How to Avoid Double Taxation

If you have investments abroad and have earned income, such as stocks or dividends, you may be subject to double taxation.

Investments abroad

Category E income (capital income) is subject to withholding tax in the country where it is paid. Suppose you obtained dividends income from Spain, where the tax rate is 19%, when you declare the income in Portugal, besides paying the 19% rate in the country of origin, you will also have to pay the 28% that has been in force in Portugal since 2012, that is, a total tax of 47%.

How to avoid double taxation

One way to avoid double taxation is through conventions. This mechanism, however, is not automatic. The process must be requested from the IRS through a certificate intended for this purpose and that must be submitted before making the payment. The list of conventions can be found on the Finance Portal.

Another way to avoid double taxation is through tax credit and its application is made in the tax return of the year in question. This method requires the submission of proof of tax already paid abroad and must be issued or certified by the tax authorities of the country where the withholdings or payments were made.

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