Better taxes than Portugal

[bandanna]

I’m a tax resident in Portugal under NHR (v1), and shareholder/investor in companies abroad where I get mostly paid in dividends not taxed in PT where it’s taxed at the source. Additionally I own equities of public and private companies where it’s becoming good time to sell. But the taxes in Portugal are not great for that, mostly 28% tax on the difference between buy or fmv price to the sell price. Instead, I’m considering to move to Dubai at least for a period of a year, become a tax resident there.

How long do I need to stay in Dubai in order to be protected from tax liability in Portugal? Do I really need to wait until TRC in UAE or can I just move to Dubai and from day one sell those shares? And I might be rusty, isn’t TRC available after 90d or it really changed to 183d?

PS - if you were in the same situation, would Dubai be the country to do that tax optimization in, or anything else comes in mind? For example recently Thailand recently seem to have some tax friendly laws.

Thanks!

 

[Sols]

Can you transfer your shares to a holding company? Then you sell your shares, the‌ profits go to the holding company, and the holding company pays you dividends.

 

[bandanna]

Good idea in general, however I don’t own an accredited company which⁠ might make things harder.

Also weirdly an accountant advised to move the shares to an⁤ operating company of line instead, still trying to figure why not the holding entity.

 

[Sols]

What do you mean by "accredited company" in this‍ context?

A holding company is nothing special. You can create one and sort out banking⁠ all in a couple of weeks. Appoint local directors if you want some peace of⁤ mind.

Cyprus or Malta non-dom status could also work as alternatives to Dubai.

 

[bandanna]

You are absolutely⁤ right and thanks for the tips. I’m certainly curious to learn in the event or⁣ deciding to move to Dubai or other country, how can I do it

 

[Alex Braun]

What's wrong with good ol' collateral loans?

 

[Alonzo]

Transferring shares to a holding company for the sole purpose to avoid exit tax is‌ risky. Talk to an experienced tax lawyer in Portugal

 

[bandanna]

What about moving to Dubai, becoming a tax resident, then doing so? ... could be‌ other countries as well, just Dubai seems the most straightforward

 

[Alonzo]

The problem is that you’ll have to pay exit tax on the gains during your⁠ entire residency in Portugal if you leave the EU. The NHR regime doesn’t shield you⁤ from this.

The only way to legally "avoid" exit tax is to move to another⁣ EU country. I put avoid in quotation marks because the exit tax payment is actually⁢ deferred until it gets sold within a certain period but the law is vague so︀ I highly recommend to look for a Portuguese tax lawyer

 

[bandanna]

What's the exit tax in PT? ... is it valid also on unexercised stock options?‌ also on unrealized gains of stocks?

One idea above was a corp in Malta or‍ Cyprus, which I'm also looking into. It sounds the road to Dubai is tougher than⁠ I thought!

 

[Tradepass]

If you incorporate an holding company in Estonia, corporate income tax is automatically deferred on‌ all types of income earned by your corporation untill distribution (or deemed-distribution) occurs... This might‍ work for some time... But it is advisable to consult a Portuguese CPA or tax⁠ lawyer to check if you get tax-free treatment if you contribute stocks or other capital⁤ assets to an Estonian corporation.

 

[aniglo22]

What would it achieve ?⁣

 

[Tradepass]

You can sell capital assets‌ tax-free (because the income would still be earned by the company, instead of you personally)‍ and get taxed only when you distribute a dividend to yourself... And avoid exit tax,⁠ because Estonia is in the EU...

 

[aniglo22]

Transferring stocks to the holding is already a taxable event.

 

[Tradepass]

This is something that, as I said earlier, must be investigated with a Portuguese tax‍ attorney or CPA. In many countries, it you organize a new corporation, make in-kind contributions⁠ and obtain a certain percentage of ownership in the new entity (as a result of⁤ the in-kind contributions), you get tax-free treatment (e.g., in the USA this is called a⁣ Section 351 nonrecognition transaction). But, honestly, I am not sure how it is treated under⁢ Portuguese tax law.

 

[aniglo22]

Company has to be Portuguese resident .⁢
CIRS 38 .
Source :
https://info.portaldasfinancas.gov....codigos_tributarios/cirs_rep/Pages/irs38.aspx

​

 

[Tradepass]

So that's the end of the story. It sounds a little‌ odd, and I would investigate the matter further because the residency requirement restricts the freedom‍ of movement within EU and discriminates between Portugal and other EU member states... However, it⁠ seems that you only get tax-free treatment only if you contribute assets that are used⁤ in a trade or business (so that would exclude most stocks and financial instruments I⁣ suppose...)

 

[toums]

Not correct. The exit tax also does not apply to countries that have a Double︀ Tax Treaty (DTT) with Portugal including a tax information exchange clause , which is the︁ case with the UAE.

Alternatively, if OP doesn't feel comfortable with that approach, He can︂ still proceed in two steps:

1. First, provide a new temporary EU address to the Portuguese︃ tax authorities (they will just send a letter with a PIN code to that address,︄ which you’ll then enter on your online tax dashboard).
   
2. Later, update the address again in︅ the system to one outside the EU , or simply leave it as is.
   

As several tax advisors told me in the past (in both mainland Portugal and Madeira), there︆ have been no real issues with NHR holders , at least up to now.

 

[Alonzo]

Well that's not fully accurate... It is a⁠ lot more complex than that.

Surely @bandanna is in touch with a Tax advisor/lawyer that⁤ is familiar with this particular situation.

 

[toums]

That's what two tax advisors there told me personally. I also⁠ had NHR (version 1), but I’ve since left Portugal.