The Portugal Tax Experts

We help expats use the generous tax breaks in Portugal

FRESH Portugal is a the Portuguese desk of FRESH, an international legal practice with 15 lawyers spread between the US, UK, Israel and now Portugal. We advise expats who are coming to Portugal from all over the world.

Portugal offers incredible lifestyle. It is also has one of the highest tax rates in Europe, alongside some of the most attractive systems of tax breaks in the world.

Our firm is the only boutique international firm operating in Portugal. As such, we are able to holistically look at people's sources of income, assess their taxes from the perspective of different countries and identify the best solutions for them.

Zeev Fisher


Lawyer (England & Wales, Israel)

Zeev is an IP and tax lawyer, qualified in the UK and Israel, a partner in the US offices of FRESH and an angel investor. His legal practice focuses on cross border aspects of ambitious international businesses.

Tito Barros Caldeira


Tax and legal advisor

Tito is a senior Portuguese tax advisor. He started his career in PWC, moving to KPMG and a senior position at Baker Tilly Portugal. He is a tax arbitrator and an expert in tax planning and tax litigation.

Dirk Cluckers


Lawyer (Belgium)

Dirk is a seasoned tax lawyer who started his career working for IBM, later moving to private practice. He has over 20 years of experience dealing with international taxation. He lives in Portugal and advising expats in Portugal.

Magda Feliciano


Lawyer (Portugal)

With approximately 20 years of experience as a senior tax lawyer in Portugal, Magda supports the Fresh team with a strong view on Portuguese taxes. Magda also resides in the Portuguese tax arbitration court as an arbitrator, giving her strong insights on the decision-making process of the authorities.

Rebecca Castro


Lawyer (Portugal and Brazil)

With over 7 years of experience spanning work in the United States, India, Brazil and Portugal, Rebecca adds a further international dimension to Fresh. As a tax lawyer, she focuses her practice on contentious proceedings versus the authorities, including civil and criminal tax proceedings

Pedro Abreu


Tax Lawyer (Portugal & Brazil)

Pedro is a specialized lawyer with a master's degree in tax law and with an accumulated experience of 6 years between works in Portugal and Brazil. In addition to his refined knowledge in the tax area, Pedro's previous experience in the public sector gives him a unique view of the legal aspects of taxation. Pedro's work at Fresh will be directly focused on the development and structuring of tax consulting strategies and administrative and tax litigation.

Tax consultation

One of our tax experts will help you plan your taxation in Portugal. These consultations are mainly designed to help people who are not yet tax residents in Portugal.

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Tax return - 2022

Our most common tax return and is meant for people with income streams that include income from work, profits, pension and investments.

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Fresh monthly subscription

A monthly subscription package (99 Euros a month) for people who have or need to open an activity in Portugal, people with complex incomes, or people who need regular access to tax services.

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Quality tax advice requires spending time understanding a person's individual situation.

We created Joana for two reasons:

1. We wanted everyone to be able to understand not just the basics of the NHR regime but also how it applies to them.

2. Since Joana collects a lot of valuable information, she saves us time and makes paid consultations with us more efficient.

Joana is not meant to replace a human tax attorney, but she is a very helpful member o our team and a great way to start.

Talk to Joana now (free!)
Meet JOANA, the TAXBOT image
We designed a special service for filing tax returns under the NHR.

Try our tax calculator now to estimate your 2022 taxes.

Go to tax calculator.
Any time is a good time for tax planning, but the best time is as early as possible, preferably before coming to Portugal and before having a NIF issued.

People who are coming to Portugal with a certain business structure will very rarely be doubted, even if the structure is highly efficient from a tax perspective. People who change structures will often be questioned by the tax authorities. Changing structures after coming to Portugal is not impossible, but it's much harder than doing it early.

More on this here.
The Non-Habitual Residency tax regime is a 10-year preferential tax regime in Portugal, targeted at people who have not lived in Portugal for the last 5 years. See our guide to NHR.
Anyone who has not been a tax resident in Portugal for the last 5 years can use the NHR as long as they apply on time (up to 31 March the year after becoming tax residents).

People often confuse eligibility and use of the NHR system and more specifically, one of the benefits of NHR is a reduced tax rate in certain high value professions. However, having one of these professions is not a requirement in obtaining NHR status and we often advise people how to benefit from the NHR even if they are not working in any of these professions.
It depends on the type of advice that you want.

Tax lawyers are experts in tax planning. A tax lawyer looks at the sources of income and will suggest ways to utilise tax breaks and reduce the overall tax burden. The advice given by tax lawyers is confidential and remains between their clients and themselves. As experts of the law, tax lawyers are usually more expensive than accountants and charge for consultation.

Accountants are experts of auditing and doing the books. Their primary role is to help their clients with reporting requirements. Many accountants will offer tax advice to their clients . If a tax case is audited, tax accountants have to disclose the advice that they gave to their clients.

Ideally, you should use a tax lawyer for tax planning and an accountant for ongoing administration and bookkeeping.
Would you prefer to be operated by a surgeon or by a family GP?

