Rules on repatriating non UK tax paid funds
Discussion
Having spent a lifetime building up & running a moderately successful business, in the course paying a small fortune in taxes over the 35 years of doing so I've recently taken up residency overseas.
I now have the benefit of a 10 year tax break where by my UK company dividends will be received free of any taxation here in Portugal, it all happened rather quickly & I had a lot to accomplish in a very short period of time prior to leaving the UK before the start of the new Tax year & didn't get to the bottom of what the rules are regarding returning some funds to the UK where I have retained a home & some commercial properties.
My accountants did briefly touch on returning funds to the UK having first of all been sent out of the UK tax free & that being a no no with HMRC but didn't give me any specifics on how that works or for how long that applies for. I will in due course ask them to provide a proper insight into the mechanics of that but wondered if anyone here has experience of this situation at all?
I now have the benefit of a 10 year tax break where by my UK company dividends will be received free of any taxation here in Portugal, it all happened rather quickly & I had a lot to accomplish in a very short period of time prior to leaving the UK before the start of the new Tax year & didn't get to the bottom of what the rules are regarding returning some funds to the UK where I have retained a home & some commercial properties.
My accountants did briefly touch on returning funds to the UK having first of all been sent out of the UK tax free & that being a no no with HMRC but didn't give me any specifics on how that works or for how long that applies for. I will in due course ask them to provide a proper insight into the mechanics of that but wondered if anyone here has experience of this situation at all?
Your UK tax obligations will depend on your UK residency status
https://www.gov.uk/tax-foreign-income/residence
Likewise, your Portuguese tax obligations will depend on your Portuguese residency status
https://www.oecd.org/tax/automatic-exchange/crs-im... (there will be more info on the Portuguese Tax Authority website, but I’ve not checked what is available in English)
If yours is a situation whereby you could be deemed tax resident in both countries, then Article 4 of the tax treaty applies:
Article 4 Residence
1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and the terms "resident of the United Kingdom" and "resident of Portugal" shall be construed accordingly.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.
https://www.gov.uk/tax-foreign-income/residence
Likewise, your Portuguese tax obligations will depend on your Portuguese residency status
https://www.oecd.org/tax/automatic-exchange/crs-im... (there will be more info on the Portuguese Tax Authority website, but I’ve not checked what is available in English)
If yours is a situation whereby you could be deemed tax resident in both countries, then Article 4 of the tax treaty applies:
Article 4 Residence
1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the law of that State, is liable to taxation therein by reason of his domicile, residence, place of management or any other criterion of a similar nature, and the terms "resident of the United Kingdom" and "resident of Portugal" shall be construed accordingly.
2. Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined in accordance with the following rules:
(a) he shall be deemed to be a resident of the Contracting State in which he has a permanent home available to him. If he has a permanent home available to him in both Contracting States, he shall be deemed to be a resident of the Contracting State with which his personal and economic relations are closest (centre of vital interests);
(b) if the Contracting State in which he has his centre of vital interests cannot be determined, or if he has not a permanent home available to him in either Contracting State, he shall be deemed to be a resident of the Contracting State in which he has an habitual abode;
(c) if he has an habitual abode in both Contracting States or in neither of them, he shall be deemed to be a resident of the Contracting State of which he is a national;
(d) if he is a national of both Contracting States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the Contracting State in which its place of effective management is situated.
Exiled Imp said:
Just to add, you may be taxable on UK sourced income and gains, regardless of your tax residency status
Indeed. I've been a non-UK tax-resident for 25 years (no property, employment, revenue or close family there since 1999), but still got taxed at source when cashing in UK private pensions pots. The nature of the funds and my residency meant I couldn't take the 25% TFLS and then spread the remainder over a number of years to keep under the personal allowance; it was all or nothing. I did one fund in 2021 and another in 2022.I was taxed on an emergency code by the pension company, (as though I had earned that amount every *month* for that entire year), then had to claim back the tax overpayment via self-assessment at the end of the tax year. A lengthy process, but it all worked out fine in the end. It was an effective rate of 5% of gross on the smaller one and 10% on the larger policy, once the TFLS and personal allowance was taken into account.
The UK/Swiss DTA meant there was nothing further to pay this end, as it had been taxed in the other state as income. So I could then use it to make additional contributions to my local occupational pension and receive a 30% tax credit here
Thanks Fella's.
The accountants have done all the required checks & work to ensure I am now officially out of the UK tax system well as much as possible from the start of this tax year having left the UK on 2nd April.
The sufficient ties thing worked out that I have 45 days per year available in the UK for the first 2 years & then 90 days after that for the next year if required.
As you say any UK property derived income is always taxed in the country of source so I will be paying UK tax on my commercial properties split between myself & the good lady wife with no personal allowance as an overseas landlord for me ( wife is remaining in our UK home & maxing out the Schengen days to be in Portugal, some issues with her parents health stop her from committing full time at the mo!)
Hence I will still have some UK taxed income that can stay in the UK, but what I was really trying to find out is the rough idea of what the situation is in returning some on my ex UK to Portugal Dividend money that I will have paid no tax under NHR back to my UK account for use in the UK without getting shafted for tax there if possible!
I'm sure there must be some sort of time limit after the funds have left the UK before any can be repatriated with no tax due.
Apparently its possible to get clearance to send your pension out of the UK without it being subject to UK tax first of all that you then have to claim back later on, I'm a few years away from that at the moment so will worry about that a bit nearer the time!
The accountants have done all the required checks & work to ensure I am now officially out of the UK tax system well as much as possible from the start of this tax year having left the UK on 2nd April.
