Following a litigation procedure filed recently to challenge a personal income tax (“IRS”) assessment of 35% on dividends received from Dubai by a tax resident individual eligible for the special tax regime applicable to non-habitual residents (“NHR”), the Portuguese Tax Authorities, when faced with the petition filed by the taxpayer with the Arbitration Court, have decided that such dividends should also benefit from the NHR exemption, regardless of the fact they were received from a black listed jurisdiction as defined by Portaria 150/2004, dated February 13th, since such country had concluded a Tax Treaty with Portugal and hence the NHR regime exemption conditions are met.
Consequently, the Portuguese Tax Authorities annulled the initial tax assessment and issued a new tax assessment applying the full exemption on the dividends received, thus complying with the NHR regime.
In conclusion, although there were no doubts regarding the applicable legislation, this clarifies that dividends received from black listed jurisdictions, which have concluded a Tax Treaty with Portugal, and provided the remaining conditions imposed by the NHR regime are met, will benefit from the NHR exemption (Article 81/ 5 of the IRS Code), as opposed to being subject to an aggravated 35% tax rate.
