If you are a resident of either the UK or Portugal, it is important to know about the double taxation agreement between the two countries. The agreement is designed to ensure that people who are taxable in both countries are not taxed twice on the same income.
The agreement between HM Revenue and Customs (HMRC) and Portugal has been in effect since 1987 and has been revised several times since then. It applies to individuals and companies who are residents of one or both countries and earn income from sources in the other country.
Under the agreement, individuals and companies are only required to pay tax in one country, even if they earn income from both. The taxes that are paid in one country are then credited against the tax liability in the other country.
The agreement covers a wide range of income types, including employment income, pensions, royalties, and dividends. It also has provisions for the avoidance of double taxation on capital gains, which are gains from the sale of assets such as property and shares.
For individuals, the agreement can be particularly beneficial if they are retired and receiving a pension from one country while living in the other. Without the agreement, they could be subject to tax in both countries, which could significantly reduce their income.
The agreement also provides for cooperation between the tax authorities of the two countries to ensure that the terms of the agreement are being adhered to. This includes exchanging information and providing assistance to each other in enforcing the agreement.
If you are a resident of either the UK or Portugal and earn income from sources in the other country, it is important to understand the terms of the double taxation agreement. This could help you avoid paying tax twice on the same income and ensure that you are complying with the tax laws in both countries.