A Tax Lawyer sent me this as I was querying my Portugal tax that was supposed to be exempt. I did much research on this beforehand and it seems like estate agent websites and lawyers unscrupulously stated that Portugal is a tax haven and will not pay tax for 10 years. How wrong was I.
I am particularly talking about selling of shares as CGT here.
"It looks as though you just got confused by the wording of the DTA, namely by what "property" means. Colloquially, this word is often used as a substitute for real estate, but legally it means anything that is owned by a person or entity, and it is divided into two types: "real or immovable property" which is any interest in land, real estate, growing plants or the improvements on it, and "personal or movable property", which is everything else, such as securities, pieces of furniture, you name it. Since capital gains are generally made by reselling securities and not other items of movable property, the expression "movable property" is often replaced by the more common word "securities".
Article 13 (5) of the DTA is standard: Gains from the alienation of any property other than that referred to in the preceding paragraphs of this Article, shall be taxable only in the Contracting State of which the alienator is a resident. "Property" here means any type of property, whether immovable (real estate) or movable (securities, such as shares or bonds). Since the preceding paragraphs refer to immovable property (i.e. real estate), property "other than that" mentioned in this paragraph is movable property (securities). So this paragraph stipulates that securities capital gains may only be taxed by the country of residence of the taxpayer.
As I said in my previous email, "The problem is that both the OECD model convention and the vast majority of DTA's state the opposite, i.e. that capital gains on the disposal of securities may only be taxed by the country of residence of the beneficiary. As a result you may say that such capital gains will as a rule be taxed by Portugal in the hands of Portugal-resident taxpayers, whether or not they hold NHR status, at the optional rate of 28% (or at 35% if the source is a blacklisted tax haven) on the balance of gains less losses."
So I am afraid that by the looks of it you will have to pay a €12k tax bill on account of a confusion over the meaning of one word! "
No deductions allowed on CGT at all. No exempt amount either. So I will just have to pay it. At least it the fixed rate of 28% is much lower that the 43% odd I would have had to pay in SA.
Looking at relocating to lower CGT countries now.
Belgium 0%
Croatia 12%
Isle of Man 0%
Poland 19%
Spain 23%
UK £11,100 annual exemption
