Category: Taxation

Portugal has emerged as a popular destination for expats and retirees, enticing with its sunshine, beaches, and relaxed lifestyle. But before packing your bags, understanding the personal tax landscape is crucial – particularly before making the move to Portugal. This article explores the key personal tax consequences you need to consider when relocating to Portugal.

Resident Versus Non-Resident:

Your tax status significantly impacts on your tax obligations.

Residents, defined as staying in Portugal for over 183 days, or regardless of spending any days maintains a habitual residence in Portugal during any day, are taxed on their worldwide income.

In contrast, non-residents are only taxed on income sourced from Portugal.

Tax Rates:

Residents face progressive tax rates ranging from 14.5% to 48% for 2024 and 2025, depending on their income tax bracket (see here for marginal tax rates). Non-residents encounter a flat rate of 25% on most income types and 28% on rental income. However, special regimes such as the Non-Habitual Resident (NHR) programme offer reduced rates for eligible individuals.

Income Categories:

Income in Portugal is categorized, with each category potentially subject to different tax rates. Common categories include:

• Employment income: Residents are taxed at progressive rates (up to 48%), while non-residents are subject to a flat rate.
• Business income: Taxation varies depending on business structure and residency status. In addition, international tax planning may be required for income earned outside of Portugal.
• House Rental income: Generally taxed at 25% for residents and non-residents, with potential reductions for long-term contracts.
  • More than 5 and less than 10 years – taxed at 15%
  • More than 10 and less than 20 – taxed at 10%
  • Over 20 years – taxed at 5%
• Investment income: Dividends and interest are usually taxed at 28%, but individuals under the NHR programme benefit from personal tax exemptions. Capital gains are taxed at rates ranging from 28% to 35% or other rates depending on the source of the capital gain.
• Going solo in Portugal – Self-employed individuals may be subject to unique tax assessment. Read here for more details.

Deductions and Allowances:

Portugal offers various deductions and allowances to reduce your tax burden. These include expenses related to:

• Health
• Education
• Mortgage interest
• Pension contributions
• Charitable donations
• Other expenses – such as rent, VAT on food, car repairs, etc…

In Portugal, residents rely on their “Número de Identificação Fiscal” (NIF), a unique 9-digit tax identification number assigned to both individuals and companies. This number serves as your key for tax purposes and is often required for financial transactions.

Social Security Contributions:

A frequently overlooked aspect of Portuguese taxes is social security contributions. Both residents and non-residents contribute, with rates varying based on income and employment status. These contributions unlock valuable social benefits, including; healthcare, unemployment benefits, parental leave, and pensions. Understanding your specific contribution requirements and potential benefits is crucial for informed financial planning in Portugal Read here for more details.

Non-Habitual Resident (NHR) Programme:

This attractive programme offers significant tax benefits for qualifying individuals, including flat tax rates of 20% on employment and self-employment income (as long as these services fall under the list of high-value activities) and 10% on pensions. However, the regime mostly ended on 31 December 2023, with some exceptions including a much stricter set of eligibility criteria to qualify than previously Read here for more details.

Seeking Professional Advice:

Navigating Portugal’s tax system can be complex. Consulting a qualified professional, familiar with the Portuguese tax system and your specific situation is highly recommended. They can guide you through the intricacies of the system, ensuring compliance and potentially maximizing your tax benefits.

Remember:

This article provides a general overview and should not be considered as personalised tax advice. Individual circumstances and specific tax situations may require further analysis by a qualified professional.

By understanding the personal tax consequences in Portugal, you can make informed decisions and approach your move with greater confidence. Remember, proper planning and professional guidance can ensure a smooth transition and help you optimise your tax position in this beautiful country.

Please do reach out to Dixcart Portugal for more information: advice.portugal@dixcart.com.

Portugal’s sunshine and relaxed lifestyle attract many aspiring entrepreneurs. However, before plunging into self-employment, understanding the unique tax landscape is crucial. This article sheds light on personal tax implications and the ‘simplified regime’, helping you to reach the right decision for you.

Tax Fundamentals

• Residents: Pay progressive income tax on worldwide income (14.5% – 48%).
• Non-Residents: Pay a flat 25% on Portuguese-source income.
• Social Security: Contributions 21.4% to 35% based on profession and chosen regime.

