TRUSTS – TAX RULES APPLICABLE IN PORTUGAL

Under the Portuguese Income Tax Code rules, the amounts paid or made available to tax residents in Portugal by trusts will be deemed as investment income and subject to taxation at a 28% tax rate, or 35% if the income derives from territories listed as clearly more favourable tax regime territories, know as tax heavens.

However, if the beneficiary of the distributed amounts is not the settlor of the trust, and in case of liquidation, revocation or extinction of the trust, the amounts paid or made available to such beneficiary shall not be taxed under the Portuguese Income Tax Code if the assets received are not Portuguese sourced or immediately remitted to Portugal (in case of cash assets) as this is viewed as a gift by Portuguese tax rules.

Given the above, beneficiaries of Trusts relocating to Portugal should seek tax advice in order to obtain information regarding the applicable tax rules and tax saving opportunities that are available, such as, but not limited to, the Non-Habitual Residents tax regime (NHR).