What about US retirement income taxes in Portugal US Social Security, IRA, 401k etc?

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If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, all or some portion of the amounts you receive may be taxable by the US, unless the payment is a qualified distribution from a designated Roth account. The taxable part of your pension or annuity payments is generally subject to federal income tax withholding.

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DERREN JOSEPH:
If the tax we have to pay on our Retirement in the US is greater than the 10% of the NR and Portugal and in the bracket, she has that. This includes social security, 401k, and IRA, where we have to pay any additional tax Portugal or according to the double tax agreement, in this case, we'd only have to pay US tax and no Portugal tax. We get this question every single time. So Augusto?

AUGUSTO PAULINO:
So first of all, thank you Derren for the, and thank all the participants. So with respect to the pension income, so for those that move now to Portugal, the NHR regime foresees taxation of 10% of pension income from a foreign source. There are some, exceptions for example, in the case of managers from social security or regime for public servants. But in general terms, those of social security benefits and pension products would be subject.

DERREN JOSEPH:
Right. So then, again, from Paula's point of view, I can tell she's been doing some research. So she's been reading, so she's aware of the double tax agreement. So what we have to do from a US point of view is take that 10% assuming that she has worked in the private sector. So as Augusta's pointed out, it comes back to the definition of pension. So in the US we have a wider definition of pension, but in Portugal, there's a specific definition of pension, right? This means that for the purposes of enjoying that tax-free, so no Portugal tax, no 10% tax, that pension has to rise from public service. So you must have worked for the government, whether it be state or federal. Then that pension, the social security and the IRA, and the 401k, then it would be free of tax, otherwise, it's gonna be tax. Now you will not be double tax and don't worry about that. The reason why is that whoever's doing US side Portugal gets for the spike, assuming that you worked in the private sector, Portugal dos 10%, then you can recategorize that income. That's some tax alchemy that we do form 1116 for the US return. That allows you to take that 10% tax as a deduction against any Taxes to the US and to the IRS in the US. So you're not gonna be taxed double, you're not gonna be double tax. So don't worry about that. But please bear in mind Portugal has a very specific treatment of the definition and concept of a pension and it is not as wide as the US and it does not include pensions that are derived from work in the private sector. So I, I know this causes a lot of misunderstanding and controversy, but that's, that's what it is. So Paula has three more questions.

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