Swedes in Portugal face end of tax-free living

swedenNorthern European pensioners are laughing all the way to the bank after figures show that Portugal's generous tax-free Non-Habitual Residents scheme has cost Treasuries over €1 billion in the last four years.

Following Finland’s lead in tearing up the tax agreement, that allowed its pensioners to live in Portugal tax-free, Sweden is dragging the Portuguese government to the negotiating table to do likewise.

The generous Non-Habitual Residents scheme run by Portugal, last year waiving €413 million in potential tax income from foreigners, has triggered the ire of northern European countries and it’s Sweden’s turn to put an end to the scheme that allows many pensioners to live in Portugal 'without paying tax in either country.' (*see Per Andersson comment below).

September sees the start of a technical consultations between the respective Tax Authorities to review the convention signed in 2002, which avoids international double taxation.

This agreement, combined with the Non-Habitual Residents Scheme, has allowed Swedish pensioners to live in Portugal without paying taxes on private pensions, a situation that Swedish Finance Minister Magdalena Andersson wants to end.

The first formal step has been taken with the consultations starting on Saturday. The minister already has congratulate herself for having "dragged Portugal to the negotiating table," calling the achievement "a great success" when interviewed by news service, Dagens Industri.

Andersson estimates that about 1,000 Swedish pensioners have come to Portugal as non-habitual residents. The Finance Minister earlier said that, "if Portugal does not tax Swedish pensions, a Swedish tax will be created. The current situation can not continue."

The Ministry of Finance in Lisbon has confirmed that meetings are to take place in September.

Portugal’s role as a ‘tax haven within Europe’ is being chipped away by influential northern governments which cite the inherent unfairness in this two-tier tax system that the European Commission can do nothing about under current legislation as each member nation controls its domestic tax rates.

Finland’s way of ending the scheme was to tear up the dual taxation agreement signed in 1970 and in force since 1971. Sweden is creating the conditions to take the same action.

Portugal’s Communist Party and Left Bloc hate the NHR scheme as it cost the Treasury €111 million in 2014, rising to €150 million the following year and €350 million in 2016.

Add this to the 2017 figure of €433 million and well-off northern pensioners have had a bonus of over €1.044 billion in the past four years.

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Note:

Readers Comments (below) make it clear that Swedish State pensions are taxed 25% at source and it is only private pensions that qualify for tax breaks - not that the Swedish Minister mentions this fact. Similarly, UK pensions to former State employees, teachers, nurses etc, are taxed at source 

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+1 #14 Hendriksson 2018-09-03 15:29
Having moved on from pensioners we must now raise the issue of reciprocal Effective Occupation - the main driver for Schengen and what should be driving the European Project. Sweden, being a mature, developed, well educated, country leads in offering effective occupation to all; hence so many migrants.
Having an authentic Portuguese experience in Sweden is a no brainer. Just open the phone book and look ! So where in Portugal can a Swede get a reciprocal experience? At best, being served a smear of Danish Lurpak on a slice of Norwegian Kavli (Ryvita) whilst the host is humming "Can you hear the drums Fernando?" is not the same.
+3 #13 Ed 2018-09-03 08:01
Fake News.

All Swedish NHR pensioners in Portugal has to pay 25% income tax (SINK) of government pensions to the Swedish tax Authority, whether or not using any services in Sweden.

The only part tax free is the minor pension payed by former private employers.

'Fake news' is propaganda that consists of deliberate misinformation or hoaxes spread via traditional print and broadcast news media or online social media.

This new report, with an explanatory note based on readers' comments did not aim deliberately to mislead.

The Swedish Minister chose not to mention that State pensions already are taxed at source and that it only those on private pensions she wants to tax.

I hope this now is clear.

Ed
+2 #12 Swede 3 2018-09-03 00:42
Therefore, when the Swedish minister of finance cracks down on what the Portuguese government has decided about local tax she is actually totally out of bounds and she is meddling with the interior business of a foreign country. It would indeed be very interesting to see the Swedish reaction the Portuguese minister of finance complained about the Swedish tax exemption for certain foreign professionals.
+4 #11 Swede2 2018-09-03 00:41
The double taxation treaty gives Portugal the right to tax private pensions. Under the NHR regime Portugal has waived tax on these incomes for a period of 10 years. This has over the last five years attracted about 1000-1500 Swedish pensioners with private pensions to move to Portugal and purchase property, cars and other goods and services. Together with people from other nations this has have had a very positive impact on the Portuguese economy not only by increased IVA, IMT etc but also by consumption boosting the local economy in many cities.
+2 #10 Swede 2018-09-03 00:40
If I had been the Portuguese minister of finance I would have told the Swedish equivalent to simply mind her own business but of course in a much nicer way. Fact is that the double taxation treaty means that all Swedish pensions except private pensions are taxed in Sweden, i.e. no Swedish pensioner manages to avoid Swedish tax on state pensions and equivalent. Fact is also that the Swedish socialist government raised the tax charged to Swedes living abroad by 25% last year, i.e. from 20% to 25%. This means that many Swedes living abroad is actually paying a higher tax on their pension income than pensioners living in Sweden. This is how socialists punish people that prefer the sun in Portugal or elsewhere before the cold winter in Sweden.
+2 #9 Per Andersson 2018-09-02 23:47
Quoting Ed:
Quoting Per Andersson:
”...allows its pensioners to live in Portugal without paying tax in either country.”?!

