The arbitration court did not agree with the couple who disputed the payment of 186 thousand euros to the IRS, since the non-resident regime was not applied to them, which, however, could no longer be extended.
This already published decision by the Center for Administrative Arbitration (CAAD) is based on the case of a Swedish couple who changed their domicile to Portugal in 2011, with both elements registered in the non-resident tax regime (RNH) for a period of 10 years (from January 2011 to December 2020) and that in 2021 they were faced with the impossibility of continuing to benefit from this regime, the 10-year period of which, however, could no longer be extended.
Following the failure to renew (in 2012, a change in law determined that the treatment was for a period of 10 years), your IRS return covering 2021 income could no longer be filed under the RNH treatment, resulting in a tax payable settlement in the amount of 186,116.84 euros.
Having seen that the Tax and Customs Authority (AT) had rejected their merciful appeal to challenge the settlement – with the tax authorities basing their response on the fact that, in light of the current legislation, there was no longer any scope for an extension of the RNH -, the couple approached the CAAD, stating , that by virtue of their RNH status obtained in 2011, they were entitled to benefit from a validity period of 10 consecutive renewable years, which extends beyond 2020.
In their application to the CAAD, the couple claimed a refund of the tax paid and compensatory interest, citing as the value of the case an amount of €130,004.85, which corresponds to the value of the settlement they intended to avoid.
However, the CAAD’s November 2023 decision concluded that AT “correctly interpreted the law and did not commit any unlawful act in executing the impugned settlement and dismissing the compassionate complaint filed against it.”
According to RNH, workers in professions considered to have high added value pay an IRS rate of 20%. Pensioners were originally exempt from the IRS in Portugal, but the law was changed so that they were now taxed at 10%.
In the case of the Swedes, after the end of the convention to avoid double non-taxation between Portugal and Sweden, that country again taxed its pensioners, even if they resided in Portugal.