Enter the Simplified Regime

This attractive option caters for self-employed individuals with specific conditions:

• Annual turnover: Under €200,000 of income.
• Business activities: Listed in the regime’s allowed activities list.

How it Works

• Tax Rates: Depending on the nature of the activity, the income subject to taxation is reduced. The income subject to taxation for products is 15% and for services is 75%, which is then taxed at 20% (if NHR), or otherwise according to the progressive tax tables. Please note that expenses must be registered on the tax office website and validated, to benefit from the percentages detailed above.
• Basic example: Product sales of €30,000 received by an NHR Portuguese tax resident. €30,000 @ 15% = €4,500 taxable income. Tax due to the Portuguese tax authorities: €4,500 @ 20% = €900.
• Reporting:
  • Annual returns are required to be submitted by 30^th June of the following year (example: tax year of 1 January to 31 December 2023 is due on 30 June 2024).
  • VAT on a quarterly basis (if applicable)
  • Social Security on a monthly basis (one year exemption)
• Reduced Burden: Less administrative complexity compared to the regular regime.

Considerations

• Not for Everyone: May not be suitable for all professions or high-earning individuals.
• Record Keeping: Maintain accurate income and expense records for compliance.
• Deadlines: Adhere to payment deadlines to avoid penalties.
• Social Security: Contributions remain mandatory under the simplified regime.
• Seek Advice: Consulting a tax advisor is crucial for eligibility assessment and maximizing benefits.

Beyond Taxes – Other Considerations

• NIF: Obtain your Tax Identification Number (NIF) for financial transactions and tax purposes.
• Health Insurance: Explore private health insurance options as social security coverage might not be comprehensive.
• Accounting Support: Consider professional accounting assistance for managing finances and tax compliance.

Remember

Self-employment in Portugal offers exciting opportunities, but understanding the tax system is essential. Research diligently, stay informed, and seek professional guidance to navigate the simplified regime and optimize your entrepreneurial journey. By planning effectively, you can embrace the sunshine and success with peace of mind.

Additional Information

For further information on the self-employment taxes and the simplified regime in Portugal, please do not hesitate to contact the Dixcart Portugal office: advice.portugal@dixcart.com. Our team is ready to assist you with any questions or concerns regarding this topic.

Portugal’s welcoming charm attracts many individuals, from expats to retirees, as well as entrepreneurs. While enjoying the sunshine and beaches, understanding Portugal’s social security system and your contribution responsibilities is crucial. This article demystifies social security contributions in Portugal for individuals, helping you navigate the system with confidence.

Who Contributes?

Both employed individuals and self-employed individuals contribute to Portugal’s social security system. The contribution rates and methods differ slightly based on your employment status.

Employee Contributions

• Rate: Generally, 11% of your gross salary is automatically deducted by your employer (note that your employer contributes 23.75%).
• Coverage: Provides access to healthcare, unemployment benefits, pensions, and other social benefits.

Self-Employed Contributions

• Rate: Typically ranges from 21.4% to 35%, depending on your profession and chosen contribution regime.
• On a quarterly basis a Social Security declaration must be submitted which declares the revenue of the previous quarter. Based on this amount, the Social Security contribution is calculated.
• Method: Contributions are paid monthly through designated channels such as Multibanco, ATMs or online banking.
• Coverage: Similar to employee contributions, offering access to various social benefits.

Special Cases

• Voluntary Social Insurance: Individuals not automatically covered can make voluntary contributions to gain access to social benefits.

Remember and Contact Information

Contribution rates may change annually, based on government regulations.

Work place insurance may be required for occupational accidents, depending on your profession.

Deadlines for self-employed contributions must be adhered to, in order to avoid penalties.

Please reach out to Dixcart Portugal for more information: advice.portugal@dixcart.com.

Cyprus and The Netherlands Double Tax Treaty

For the first time in the history of the Republic of Cyprus and The Kingdom of The Netherlands, a Double Tax Treaty came into force on 30^th June 2023 and its provisions are applicable as from 1 January 2024 onwards.

This article updates our note issued in June 2021, with regards to the execution of a Double Tax Treaty, on 1^st June 2021.