Many firms in Portugal offer a wide range of services, ranging form immigration, to property, civil litigation and they also offer tax advice.

Indeed, we would expect any lawyer to know "a little bit about everything" but believe us - tax law is really complicated and it is also very creative. So yes, it is easier to use the same people you already know for everything you need, but it is unlikely that they will have the expertise and depth of tax knowledge to give the best advice.



Apart from being tax lawyers who focus our practice on advising expats, we are also an international boutique with qualified lawyers from Portugal and multiple other jurisdictions.  

The reason that this is so important is that the NHR system does not allow Portugal to impose tax in many cases when the other country has the right to impose tax. It is therefore impossible to advise on Portuguese taxation without understanding the systems that interact with it and who is better placed to understand such system than lawyers in these jurisdictions?

When we create a tax plan, we consider how the countries' different tax systems interact with each other, we understand the sources of income and the different forms of incorporation and investment vehicles used by people.

And finally, we offer big-4 quality advice and solutions in accessible prices.


We have qualified lawyers in the UK, US and Portugal but we advise expats who are coming to Portugal from all countries. We are experts of reading and understanding double taxation treaties and we have very good familiarity with exit taxes and similar situations.

We do not advise on taxation in countries where we are not qualified but we often coordinate advice with a tax expert in the country that people come from. Our advantage is knowing how to do that - what questions to ask, and how the systems interact with each other. 
Many people don't understand the difference between international tax lawyers and high street accountants. Think brain surgeons vs. a family doctors.

At FRESH, we do a lot as free service to the community. We encourage everybody to join our free FB group, read our free content , use our free taxbot or the free tax calculator.

However, our time and expertise is reserved to our good paying clients.

The day has arrived and our much anticipated tax calculator for expats is finally up and running. Our tax calculator is the first product to estimate taxes for expats under the NHR scheme. There is nothing quite like it.


But estimating taxes is not enough. Eventually, a tax return need to be filed and at Fresh we designed the best-in-class tax return filing service, designed around our calculator.


Early on in our journey, we consulted our clients and the expat community and a large majority told us that they would not feel comfortable self-filing their taxes. Further conversations have made it clear that nearly everyone filing their taxes in Portugal would want to consult a tax lawyer before doing so. We therefore made it a standard part of our service. 


Our tax filing package (400 Euros)

Our most common tax return and is meant for people with income streams that include income from work, profits and investments. 

Once you book our service, we will ask you to provide us your income information and personal details and will book a consultation with a tax attorney to discuss it. 

This will be followed by filing and reporting the tax return.

Our standard packages do not include responding to queries from the tax authorities, arguing with them or taking them to court.  


Fresh Membership  (99 Euros a month)

For people who have complex income, or people who need regular access to tax services, including people who are self-employed in Portugal and need to file VAT and social security reports, we designed a membership package that includes the tax return but also ongoing consultancy. 


Next steps

The next step would be to book a package with us. If you are not sure about which package you need, do not worry, you can change it later. 

One of the most important tools in the toolbox of the tax advisor is identifying income from intellectual property. Tax planning that takes advantage of intellectual property is very common at big corporate level, but unfortunately, rarely utilised when it comes to individual taxpayers due to the niche expertise needed in both tax and intellectual property. 

The two most important principles of taxation is tax residency and the source of the income. The NHR in Portugal exempts most types of foreign sourced income. This leads to a great deal of planning that focuses on using non Portuguese companies and taking dividends out of these companies as an alternative to incorporating in Portugal.

Such structures have risks that need to be mitigated as part of planning. These risks have to do with both the residency of the company and the sourcing of the income.

Companies that are managed from Portugal could be considered residents in Portugal. 

Income generated from work in Portugal could be considered Portuguese-sourced. 

Whilst foreign companies remain one of the most important pillars of tax planning, foreign-based structures that are not based on a genuine trade outside of Portugal require a high level of risk mitigation.


Intellectual property, however, can give rise to royalty income. Royalty income falls under the NHR and will not be taxed in Portugal if it is sourced in the other country and can be taxed in the other country. The vast majority of the double taxation treaties that Portugal is a party to provides for possible (very low) taxation of royalties so foreign royalties are almost always exempt from taxation in Portugal. 


However, the truly great benefit of royalties is that the typical clause in the double taxation treaty sets out that the location of the payer has preference in determining where the income was source. This is in sharp contrast to income from work, which is sourced where the work is physically done.


The outcome is that if someone living overseas pays a person to use their intellectual property, the income is genuinely foreign sourced and issues of sourcing and residency should not arise.


It is very common in the course of trade that businesses own intellectual property - this could be brands, websites, copyrighted materials, software etc. However, small businesses tend to ignore the existence of such intellectual property rather than charge for using it. It is often the case that income that is classified as self-employment or employment income is actually wrongly classified and in fact, some of the income relates to intellectual property owned by the taxpayer. Identifying such intellectual property and assigning an appropriate value to it can be extremely powerful and open up exciting tax planning opportunities.



