Swedish pensioners will have one less reason to come and retire in Portugal. Indeed, after long months of negotiations and contradictory statements by both parties, Sweden and Portugal have signed a new tax treaty that particularly affects beneficiaries of NHR status, non-habitual resident. Sweden will regain the right to tax the private pensions of Swedish pensioners living in Portugal, following the signing of a protocol to the tax treaty aimed at eliminating double taxation by both countries. This new agreement simply signifies the death sentence of the tax exemption enjoyed by Swedish retirees in Portugal. Lisbob, the expatriate assistant in Portugal, tells you all about the end of NHR status for Swedish retirees.
A new tax treaty that puts an end to NHR status
"This protocol addresses a number of issues, including the review of the pension jurisdiction jurisdiction clause, which establishes the concurrent jurisdiction of the State of origin and the State of residence. ", said the Ministry of Finance of Portugal.
In a statement, the Ministry of Mário Centeno announced the signature in Brussels of the protocol with the Swedish Minister of Finance Magdalena Andersson, stressing that the text resulting from these negotiations stemmed from discussions started last year.
The same communiqué indicates that the protocol "responds to the main concerns of both countries, to fight against tax evasion and eliminate double taxation on income, strengthen bilateral economic and trade relations", without detailing the changes made.
End of NHR status for Swedish retirees
Thanks to this protocol, Sweden regains the right to impose private pensions on Swedish retirees living in Portugal, thus eliminating the tax exemption status they enjoyed during their expatriation and their registration in the NHR (non-habitual resident), with a tax rate of 0%.
Established in 2009, the NHR scheme offers some workers the opportunity to pay a special 20% tax on the IRS and pensioners with pensions paid from another country the opportunity to be totally exempt from paying the IRS. In the case of a double taxation treaty, this gives the country of residence (Portugal) the right to tax these pensions.
With this new tax treaty signed between Portugal and Sweden, it is up to the country of residence to eliminate double taxation by the tax credit method or the exemption method.
For the new rules to begin to be applied, the signed protocol must still be submitted for approval and ratification. Lusa also asked the Ministry of Finance about the date from which the amendments to the Double Taxation Convention, now signed by Mário Centeno and his Swedish counterpart, have started to be implemented, but have not received no answer.
1,347 Swedish pensioners concerned out of a total of 9,589
Official data from the Portuguese tax authorities show that in 2017 the number of people who provided the form in which the pension income paid by a foreign country is reported (Annex J) was 9,589, of which 1,347 were Swedish. These retirees will simply lose their NHR status.
Last April Mário Centeno said that the Non-Habitual Resident Plan (NHR) was being revised to make it more attractive for professionals with the qualifications that the country needs.
The NHR status for assets is currently reserved for a list of occupations considered high value added, to which it is possible to pay an IRS rate of 20%. The problem comes mainly from the processing time of applications for NHR status or registration to Professional Orders in Portugal which can take 2 years. Thus, the NHR status is refused while the person fits well in the criteria and does not finally settle in Portugal for lack of administrative responsiveness.