Foreign pension income

The Portuguese tax department has closed what now appears to have been an “imaginary” loophole in the tax law concerning pension income.

It had been thought that foreign pensions would not be taxable in Portugal if paid to residents who had taken tax residency under the Portuguese 2009 non habitual resident’s regime.

This “loophole” was being exploited in Sweden and some other territories where it is possible to be exempt from pension income paid from those countries if one emigrates under certain conditions.

However it has now been clarified by the Portuguese department that foreign pension income received in Portugal will always be taxed in Portugal regardless of the tax regime of the foreign territory and in accordance with the double tax treaty signed with that territory.

Sovereign opinion:
With the Portuguese economy in dire straits it is felt that Portugal has lost an opportunity here to attract foreigners with high pension levels to reside in Portugal, buying property to kick start the real estate and building sectors and contributing to the economy by paying direct consumer taxes.