A lot of confusion arises from the definition of "Foreign sourced income" and "Portuguese-sourced income". 


For our readers' benefit, the view of the Portuguese authorities of what constitutes Portuguese sourced income is defined in Article 18(1) of the IRS code which is brought hereby fully, followed by a machine translation to English.


It should be noted that the definition in Portuguese law of Portuguese sourced income is at times at odds with the double taxation treaty that Portugal is part of. In such an event, it is expected that the authorities will respect the double taxation treaty.


In Portuguese:


Artigo 18.º
Rendimentos obtidos em território português

1 - Consideram-se obtidos em território português:

a) Os rendimentos do trabalho dependente decorrentes de atividades nele exercidas, ou quando tais rendimentos sejam devidos por entidades que nele tenham residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

b) As remunerações dos membros dos órgãos estatutários das pessoas coletivas e outras entidades, devidas por entidades que nele tenham residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

c) Os rendimentos de trabalho prestado a bordo de navios e aeronaves, desde que os seus beneficiários estejam ao serviço de entidade com residência, sede ou direção efetiva nesse território;

d) Os rendimentos provenientes da propriedade intelectual ou industrial, da prestação de informações respeitantes a uma experiência adquirida no setor comercial, industrial ou científico, ou do uso ou concessão do uso de equipamento agrícola, comercial ou científico, quando não constituam rendimentos prediais, bem como os derivados de assistência técnica, devidos por entidades que nele tenham residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

e) Os rendimentos de atividades empresariais e profissionais imputáveis a estabelecimento estável nele situado;

f) Os rendimentos que não se encontrem previstos na alínea anterior decorrentes de atividades profissionais e de outras prestações de serviços, incluindo as de carácter científico, artístico, técnico e de intermediação na celebração de quaisquer contratos, realizadas ou utilizadas em território português, com exceção das relativas a transportes, telecomunicações e atividades financeiras, desde que devidos por entidades que nele tenham residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

g) Outros rendimentos de aplicação de capitais devidos por entidades que nele tenham residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

h) Os rendimentos respeitantes a imóveis nele situados, incluindo as mais-valias resultantes da sua transmissão;

i) As mais-valias resultantes da transmissão onerosa de partes representativas do capital de entidades com sede ou direção efetiva em território português, incluindo a sua remição e amortização com redução de capital e, bem assim, o valor atribuído aos associados em resultado da partilha que, nos termos do artigo 81.º do Código do IRC, seja considerado como mais-valia, ou de outros valores mobiliários emitidos por entidades que aí tenham sede ou direção efetiva, ou ainda de partes de capital ou outros valores mobiliários quando, não se verificando essas condições, o pagamento dos respetivos rendimentos seja imputável a estabelecimento estável situado no mesmo território;

j) As mais-valias resultantes da alienação dos bens referidos na alínea c) do n.º 1 do artigo 10.º, quando nele tenha sido feito o registo ou praticada formalidade equivalente;

l) As pensões devidas por entidade que nele tenha residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

m) Os rendimentos de atos isolados nele praticados;

n) Os incrementos patrimoniais não compreendidos nas alíneas anteriores, quando nele se situem os bens, direitos ou situações jurídicas a que respeitam, incluindo, designadamente, os rendimentos provenientes de operações relativas a instrumentos financeiros derivados, devidos ou pagos por entidades que nele tenham residência, sede, direção efetiva ou estabelecimento estável a que deva imputar-se o pagamento;

o) Os rendimentos derivados do exercício, em território português, da atividade de profissionais de espetáculos ou desportistas, ainda que atribuídos a pessoa diferente.p) As mais-valias resultantes da transmissão onerosa de partes de capital ou de direitos similares em sociedades ou outras entidades, não abrangidas pela alínea i), quando, em qualquer momento durante os 365 dias anteriores, o valor dessas partes de capital ou direitos resulte, direta ou indiretamente, em mais de 50 %, de bens imóveis ou direitos reais sobre bens imóveis situados em território português, com exceção dos bens imóveis afetos a uma atividade de natureza agrícola, industrial ou comercial que não consista na compra e venda de bens imóveis. (Aditado pela Lei n.º 114/2017, de 29 de dezembro)

q) As mais-valias resultantes de cessão onerosa de direitos, de qualquer natureza, sobre uma estrutura fiduciária, desde que, em qualquer momento durante os 365 dias anteriores à transmissão, o valor dessa estrutura resulte, direta ou indiretamente, em mais de 50 % de bens imóveis ou direitos reais sobre bens imóveis situados em território português. (Redação da Lei n.º 12/2022, de 27 de junho)
2 - Entende-se por estabelecimento estável qualquer instalação fixa ou representação permanente através da qual seja exercida uma das atividades previstas no artigo 3.º

3 - É aplicável ao IRS o disposto nos n.os 4 e 5 do artigo 4.º e nos n.os 2 a 11 do artigo 5.º, ambos do Código do IRC, com as necessárias adaptações. (Redação da Lei n.º 75-B/2020, de 31 de dezembro)


In English:

