sense of knowing if the income obtained, from the dividends received, will give rise to the payment of IRS in Portugal, when your residence is located in Luxembourg;
2nd) if there is any way to solve the problem of “duplicate” payment.
First, it should be clarified that the income obtained, related to the dividends paid by a company residing in PT to a non-resident, is subject to the payment of IRS in PT. Therefore, the rate of 28% will be applied to these.
In a second step, it is necessary to answer the question of whether, due to the fact of obtaining this income in PT, there may be a way to reduce the tax burden in PT by the income obtained there.
Effectively, if the convention is triggered to avoid double taxation between Portugal and Luxembourg, there may be a way to reduce the tax burden, that is, the rate to be applied in Portugal, instead of being the usual 28%, would apply a reduced rate of 15%.
On the other hand, and in consultation with a tax consultant in Luxembourg, you will find that you may be able to deduct this tax paid in PT (or part) in Luxembourg.
As a conclusion, and in order to summarize, dividends received by non-residents in PT, paid by a company that has residence / headquarters there, are taxed at the rate of 28%, being possible, through the convention, to apply a rate reduced by 15% in PT, recovering this amount, or part, in Luxembourg.