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Portuguese tax residency

When does this take affect, is the 183 days rule still required.

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Hi folks, hope you can help.

One of my clients has made a substantial sum crypto currency trading and investing. (Circa £2m) and is emigrating to Portugal

He has now obtained his residency - yesterday, has a Portuguses NI Number (NIF) and has been granted fiscal resdiency.

Currently there is no tax levied on cryptocurrency trading, nor conversion to FIAT in Portugal, and he wants to withdraw circa £500k to buy a house. Under Portugeuse law he won't be taxed on this, so my question is, does he have to be out of this country for more than 183 days in 12 months for it to be not taxed in UK.

He still has business interests in UK which are dealt with in UK tax system, but he is actually now living in Portugal, he's been there six weeks, and has rented an apartment for 6 months whilst he looks for somewhere to buy.

Thank you

Replies (25)

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By David Ex
19th Nov 2021 13:40

Not sure what your question is but you’re not thinking that becoming Portugal tax resident immediately makes the client non-UK resident, are you? Pretty sure that’s not the case.

Have you run the facts through the HMRC Statutory Residence Test?

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Replying to David Ex:
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By welshwizard62
19th Nov 2021 13:52

Thank you David.
I thought it was the case that he basically has to wait until he has been out of the country >183 days, then he can draw down his crypto to FIAT in Portugal, and it will fall under Portuguese jurisidction.

As he is emigrating completely and cutting all ties with UK this won't be an issue, he just needs to wait before buying his property.

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Replying to welshwizard62:
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By jonharris999
19th Nov 2021 14:21

@ David Ex is on the money (though in a different sense to your happy client).

Run through the SRT and take a view on where the client is tax resident for the purposes of his 2021/22 SATR, and whether perhaps he might be able to apply for Split Year treatment (though that won't in itself help him if the big transaction was in the UK Res part of the year).

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Replying to David Ex:
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By welshwizard62
19th Nov 2021 13:52

Thank you David.
I thought it was the case that he basically has to wait until he has been out of the country >183 days, then he can draw down his crypto to FIAT in Portugal, and it will fall under Portuguese jurisidction.

As he is emigrating completely and cutting all ties with UK this won't be an issue, he just needs to wait before buying his property.

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By carnmores
19th Nov 2021 14:52

crypto currency gains are taxable in the uk so why do you think that they are not not taxable in the UK ?

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Replying to carnmores:
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By welshwizard62
19th Nov 2021 15:25

read the question?

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Replying to welshwizard62:
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By carnmores
19th Nov 2021 15:36

I have . it says he has already made the gain when he draws it down is irrelevant

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Replying to carnmores:
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By welshwizard62
19th Nov 2021 16:35

No it doesn't. Non FIAT currency is not taxable anywhere in the world, only taxable when it becomes FIAT. ;)

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Replying to welshwizard62:
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By Justin Bryant
19th Nov 2021 16:46

Are you sure that's right? If I exchange crypto for a house, that's CGTable is it not?

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Replying to welshwizard62:
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By David Ex
19th Nov 2021 16:52

welshwizard62 wrote:

No it doesn't. Non FIAT currency is not taxable anywhere in the world, only taxable when it becomes FIAT. ;)

This is HMRC’s view:

https://www.gov.uk/government/publications/tax-on-cryptoassets

No idea whether this is regarded as uncontroversial or is disputed.

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Replying to David Ex:
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By Justin Bryant
19th Nov 2021 16:58

welshwizard62 is clearly wrong re my house swap example (no CGT ROR there you'll find), so by analogy is wrong period regardless of HMRC's view.

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Replying to Justin Bryant:
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By welshwizard62
19th Nov 2021 17:08

The error lies with you I believe. The crypto gain is in a wallet, and has not been drawn down to FIAT. So it is therefore unrecognized by HMRC as it has no central bank value!!

Once it is drawn down it becomes subject to CGT in the UK. In Portugal it is not taxed at all. They would rather have the funds in their economy. On drawdown the owner is entitled to retain 100% of the gain. So free to spend it on house purchase etc

I think you will find the number of people applying to be resident of Portugal from all over the world is at a record high.