Article 18.
Income obtained in Portuguese territory

1 - The following are considered to be obtained in Portuguese territory:

a) Income from dependent work [employment - Fresh comment] arising from activities carried out there [in Portugal - Fresh comment], or when such income is owed by entities that have their residence, head office, effective management or permanent establishment to which the payment [in Portugal - Fresh comment];

b) Remunerations of members of statutory bodies of legal persons and other entities, owed by entities that have their residence, registered office, effective management or permanent establishment to which the payment must be attributed; [this relates for example to payment to directors of Portuguese companies, even if NOT located in Portuguese territory - Fresh comment]

c) Income from work provided on board ships and aircraft, provided that their beneficiaries are at the service of an entity with residence, head office or effective management in that territory [Portugal - Fresh comment];

d) Income from intellectual or industrial property, from the provision of information regarding experience acquired in the commercial, industrial or scientific sector, or from the use or concession of the use of agricultural, commercial or scientific equipment, when they do not constitute property income, as well as as the derivatives of technical assistance, owed by entities that have their residence, headquarters, effective management or permanent establishment [In Portugal - Fresh comment] to which the payment must be attributed;

e) Income from business and professional activities attributable to a permanent establishment located therein [in Portugal - Fresh comment];

f) Income that is not provided for in the previous paragraph arising from professional activities and other services, including those of a scientific, artistic, technical and intermediation nature in the celebration of any contracts, carried out or used in Portuguese territory, with the exception of those relating to transport, telecommunications and financial activities, provided that they are owed by entities that have their residence, head office, effective management or permanent establishment to which the payment must be attributed;

g) Other income from investing capital owed by entities that have their residence, head office, effective management or permanent establishment to which the payment must be attributed;

h) Income from real estate located therein, including capital gains resulting from their transfer;

i) Capital gains resulting from the onerous transfer of shares representing the capital of entities with head office or effective management in Portuguese territory, including their redemption and amortization with capital reduction, as well as the value attributed to associates as a result of the sharing that, under the terms of article 81 of the IRC Code, is considered as a surplus value, or of other securities issued by entities that have their registered office or effective management there, or even of shares of capital or other securities when, not if these conditions are met, the payment of the respective income is attributable to a permanent establishment located in the same territory;

j) Capital gains resulting from the sale of the assets referred to in subparagraph c) of paragraph 1 of article 10, when the registration has been made or an equivalent formality has been carried out;

l) Pensions owed by an entity that has its residence, head office, effective management or permanent establishment to which the payment must be attributed;

m) Income from isolated acts performed therein;

n) Equity increases not included in the preceding paragraphs, when the assets, rights or legal situations to which they relate are situated, including, in particular, income from operations relating to derivative financial instruments, due or paid by entities that have their residence there , head office, effective management or permanent establishment to which the payment must be attributed;

o) Income derived from the exercise, in Portuguese territory, of the activity of entertainment professionals or sportsmen, even if attributed to a different person.p) Capital gains resulting from the onerous transfer of shares of capital or similar rights in companies or other entities, not covered by subparagraph i), when, at any time during the previous 365 days, the value of those shares of capital or rights results, directly or indirectly, in more than 50%, of immovable property or rights in rem over immovable property located in Portuguese territory, with the exception of immovable property allocated to an agricultural, industrial or commercial activity that does not consist of the purchase and sale of real estate. Added by Law No. 114/2017, of December 29)

q) Capital gains resulting from the onerous assignment of rights, of any nature, over a fiduciary structure, provided that, at any time during the 365 days prior to the transfer, the value of this structure results, directly or indirectly, in more than 50 % of immovable property or rights in rem over immovable property located in Portuguese territory. (Writing of Law No. 12/2022, of June 27 )
2 - A permanent establishment is any fixed installation or permanent representation through which one of the activities provided for in article 3 is carried out
3
- The provisions of paragraphs 4 and 5 of article 4 are applicable to the IRS and in paragraphs 2 to 11 of article 5, both of the IRC Code, with the necessary adaptations. (Writing of Law No. 75-B/2020, of December 31)



Fresh Portugal, a Portuguese desk of an international law group specialising in taxation, has announced registration for early access to FreshReturns, a tax return product designed specifically for expats benefiting from the NHR scheme.


The service, now open for early access for a limited time, is the first of its kind and is meant to resolve the many confusions and inaccurate tax reporting in the expat community.


Everyone living in Portugal with foreign income needs to file a tax return at the end of each tax year in Portugal.


Due to the complexity of the NHR scheme, filing a correct tax return in Portugal is almost an impossible mission. Expats with income sources such as LLCs, limited companies or S-Corps often find themselves puzzled in front of the Portuguese annual statement wondering what to do and high streets accountants without deep understanding of corresponding systems are often unable to offer reliable help.


Fresh Portugal already helps hundreds of expats, primarily those on high income, to plan their taxation. To support all expats, Fresh has already Joana the tax bot, an automated chatbot that provides basic advice to expat on taxation in Portugal. With the launch of FreshReturns, Fresh Portugal is completing its offering to all expats in Portugal.