Main provisions of the Double Tax Treaty

The Treaty is based on the OECD Model Convention for the Elimination of Double Taxation on Income and on Capital and incorporates all the minimum standards of the Actions against Base Erosion and Profit Shifting (BEPS) concerning bilateral agreements.  

Withholding Tax Rates

Dividends – 0%

There is no withholding tax (WHT) on dividends if the recipient/beneficial owner is:

• a company that holds at least 5% of the capital of the company paying the dividends throughout a 365 day period or
• a recognized pension fund which is generally exempt under the corporate income tax law of Cyprus

The WHT in all other cases shall not exceed 15% of the gross amount of dividends.

Interest – 0%

There is no withholding tax on payments of interest provided that the recipient is the beneficial owner of the income.

Royalties – 0%

There is no withholding tax on payments of royalties provided that the recipient is the beneficial owner of the income.

Capital Gains

Capital gains arising from the disposal of shares are taxed exclusively in the country of residence of the alienator.

Certain exemptions apply.

The below exemptions apply:

1. Capital gains arising from the disposal of shares or comparable interests deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State, may be taxed in that other State.
2. Capital gains arising from the disposal of shares or comparable interests deriving more than 50% of their value directly or indirectly from certain offshore right/property relating to exploration of the seabed or subsoil or their natural resources located in the other Contracting State, may be taxed in that other State.

Principal Purpose Test (PPT)

The DTT incorporates the OECD/G20 Base Erosion and Profit Shifting (BEPS) project Action 6

PPT, which is a minimum standard under the BEPS project. The PPT provides that a DTT benefit shall not be granted, under conditions, if obtaining that benefit was one of the principal purposes of an arrangement or transaction.

Additional Information

If you require further information as to how the DTT between Cyprus and the Netherlands could be of benefit please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com or your usual Dixcart contact.

Introduction:

In a highly anticipated announcement, Chancellor Jeremy Hunt presented the Autumn Budget 2023 in the House of Commons on 22 November 2023, revealing a set of measures aimed at fostering economic growth and stimulating business investment.

The budget, comprising “110 growth measures,” outlines a strategic plan to boost the UK economy by £20 billion annually. This article provides a comprehensive summary of the key tax and related measures introduced in the Autumn Budget.

Tax Measures:

1. Class 1 Employees NI Reduction (From January 2024):

• A significant move to stimulate income, the budget proposes a 2% reduction in Class 1 employees’ National Insurance contributions, effective from January 2024.

2. Self-Employed and Class 4 NI Adjustments (From April 2024):

• The Autumn Budget abolishes Class 2 National Insurance for the self-employed and implements a 1% reduction in Class 4 National Insurance from April 2024, providing relief for independent workers.

3. National Living Wage Increase (From April 2024):

• In a commitment to improving workers’ livelihoods, the National Living Wage is set to increase by a substantial 9.8%, reaching £11.44 per hour from April 2024.

4. Capital Allowances Full Expensing Permanent:

• A boost for businesses, the budget makes the full expensing of Capital Allowances permanent, allowing companies to deduct expenditure on new equipment and machinery from profits.

5. R&D Tax Credit Schemes Merger (From April 2024):

• The Research and Development (R&D) tax credit schemes are set to merge, with a reduction in the rate for loss-making businesses to 19%, and a lowered intensity threshold for loss-making SMEs to 30%.

6. Extension of Investment Zones and Freeports Incentives:

• To encourage investment, the budget extends incentives for Investment Zones and Freeports, fostering economic activity in designated areas.

7. Pensions Triple Lock (From April 2024):

• A significant commitment to pensioners, the basic state pension will increase by 8.5% to £221.20 per week from April 2024.

8. Business Rate Discount Extension:

• The 75% discount on business rates for retail, hospitality, and leisure companies is extended for another year, providing crucial support to sectors impacted by the economic challenges.

9. Freeze on Small Businesses Rates Multiplier:

• Recognising the challenges faced by small businesses, the budget freezes the small business rates multiplier for a year.

10. Universal Credit and Benefit Increase (From April 2024):

• A boost for individuals and families, Universal Credit and other benefits are set to increase by 6.7% from April 2024.

11. Alcohol Duty Freeze (Until August 2024):

• In a move to support consumers and businesses in the alcohol industry, the budget freezes alcohol duty until 1 August 2024.