Thank you :)

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Replying to Justin Bryant:
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By welshwizard62
19th Nov 2021 17:08

The error lies with you I believe. The crypto gain is in a wallet, and has not been drawn down to FIAT. So it is therefore unrecognized by HMRC as it has no central bank value!!

Once it is drawn down it becomes subject to CGT in the UK. In Portugal it is not taxed at all. They would rather have the funds in their economy. On drawdown the owner is entitled to retain 100% of the gain. So free to spend it on house purchase etc

I think you will find the number of people applying to be resident of Portugal from all over the world is at a record high.

Thank you :)

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Replying to David Ex:
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By welshwizard62
19th Nov 2021 17:02

Hi David,

Yes I have read that thoroughly, the tax point for CGT occurs upon transfer to FIAT.

Until then the asset isn't realised as it is still in a crypto wallet, and has no technical value, as it is not controlled by a central bank.

In this instance the funds will be realised into a Euro bank account with a Portuguese Bank, and this isn't happening now until 10th April, which will be 183 days +.

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Replying to welshwizard62:
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By Justin Bryant
19th Nov 2021 17:08

But that's not right is it? Look at my house swap example. A house is not fiat.

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Replying to welshwizard62:
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By jonharris999
19th Nov 2021 17:13

If @WelshWizard you are right that there is no CGT before exchange of crypto gains for fiat currencies, why does the basic page of HMRC guidance say:

"You might need to pay Capital Gains Tax when you:

sell your tokens
exchange your tokens for a different type of cryptoasset"

This is repeated in the manual you have read:
https://www.gov.uk/hmrc-internal-manuals/cryptoassets-manual/crypto22100

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Replying to jonharris999:
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By Justin Bryant
19th Nov 2021 17:15

Yes; I could have told you that (and indeed did) without reading HMRC's manual re my analogous house swap example.

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Replying to welshwizard62:
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By carnmores
19th Nov 2021 17:10

IMO its clearly taxable though whether its a trade and income taxable or a CGT transaction we have not been told. if it goes to a tribunal i rate your chances of winning at less than 1%. i dont know how you arrived at the the decision its not taxable. this is tax evasion

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Replying to carnmores:
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By welshwizard62
19th Nov 2021 17:16

How is it taxable? How is it tax evasion? The gain is not FIAT, it is in crypto wallet. When it is drawn down in April 2022, it will be into a Euro bank account based in Portugal, where my client has full residency, and full fiscal residency, and they don't tax crypto gains!!
It's legal and planned avoidance.

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Replying to welshwizard62:
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By Justin Bryant
19th Nov 2021 17:25

Ignorance is bliss I guess.

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Replying to carnmores:
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By Justin Bryant
19th Nov 2021 16:53

It may be irrelevant in more ways that one, as how the devil are HMRC gonna tax it unless he's scrupulously honest? I suspect at least 99% of realized UK crypto gains goes untaxed.

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Replying to Justin Bryant:
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By welshwizard62
19th Nov 2021 17:03

Watch this space. Connect knows more than people realise.

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Replying to welshwizard62:
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By Justin Bryant
19th Nov 2021 17:12

That's what HMRC propaganda wants you to think more likely. How the hell can HMRC trace all these gains? There is no way (even if it's traceable in theory anyone can make it untraceable in practice). Otherwise criminals would not use BTC etc. in the 1st place would they?

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By carnmores
19th Nov 2021 19:42

Today's Tax Journal has an article on this go and have a look

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By more rain
23rd Nov 2021 10:57

You state that the client is TRADING and investing crypto.

A ‘disposal’ includes: exchanging cryptoassets for cash or for a different type of cryptoasset;

My two cents on this is that if your client put £10,000 into a crypto platform and purchased £10,000 of Litecoin and the Litecoin increased to £20,000. If any any point he traded this Litecoin for another coin he has made a disposal for UK CGT purposes.

So unless your client has simply injected cash into a platform and never exchanged currencies you may be ok, but I highly doubt that is the case.

You would need to work out his residence position under the SRT test and then the CGT treatment would follow.

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