Portugal offers a lot of wonderful things - great weather, beaches, food, safety, golf, friendly culture, relaxed pace of life. Portugal has always been high on the list of choices of places to retire to, but in recent years, Portugal also became one of the trendiest place for many groups - digital nomads, remote workers, surfers, young families. Most recently, it was discovered by Americans who are moving to Portugal in masses.

Despite all of Portugal's many virtues, Portugal probably would not have had such success attracting expats if not for taxes. Two major issues woo money-savvy expats to come to Portugal - no tax on crypto gains, which is likely to change soon, and the NHR program. 

A google search of the NHR program will surface many articles. There is no shortage of information but even savvy readers will end up more confused after reading some of it. The information on the NHR system is inconsistent and often wrong. 

Things do not get better when seeking advice. Expats trying to understand how taxation truly works are often puzzled by the fact that different tax advisor tell them different things and some who have ventures into the tax authority offices to try and ask the officials were equally confused - even the tax authorities don't know how NHR really works.

So is Portugal a low tax country for expats? Yes, no and definitely maybe.


Why Yes?

The NHR framework differentiates between different streams of income. Generally, most types of foreign-sourced income are exempt from taxation so long as the income comes from a "legit" country (not black-listed) and so long as it is exposed to potential taxation in that country (even if no tax is charged).

Many people who come to Portugal own foreign companies or create them before coming to Portugal. The fact that "foreign-sourced" income is usually exempt from taxation in Portugal allows them to claim the exemption on their tax return. Theoretically, the tax authorities could challenge many of these tax returns but in reality, they do not. Most tax returns are accepted and so, income from foreign companies (including US LLCs) flows to their owners without taxation in Portugal. This could lead and often leads to a very tax-friendly environment.


Why not? 

Whilst some of the income that expats are generating and are paying themselves from companies is indeed genuine passive income, much of it is not and the foreign companies are in fact a channel to pay people money that they earned from work. Such income is not exempt from taxation under the NHR

There are multiple ways that the tax authorities could use to attack company structures, leading to taxation that is not particularly low. The fact that the Portuguese authorities are not conducting many audits and are not aggressively using the options afforded to them by the law is not a fact of nature. There is little enforcement now but this could change tomorrow, leading to huge potential exposure.


Definitely maybe

Perhaps the best way to answer the question above is by highlighting the uncertainty. Portugal's tax regime is complex, includes multiple grey areas, is applied inconsistently and is rarely enforced. Even the very few decisions implementing the NHR law are not binding on future courts or tax inspectors so "anything can happen" is the most correct answer. 


Navigating uncertainty

People who come from jurisdictions with relatively clear rules and binary answers find it rather overwhelming to try to navigate the uncertainty. 

Unfortunately, the local community of accountants and tax lawyers are completely overwhelmed by the amount, complexity and intensity of the new expat migration. The Portuguese legal and financial services industry is still mostly made primarily of generalists. Neighbourhood lawyers who deal with property, commercial matters and occasionally a tax issue are suddenly asked to understand what is an LLC or an S-Corp and suggest how it would be taxed. Accountants who have dealt primarily with domestic clients discover an influx of clients just because they can communicate well in English, but their questions are complex and nuanced and are truly, hard work.

The outcome is that many expats end up never receiving good advice, never having clarity and essentially, move to Portugal and assume considerable tax risks. 


----

The author is an international tax lawyer who advises expats on their move to Portugal. He is the creator of the Joana tax bot and offers a dedicated tax filing service designed specifically for expats.


Many people who are used to operating as employees or self-employed are sometimes worried about trading via a company, such as an LLC. 

In fact, trading as a company is really easy and has the benefits of a more organised way to conduct business.


Here are the tools we recommend for trading as a company:

Xero - we recommend creating an account with Xero (www.xero.com). Xero is a modern, award-winning accounting software. 

After creating an account, you could create invoices and send them to your clients.


Wise - Wise (previously Transferwise) offers bank-like and currency conversion services. Wise could be linked to Xero as a bank account (each currency is a separate account).


Dext - Dext simplifies and automates the process of converting paper receipts into bills that can later easily be reported as expenses. Dext can be linked to Xero as well.


That's it! This is all you need to run a successful business via a company!

Since Portugal does not tax dividend income and potentially other distributions under the NHR regime so long as it could be taxed in the other country (which is normally the case), it has been attractive for people benefitting from this regime to trade via foreign companies and extract distributions, as an alternative to incurring employment or self-employment income which is both taxed in Portugal and is subject to the list of high value professions. 

The risks of this approach have been the subject of much discussion. Essentially, a foreign company that incurs profits in Portugal could be taxed for these profits and this outcome can be achieved in a number of ways, including treating the company as Portuguese tax resident or concluding that the company has a permanent establishment in Portugal. 

It is generally true that the more substance the company has overseas, the lower these risks. One strategy which has been common in the past is appointing nominee directors overseas. These are people who act under direction of the owners without any true authority. In our mind,  appointing a person who knows nothing about the company can do more damage than good. In a thorough tax inspection, it is all but admission that the incorporation of the company is meant for tax reduction. 

