The Scandinavian country regains the right to tax Swedish pensioners residing in Portugal starting this Friday.
The Convention to Avoid Double Taxation between Portugal and Sweden comes to an end this Friday, making this country regain the right to tax Swedish pensioners residing in Portugal.
Unhappy with the tax exemption given to pensions through the non-habitual resident tax scheme (NHR), Sweden has decided to move forward with a request to revise the Double Taxation Avoidance Convention signed with Portugal.
Negotiations for that revision began in 2018, and in May of the following year, a protocol amending the Convention was signed, providing that the Swedes would start taxing their retirees’ pensions again in 2023 or already in 2022 if Portugal did not take measures to end that exemption from taxation on pensions granted under the NHR.
In 2020, through the State Budget Law, it became foreseen that residents in Portugal benefiting from the NHR tax scheme would be subject to a 10% tax rate on pensions paid by another country.
Thus, residents in Portugal with a pension paid by Sweden who joined this 10% rate could postpone until 2023 being taxed by the Scandinavian country, as long as Portugal ratified the protocol – which it did not.
Faced with Portugal’s non-ratification of the protocol, the Swedish parliament approved, at the beginning of June 2021, the end of the tax treaty it had with Portugal.