12. Making Tax Digital (MTD) Simplification:

• The budget introduces changes to simplify the design of Making Tax Digital (MTD) for Income Tax Self-Assessment (ITSA), aiming to streamline tax processes for businesses.

Conclusion:

As the United Kingdom stands at the threshold of a new economic era, the Autumn Budget 2023 emerges as a blueprint for resilience and growth. Chancellor Jeremy Hunt’s unveiling of “110 growth measures” signifies a commitment to rejuvenating the economy and bolstering business confidence.

If you would like any further information regarding the new measures outlined above, please don’t hesitate to contact your usual Dixcart UK contact or enquire at advice.uk@dixcart.com

As part of the action plan, launched by the Cyprus government to attract foreign businesses to establish or expand their activities in Cyprus, there have been new amendments in 2023 to the Cyprus Income Tax Law, regarding the 50% and the 20% tax exemptions for first time employment in Cyprus.

This article outlines the amended income tax exemptions.

What are the Amended Income Exemptions for Cyprus Tax Residents?

• 50% income tax exemption

This applies for first time employment in Cyprus, which commenced on or after 1st of January 2022, with remuneration exceeding EUR 55,000 per annum.

Individuals must not have been a resident of Cyprus, for a period of at least 15 consecutive tax years, immediately prior to the commencement of their employment in Cyprus. For each individual, the exemption will apply once in their lifetime for a period of 17 years.

Subject to certain conditions, individuals whose employment commenced prior to 1 January 2022 may also be eligible to transition into the amended 50% exemption.

• 20% income tax exemption

This applies for first time employment in Cyprus, which commenced on or after the 26 July 2022, and relates to remuneration up to a maximum exemption of EUR 8,550 per annum.

Individuals, immediately prior to the commencement of employment in Cyprus must not have been a resident of Cyprus for a period of at least three consecutive tax years and must have been employed outside Cyprus by a non-resident employer. The exemption applies for a period of seven years, starting from the tax year following the tax year of commencement of employment.

Individuals granted the 50% exemption detailed above will not be eligible for this exemption.

• Previous 50% or 20% exemptions

Individuals that do not meet the conditions to transition to the new 50% exemption, but who were eligible to benefit under the previous 50% or 20% exemptions, may continue to benefit from the previous exemptions, for the remaining period of their entitlement.

The previous exemptions were available for ten years (50% exemption), or five years (20% exemption), respectively, for each individual.

Get in Touch To find out more in income exemptions get in touch with our experts at Dixcart Cyprus advice.cyprus@dixcart.com

As a response to the sanctions placed on Russia, Russia signed, on the 8^th of August 2023, a decree suspending (not abolishing) the double tax treaties with multiple ‘unfriendly’ countries including Cyprus.

According to the official decree, the suspension of DTT’s is justified by Russia’s need to respond to ‘unfriendly actions’ taken by these nations against the Russian Federation, its citizens, and legal entities, in connection with the war in Ukraine.

What does this mean for International Taxation?

The suspension of such agreements in full or in part will inevitably entail not only an increase in the tax burden due to double taxation of the same income, but will also have a major impact on reporting.

The decree halts the application of key provisions in approximately half of Russia’s DTT’s.

The suspension pertains to the following provisions:

• Taxation of dividends, interest, royalties, income from permanent establishments, capital gains, employment earnings, and miscellaneous income.
• Provisions related to property taxation.
• Non-discrimination clauses.
• Limitation of benefits provisions stipulated in several treaties, namely: Sweden, Luxembourg, UK, Switzerland, Cyprus, Lithuania, Austria, and Malta.
• Provisions involving mutual assistance in tax collection for agreements with Belgium, Norway, Cyprus, Austria, and Japan.

From a Cyprus perspective

Cyprus Minister of Finance will continue to honour the Tax Treaty with Russia until further notice.

The suspension of the treaty from Russia’s side will have some tax implications for Cyprus registered companies that receive income from Russian entities. The tax applied on interest, which is deducted at source, will increase from 15% to 20%. As for royalty income, tax applied will rise from 0% to 20%, whereas the tax deducted at source for dividend income, will remain at 15%, as it was before.