In our mind, the best structures are real one. A company that includes true partners in other jurisdiction with real authority to make important decisions and with economic sense and history is the way to go.

Naturally, not all companies have foreign managers. At Fresh, we offer a management service to support companies wishing to introduce a true, substantive, international element to their trade and improve their operations and compliance. 

We call it Fresh Ops. Some of our staff in the UK and US has been thoroughly trained in compliance and company secretarial work. As part of this service, one of our companies becomes a manager of the company in question.  

As part of Fresh Ops, we become the general counsel (the company's lawyers) and operations manager for the company. We are responsible to assemble a board of directors (or managers in the event of LLCs) and we are responsible to bring the board together, identify the important decisions that need to be made in the company's life, vote on them and implement them. Board (or management) meetings are convened physically in our offices in the UK or the US (or both). 

We also accept responsibility to negotiate and sign contracts on behalf of the company (one would note that managers retaining a right to sign contracts risk being seen as a permanent establishment). As lawyers, we are well-trained in doing so and the process is done alongside owners.

Boards that we are part of operate as real boards - facts are presented, a discussion is had and decisions are made. 

Board meetings are documented and we produce minutes showing proper compliance and management. 

Whilst the shareholders/owners remain the ultimate decision-makers, our involvement in a company is made to improve its management style, introduce proper decision-making mechanisms and improve the outcomes of company contracts. 

Although board meetings are minuted, the discussions between us and the company owners enjoy legal privilege and are confidential.

Since we do not believe in management without substance, Fresh Ops is not a cheap service, we can only accept so many companies and it is not a service designed just for people who want to shift tax residency. It is designed for people who want to improve their companies by introducing robust management structures. At the same time, we believe that Fresh Ops is defensible to any tax authority that considers place of effective management.

US LLCs are one of the most common and attractive tax planning structures in Portugal and particularly for benefiting from the NHR scheme. 

The extensive use of US LLCs as a tax planning vehicle in Portugal can be traced back to a binding ruling that was requested by a taxpayer quite some time ago (processo 2360/2016).

Case 2360/2016

It is important to remember that such a ruling is limited to the facts of the matter and that it can change in the future. However, the ruling provided important information on the manner in which the Portuguese tax authorities view US LLCs.

In that ruling, the relevant LLC was taxed as a partnership and it was a finding of fact that it was not managed or directed from Portugal.

The Portuguese tax authorities considered the fact that an LLC is a transparent entity in the United States and that income passes to the members but arrived in the conclusion that only companies that are professional societies or companies for simple administration of assets could be tax transparent in Portugal, as these are the type of companies that can be transparent under Portuguese law.

It follows that for companies that are not one of the above structures (not professional companies or holding companies), an LLC will not be considered transparent. 

Flowing from there, the income from the LLC was classified as "other income" that both countries have the right to tax and the taxpayer was charged at a 28% tax. Importantly, the taxpayer in that case have not benefit from the NHR scheme. Had the NHR scheme been applied, the outcome of the fact that both countries have the right to tax the income would have been zero tax in Portugal.

This case led to an avalanche of tax planning using US LLCs, taking advantage of the different tax treatment (transparent/pass-through in the US, opaque in Portugal) and taking full advantage of the Portuguese NHR regime.

It is important to remember, however, that the case has been limited to the specific circumstances and also carefully read the clues from this case. It is our view that LLCs that are used as a vehicle for income from work done in Portugal could be taxed in Portugal under a number of doctrines, but the risk profile of different cases is on a very wide spectrum.


How can Portugal tax LLC income?

Risk 1 - interpretation changing

One option is that the tax authorities will change their interpretation. "hard cases make bad law" and in the relevant case the taxpayer did not have NHR. It is possible that the authorities will change their view. We believe that it is less likely - a conclusion of transparency is not well-supported in Portuguese law. The finding that an LLC is not a transparent entity is a fairly common finding and the same finding has been reached in a number of other countries, including the UK. 

Risk 2 - different treatment for single person disregarded entities

The relevant case dealt with a partnership. Many LLCs are single-person pass-through entities. Whilst a single person pass-through entity is still an LLC, it is not required to have an EIN (employer identification number) and is not required to file a separate tax return. These factors could weigh against considering a single-person LLC as a company in a similar manner as a partnership was considered to be a company. However, hypothetically a single-person LLC that is not member-managed is more likely to be deemed a company than a member-managed LLC. 

Risk 3 - the LLC is a resident in Portugal

In the relevant case, there was a finding of fact that the company was neither managed not directed from Portugal. Accordingly, if a company is managed from Portugal it would be deemed a tax resident in Portugal. 

There is no single definition of the "place of effective management" but some guidance is offered in paragraph 24 in the Commentary on Article 4 which was included in the 2000 Update to the Model:

“24. …The place of effective management is the place where key management and commercial decisions that are necessary for the conduct of the enterprise’s business are in substance made. The place of effective management will ordinarily be where the most senior person or group of persons (for example a board of directors) makes its decisions, the place where the actions to be taken by the enterprise as a whole are determined; however, no definitive rule can be given and all relevant facts and circumstances must be examined to determine the place of effective management. An enterprise may have more than one place of management, but it can have only one place of effective management at any one time.” 