The sufficient ties thing worked out that I have 45 days per year available in the UK for the first 2 years & then 90 days after that for the next year if required.
As you say any UK property derived income is always taxed in the country of source so I will be paying UK tax on my commercial properties split between myself & the good lady wife with no personal allowance as an overseas landlord for me ( wife is remaining in our UK home & maxing out the Schengen days to be in Portugal, some issues with her parents health stop her from committing full time at the mo!)
Hence I will still have some UK taxed income that can stay in the UK, but what I was really trying to find out is the rough idea of what the situation is in returning some on my ex UK to Portugal Dividend money that I will have paid no tax under NHR back to my UK account for use in the UK without getting shafted for tax there if possible!
I'm sure there must be some sort of time limit after the funds have left the UK before any can be repatriated with no tax due.
Apparently its possible to get clearance to send your pension out of the UK without it being subject to UK tax first of all that you then have to claim back later on, I'm a few years away from that at the moment so will worry about that a bit nearer the time!
Bigfacthunt said:
Thanks Fella's.
The accountants have done all the required checks & work to ensure I am now officially out of the UK tax system well as much as possible from the start of this tax year having left the UK on 2nd April.
The sufficient ties thing worked out that I have 45 days per year available in the UK for the first 2 years & then 90 days after that for the next year if required.
As you say any UK property derived income is always taxed in the country of source so I will be paying UK tax on my commercial properties split between myself & the good lady wife with no personal allowance as an overseas landlord for me ( wife is remaining in our UK home & maxing out the Schengen days to be in Portugal, some issues with her parents health stop her from committing full time at the mo!)
Hence I will still have some UK taxed income that can stay in the UK, but what I was really trying to find out is the rough idea of what the situation is in returning some on my ex UK to Portugal Dividend money that I will have paid no tax under NHR back to my UK account for use in the UK without getting shafted for tax there if possible!
I'm sure there must be some sort of time limit after the funds have left the UK before any can be repatriated with no tax due.
Apparently its possible to get clearance to send your pension out of the UK without it being subject to UK tax first of all that you then have to claim back later on, I'm a few years away from that at the moment so will worry about that a bit nearer the time!
If you are a UK citizen you can still claim the personal allowance.The accountants have done all the required checks & work to ensure I am now officially out of the UK tax system well as much as possible from the start of this tax year having left the UK on 2nd April.
The sufficient ties thing worked out that I have 45 days per year available in the UK for the first 2 years & then 90 days after that for the next year if required.
As you say any UK property derived income is always taxed in the country of source so I will be paying UK tax on my commercial properties split between myself & the good lady wife with no personal allowance as an overseas landlord for me ( wife is remaining in our UK home & maxing out the Schengen days to be in Portugal, some issues with her parents health stop her from committing full time at the mo!)
Hence I will still have some UK taxed income that can stay in the UK, but what I was really trying to find out is the rough idea of what the situation is in returning some on my ex UK to Portugal Dividend money that I will have paid no tax under NHR back to my UK account for use in the UK without getting shafted for tax there if possible!
I'm sure there must be some sort of time limit after the funds have left the UK before any can be repatriated with no tax due.
Apparently its possible to get clearance to send your pension out of the UK without it being subject to UK tax first of all that you then have to claim back later on, I'm a few years away from that at the moment so will worry about that a bit nearer the time!
https://www.gov.uk/tax-uk-income-live-abroad/perso...
The rules on remittance basis changed a few years ago, so I don’t think it should be an issue if not UK resident - it should be on an arising basis, but check this with your accountant.
I would also advise double checking the status with a tax specialist.
The fact that your wife is still resident in the UK could be a red flag to your tax domicile.
When I lived in the Netherlands for a few years, I actually received a letter from HMRC confirming I was not tax resident in the UK
The fact that your wife is still resident in the UK could be a red flag to your tax domicile.
When I lived in the Netherlands for a few years, I actually received a letter from HMRC confirming I was not tax resident in the UK
dingg said:
If I were you I'd double check with an international tax law specialist rather than your accountant as afaiu if you retain a home available for you to stay in, ie not let to tenants
You haven't broken sufficient ties to escape hmrc clutches.
https://www.gov.uk/government/publications/rdr3-st...
See 3.2
Ps I'm also in Portugal
This may help
https://www.google.com/url?sa=t&source=web&...
UK tax residency rules and Portugal tax residency rules may be in conflict, which then means the tie-breaker under Article 4 of the tax treaty should be applied (as posted above).You haven't broken sufficient ties to escape hmrc clutches.
https://www.gov.uk/government/publications/rdr3-st...
See 3.2
Ps I'm also in Portugal
This may help
https://www.google.com/url?sa=t&source=web&...
Edited by dingg on Monday 10th June 13:35
If OP continues to be UK tax resident under Article 4, he cannot also be Portugal tax resident, and vice versa.
The key is identifying his tax residence status for what his UK (and Portuguese) tax obligations are (or will be). Once this is established, next will be to identify which UK income will continue to be taxable should he be considered as not UK tax resident.
The UK (tax) residency rules are quite strict, and in absence of double tax protection under a tax treaty, could mean (as you say) not escaping HMRC clutches. But the UK has quite a wide treaty base, and most (ordinary) people will have protection from double tax. Those that travel and "live" in multiple locations to avoid residency in any one particular country need to be a little more careful
ETA https://www.gov.uk/tax-foreign-income/residence
Edited by Exiled Imp on Monday 10th June 14:15
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