How about some research? All Swedish NHR pensioners in Portugal has to pay 25% income tax (SINK) to the Swedish tax Authority, whether or not using any services in Sweden.


How are some Swedes paying no tax on pensions?

See: https://www.bloomberg.com/news/articles/2018-04-29/-europe-s-florida-sparks-rift-as-portugal-lures-rich-pensioners

"After a lifetime of long Swedish winters and hefty tax bills, Dan Wikstrom’s dream of a comfortable retirement in the sun has come true. Not in a Caribbean tax haven, but in Portugal, a far more convenient four-hour flight away.

The 63-year-old former executive is among a growing number of northern Europeans lured south by a flat income tax rate of 20 percent and 10 years of tax-free pension payments. For Wikstrom that means doubling his retirement income, to around $12,000 per month."


Fake News.

All Swedish NHR pensioners in Portugal has to pay 25% income tax (SINK) of government pensions to the Swedish tax Authority, whether or not using any services in Sweden.

The only part tax free is the minor pension payed by former private employers.
+1 #8 Per Andersson 2018-09-02 23:31
Quoting Ed:
Quoting Per Andersson:
”...allows its pensioners to live in Portugal without paying tax in either country.”?!

How about some research? All Swedish NHR pensioners in Portugal has to pay 25% income tax (SINK) to the Swedish tax Authority, whether or not using any services in Sweden.

The only part tax free is the minor pension payed by former employers.

Why the Swedish pensioners is hunting down by the Swedish finance minister?

Pure evilness.


See also: https://nordic.businessinsider.com/swedish-retirees-are-flocking-to-portugal-to-avoid-taxes-2017-9/

"In recent years, Portugal has become a popular low-tax haven for Swedish retirees. Since 2009, almost 2300 Swedes, most of them senior citizens, have swapped dark winters for the Mediterranean sun, and moved to Portugal either part- or full-time. Doing so, they have been able to avoid paying taxes to Sweden, while paying zero taxes on their pension income in Portugal for up to ten years.



That is just not true.

All Swedish pensioners with NHR status in Portugal is paying 25% of the government pension, the tax is named SINK.

https://www.skatteverket.se/privat/skatter/internationellt/bosattutomlands/sinksarskildinkomstskattforutomlandsbosatta/papension.4.6fdde64a12cc4eee23080002614.html
+1 #7 Ed 2018-09-02 23:24
Quoting Per Andersson:
”...allows its pensioners to live in Portugal without paying tax in either country.”?!

How about some research? All Swedish NHR pensioners in Portugal has to pay 25% income tax (SINK) to the Swedish tax Authority, whether or not using any services in Sweden.

The only part tax free is the minor pension payed by former employers.

Why the Swedish pensioners is hunting down by the Swedish finance minister?

Pure evilness.


See also: https://nordic.businessinsider.com/swedish-retirees-are-flocking-to-portugal-to-avoid-taxes-2017-9/

"In recent years, Portugal has become a popular low-tax haven for Swedish retirees. Since 2009, almost 2300 Swedes, most of them senior citizens, have swapped dark winters for the Mediterranean sun, and moved to Portugal either part- or full-time. Doing so, they have been able to avoid paying taxes to Sweden, while paying zero taxes on their pension income in Portugal for up to ten years.
+2 #6 TerryP 2018-09-02 23:21
Quoting Paul-vr:
These are pensions and shouldn't be taxed at all. As far as Portugal's position. There are billions of euros coming into the country. They're being spent helping the economy and what about the 23% VAT on those billions being spent? Think of all lost sales for retail, restaurants, realestate, when they leave.
:lol:


The fact is that HNR pensioners are paying little or no tax while neighbours are paying up to around 50% top rate.

How is this fair?
+1 #5 Ed 2018-09-02 23:12
Quoting Per Andersson:
”...allows its pensioners to live in Portugal without paying tax in either country.”?!

How about some research? All Swedish NHR pensioners in Portugal has to pay 25% income tax (SINK) to the Swedish tax Authority, whether or not using any services in Sweden.


How are some Swedes paying no tax on pensions?

See: https://www.bloomberg.com/news/articles/2018-04-29/-europe-s-florida-sparks-rift-as-portugal-lures-rich-pensioners

"After a lifetime of long Swedish winters and hefty tax bills, Dan Wikstrom’s dream of a comfortable retirement in the sun has come true. Not in a Caribbean tax haven, but in Portugal, a far more convenient four-hour flight away.

The 63-year-old former executive is among a growing number of northern Europeans lured south by a flat income tax rate of 20 percent and 10 years of tax-free pension payments. For Wikstrom that means doubling his retirement income, to around $12,000 per month."

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