Different factors that have been taken by courts over the world have been: 

− Place of incorporation.
− Place of residence of shareholders and directors.
− Where the business operations take place.
− Where financial dealings of the company occurred; and
− Where the seal and minute books of the company were kept.


Risk 4 - permanent establishment

Even if effective management of the company is not in Portugal, the income associated with a permanent establishment could be taxed in Portugal. Permanent establishment is often created when there is a permanent physical office in Portugal (an office will typically be seen as permanent if it exists for more than 6 months) or where a director with the ability to bind the company in contracts resides in Portuguese territory.


Risk 5 - Portuguese-sourced income

Even if a company is managed from outside of Portugal and does not have a permanent establishment in Portugal, there is still a path to taxation. A country can still tax income sourced in its territory. However, the burden of proof is on the tax authorities.


Defending LLCs from Portuguese taxation

As can be seen above, there are multiple ways for tax authorities to try and tax income. In practice, authorities would rarely carry out an FBI-style enquiry and would normally focus on relatively "low hanging fruit". 

For our clients who are considering LLC structures, we often offer the following advice:

- Partnerships are more defensible than single-person-disregarded entities.

- An overseas management reduces the risk dramatically. Management should be documented properly.

- An office in Portugal or a manager in Portugal with the right to bind the company in contracts increases the chances of a permanent establishment.


Many people trade from LLCs and are oblivious to the risks and to the ways to mitigate them. So far, the Portuguese tax authorities have not been cracking down on LLCs but we always prefer to be ready because things are good until they are not. 

It is important to remember that when a structure is created purely for tax optimisation, it often looks just like what it is, whilst genuine partnerships between people in different countries are much easier to defend. We therefore always advise on trying to work with real relationships.








To get a NIF, you need the following documents (in a Latin language or with a certified translation):


1. A photocopy of a valid passport. 

2. Proof of residential address, with the name on the address matching the name on the passport. This can be:

 (a) A valid driving license (both sides). For US citizens - issued within the last 12 months. 

 (b) First page of a bank statement, dated within the last 3 months. 

 (c) Utility bill from the last 3 months.

 3. Power of attorney.


We are often asked by people we advise who are under the NHR scheme whether capital gains would be taxable in Portugal.


Capital gains on property 

When the capital gains are a result of selling immovable property (like homes or commercial property), the answer is often fairly straight-forward. The double taxation treaties that Portugal is party to normally state clearly that capital gains from a sale of property are taxable in the country where the property is based. Therefore normally only people holding property in a country that does not have a double taxation treaty with Portugal should be worried about taxation from property gains. Such people are almost always better off selling their property before coming to Portugal or holding on to it as long as they are in Portugal. 


Capital gains on securities (such as shares) 

The question becomes more complex when it comes to capital gains from securities or other assets. The NHR law clearly includes capital gains as a category that could benefit from NHR (category G). The rule that is states in the law is that if the other country may tax the gain, Portugal will not tax it. To know whether a country may or may not tax the gain, we need to look at the relevant tax treaty between Portugal and the other country. 

There are three countries that we are aware of that currently may tax capital gains from securities: 

Brazil - Brazil presents an interesting case because the Brazilian government informed the Portuguese government that the DTT between the countries is terminated. However, it is unclear whether the Portuguese government treats the agreement as terminated and so far as it is in force from the Portuguese side, it awards Brazil the right to tax capital gains. 

United States - the United States has a unique tax policy of taxing citizens wherever they live and all the tax agreements that the US is party to allows the US government to tax its own citizens for all types of gain, including capital gains. This is called “the savings clause”. 

Canada - Canada has a specific provision (Article 13.6 of the double taxation treaty) allowing it to tax its citizens or people who were residents for at least 15 years in Canada prior to moving to Portugal, for capital gains occurring up to 5 years after the move. There may be other agreements allowing taxation of capital gains so it’s always best to check the specific agreement, but normally double taxation treaties set out that taxation of capital gains occurs in the country of residency. In a comment to this article, a Canadian CPA noted that Canada does not in fact apply such tax, but the exemption in Portugal should nevertheless trigger.


The law is therefore clear that there are circumstances where capital gains will not be taxed in Portugal, whilst in most circumstances it will be taxed. 


Declaring capital gains on tax returns 

Sadly, however, whoever created the online tax return form “didn’t get the memo”. Even if the taxpayer rightfully claims an exemption from capital gains, the automated calculation will not acknowledge it and will produce a tax assessment that includes full taxation on the gains. This leaves the taxpayer to choose between three bad choices: (1) pay the tax even through it isn’t due (2) choose different category and submit a wrong return (3) submit a correct return and dispute the wrong outcome. In one case, a US citizen taxpayer chose option 3 and successfully won in court, but that had not changed the form. 