However, as announced by the Minister of Finance, the non-application of the Double Taxation Avoidance Agreement’s provisions, might not have further significant consequences for Cyprus, as the existing sanctions and restrictions have already impacted significantly on the economic relations between the two countries.

For additional information, please contact: Katrien De Poorter at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

The data contained within this Information Note is for general information only. No responsibility can be accepted for inaccuracies. 

Foreign Films Being Shot in Malta

Malta has established itself as a top film location in the Mediterranean and is gaining a strong global reputation that is managing to attract a large volume of foreign films and series over recent years.

Such films include; the movie Entebbe, Game of Thrones and the Netflix series Sense 8, as well as box offices movies such as Jurassic World Dominion and Gladiator 2 which is set to start production in the next half of the 2023. There has  been an increase in crews from Hollywood and Bollywood as well as marketing agencies and production companies frequently visiting the island to take advantage of the benefits available to them.

In this article we will discuss the specific  reasons as to why the film industry is continuing to grow in Malta and why it has attracted so much interest. In addition to; Malta’s versatile location, the film servicing facilities and infrastructure as well as English being the first language, a significant bonus is the fiscal incentives offered by the Government.

Fiscal Incentives

Currently there are  several tax incentives in Malta, that can be enjoyed by both local and international film productions.

1. Cash Rebate – A cash rebate of up to 40% of the eligible expenditure incurred in Malta on film production, including; pre-production, production, and post-production costs. The minimum expenditure threshold is €60,000 for feature films, documentaries, and TV drama series, and €100,000 for TV commercials, animation, and other productions.
2. VAT Refund – A refund of up to 25% of the VAT paid on eligible expenditure incurred in Malta on film production.
3. Tax Credit – A tax credit of up to 25% of the eligible expenditure incurred in Malta on film production. The credit can be used to offset tax payable on income earned in Malta.
4. Co-Production Fund – A fund that provides up to 25% of the eligible expenditure incurred in Malta on co-productions. The fund is available to international co-productions that involve a Maltese production company as a partner.
5. Malta Enterprise Investment Aid – A scheme that provides financial assistance to companies that invest in film production facilities in Malta. The assistance is in the form of a cash grant of up to 35% of the eligible costs of the project.

Geographics

Malta has an ability to ‘double-up’ to become multiple locations, which gives it a great advantage over many other jurisdictions. Over the years the island has been transformed into; North Africa, ancient Rome, the South of France and Tel Aviv. Producers are attracted by the island’s natural beauty and the diverse architecture of Malta’s towns and villages, castles, palazzos, towers and farmhouses. Mother Nature also plays her role; with 300 days of sunshine a year, directors are re-assured that filming is far less likely to be unexpectedly interrupted.

Local Production Support in Malta

Filmmakers are also given a warm welcome by the Malta Film Commission (MFC), which is responsible for the promotion and development of the industry. It offers assistance and guidance and is usually the first point of contact for any filmmaker considering Malta as a location.

The MFC runs an incentive scheme, which offers up to a 40% rebate of costs, in relation to; accommodation, transport and location hire.  

Screen tourism is a growing phenomenon worldwide, and Malta‘s film and tourism sectors have responded to this trend by offering dedicated tours that take visitors to the sites where movies were filmed.

Malta Film Studios

Malta is also home to the Malta Film Studios which offer shallow water tanks to allow the shooting of water scenes in a controlled environment with an unlimited ocean backdrop.

The island is currently sharpening its focus on developing further film infrastructure. The Government is currently looking for a strategic partner to redevelop, renovate and operate the film studios, and world-renowned companies have expressed their interest in the project. There are plans for the building of one or two sound-stages to allow producers to work in a fully controlled environment, so that filming can flourish 365 days a year.

How Can Dixcart Malta Help? 

The Dixcart office in Malta has a wealth of experience in assisting companies in Malta and detailed knowledge of the benefits and financial incentives that are available to film production companies and how to claim these.

We also offer legal and regulatory compliance insights to meet specific needs and to ensure that all necessary legal requirements have been met. In addition our team of qualified Accountants and Lawyers are available to set up structures and to manage them efficiently if you decide to incorporate a new company or redomicile an existing structure.

To Contact Us

Please do not hesitate to contact the Dixcart office in Malta and we will be delighted to assist you: advice.malta@dixcart.com.