In January 2020, the EU and the UK agreed on the terms of the withdrawal agreement. A transitional period is in effect until 31 December 2020 and any reference to Member States in EU tax law and directives should be understood as involving the UK. Similarly, the fundamental freedoms of the EU will continue to apply to the UK. In addition to Portugal`s national regimes that exempt international double taxation, Portugal has entered into double taxation with more than 70 countries/legal systems to avoid double taxation and to allow cooperation between Portugal and foreign tax authorities to enforce their respective tax laws. Double taxation agreements are agreements between two states: for the purposes of this section, we consider a person to be a tax resident in the United Kingdom and an additional country, although double taxation agreements may exist between two countries. It is essential to determine whether this is possible and how a double taxation agreement should be applied, given that it is the country of residence that generally pays tax duties. If a person is considered non-resident in the United Kingdom under double taxation agreements, that person would only be taxable in the United Kingdom if the income comes from activities in the United Kingdom. This is important because it means that all non-UK income and investment profits are protected from UK tax. Portuguese residents are subject to the taxation of their global income at progressive marginal rates and non-residents are subject to Portuguese tax on their income from Portuguese sources at current rates (between 25 and 28%), depending on the type of income received. A double taxation agreement may provide for a change in these rules.
On the basis of European Union (EU) rules and bilateral social security agreements, a derogation may apply to social security contributions for longer business travellers. Since there are many rules and complications that can arise when applying double taxation agreements, it is important to seek professional help from a qualified and experienced accountant. From the point of view of national tax legislation, in parallel with international tax legislation, it should be noted that the provisions agreed in bilateral tax treaties prevail over the provisions of domestic law in the event of conflict. The Convention on the Prevention of Double Taxation will apply primarily to national law where a non-resident subject meets the application of the convention. In this case, the State of residence is solely responsible for the taxation of the resident`s income, including income collected in the state in the territory from which the subject is foreign to the territory. Yes, it is a possibility that depends on the nature of the income streams and also on the specific double taxation convention. Specific provisions apply to border workers in the following double taxation agreements: there is no threshold/minimum number of days that exempt the worker from the conditions of deposit and payment of taxes in Portugal for Portuguese working days. However, the application of a double taxation agreement may determine that the worker is not subject to the reporting obligation, provided that the person spends less than 183 days in Portugal and that the person`s income is not paid or charged by a Portuguese unit. For more information on how to avoid double taxation, you can contact our law firm in Portugal.