Tax planning 

Whether tax is due or not, considerable capital gains offer a wide range of planning opportunities with the most common structure being incurring capital gains within an entity.

We often write about the NHR regime. 

One of the peculiarities of the NHR regime and what makes it so complicated is that the exemption from taxation in Portugal of foreign-sourced income depends on whether a person who generates income in a country other than Portugal could be taxed in that country.

This applied to self-employment income, dividend income, capital gains and other types of income. 

As US citizens are painfully aware, the US is the only country in the western world that taxes its citizens wherever they live. This means that the US always has the right of taxation in relation to its citizens and this right is enshrined in the double taxation treaties that it is party to, including the one in Portugal. It's called "the saving clause". 

This leads to a unique outcome - US citizens under the NHR regime are generally exempt from Portuguese taxation for almost all types of their foreign income.

Below is what we believe to be the correct treatment of US citizens in Portugal on different types of income:  

Employment income 

Work done by a US citizen as an employee (W2) who is a resident in Portugal can be taxed in the US if the work is physically done in the US. If it is taxed in the US, it should not be taxed in Portugal. A remote worker working from Portugal should be paying tax in Portugal.

Self-Employment income, via Portuguese green receipts 

Work done in Portugal that is a high value activity would generally be taxed in Portugal (because it is not "foreign-sourced").

Work done outside Portugal should not be taxed in Portugal. 

Self-Employment income, as distributions from a US LLC that is taxed in the US as a partnership

Such income will generally not be taxed in Portugal if the clients are outside Portugal and the management of the LLC is outside of Portugal. Thus it is often very important to pay attention to the management. 

Capital gains 

Such income will generally not be taxed in Portugal. In one case, the Portuguese authorities tried to argue that the saving clause is insufficient to prevent Portuguese taxation and the court rules in favour of the tax-payer. 

Dividend income

Generally not taxed in Portugal.

If you ask most people what’s their favourite thing in the world, most would probably choose their spouses, children, the seaside or romantic sunsets. 

These are the sort of things that people like to think about and when people are coming to Portugal, they definitely get a lot of the last two. 

One thing people really don’t like to think about is taxes. So they don’t. They don’t think about taxes before they move or they don’t think about them at all. There are some myths and stereotypes about taxation in Portugal and it is just convenient for people to think that they can just continue to pay tax in the countries they left and “deal with it later” or that “Portugal doesn’t tax foreign income” or that “We don’t need to pay in Portugal because we moved at the end of the year” or whatever other myth they heard. 

Then comes the first tax return and they have to crush into reality and meet the harsh truth – Portugal wants to tax its residents, it taxes them from day 1 and it’s tax legislation is really complex. Portugal is probably the country with the highest tax rates in Europe for its residents but it can also be one of the countries with the lowest tax rate in Europe for expats. The difference is in planning

Portugal want talented people to come and bring their income with them. It accepts that some of that income has nothing to do with Portugal and is willing to go along way exempting people from taxation. However, Portugal is not happy for people who are already paying tax in Portugal or should be paying in Portugal to try and avoid it. 


Tax planning vs tax avoidance. 

Tax Planning involves intelligent planning of reducing the tax liability by claiming all the eligible deductions, rebates & exemptions as per law. It is generally considered to wise, advisable and morally correct for people to plan their taxes, taking advantage of benefits and deduction. Tax avoidance is deliberately indulging in the practice of adjusting financial affairs to the extent that the tax liability is minimised.  It is generally considered unwise, not advisable and morally wrong. Tax authorities accept tax planning but do not appreciate tax avoidance. People who avoid taxation could be fined and in extreme cases could be prosecuted. The difference between tax planning and tax avoidance could, in many cases, come to timing and consistency.

People who are coming to Portugal with a certain business structure and continue to use the same structure would very rarely be second guessed by the authorities, whereas people who arrive in Portugal, report their income in a certain way and then realise they could have perhaps achieved a tax saving and change their structure would almost certainly raise red flags and could be on the hook. 


Specific examples 

John is a hypothetical British person who is a teacher in an online British private academy. He receives a salary from the UK school. John arrived in Portugal 3 years ago and obtained NHR status. He continued to receive his income as a salary in the UK and has been taxed in the UK. In an audit, the Portuguese tax authorities identified that he works from Portugal and taxed his entire employment income at full rate since he is not on a high value profession, sending him to apply for a refund from HMRC, the UK tax authorities. Had John planned ahead, he would have formed a company in the UK together with his UK-based colleague offering the same services, before moving to Portugal. He could have taken money out of the company by paying himself dividends and would have suffered no tax in Portugal for that income, with the only tax being UK corporation tax of 19%.

Janice is an American SEO advisor working with a partner in Norway, each as independent contractor. Janice is a borderline IT specialist and may pay 20% tax in Portugal but is more likely to be taxed at full rate. However, had Janice formed an American LLC ahead of her move together with her partner, she may have been full exempt from Portuguese taxation. Should Janice do that when she is already in Portugal, she is fairly likely to be audited, pay full tax and fined.

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