Amended Tax Agreement between Sweden and Portugal

On May 16, 2019, the Swedish and Portuguese governments amended the tax agreement between Sweden and Portugal. In 2009, Portugal introduced regulations allowing all foreigners to withdraw their private occupational pensions tax-free in Portugal. Under the previous tax agreement between Portugal and Sweden, Sweden refrained from taxing private occupational pensions. These pensions were thus completely tax-free. In August 2018, