Capital gains payment
The newspaper Correio da Manhã Canada publishes the article "Payment of Capital Gains" by Vanessa Mendes, CEO of Be Wise Consultant in the 10/11/2020 edition.
Read the full answer:
10 of November 2020.
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“(…) I set up a company in Portugal, with a longtime friend, and I want to receive money from the fruits of our activity. I was informed that I have to pay 50% of IRS in Portugal, even though my residence is in Canada…”
Carlos Martins, Toronto
We would like to start by thanking the email you sent us, the questions raised being quite pertinent, we will, in the best way, clarify your doubts considering only the information presented.
First of all, it should be clarified that the question refers to the tax treatment to be given in PT to the distribution of dividends, carried out by an entity with headquarters in Portugal, to its partners, one of them, at least, residing in Canada.
In accordance with the taxation rules provided for in PT, as a rule, income paid as dividends by a company resident in PT, made available to a partner whose residence is located in another country, is taxed at a liberating rate of 28%, without applying the general IRS rates, these can, depending on the taxable income, reach 48%.
However, it should be noted that under the convention to avoid double taxation between PT and Canada, dividends obtained in PT may, when triggered, be taxed at a rate of 15%. In this way, a reduction in the tax burden in PT can be obtained, with the eventual and probably total recovery of this amount in Canada.
In conclusion, and in order to systematize, the dividends obtained by non-residents in PT, when made available to them by an entity whose residence is located in PT, are taxed there at the rate of 28%, and, if the Convention, a reduced rate of 15% should be applied.
Place your questions to the following email: vmendes@firehorse.pt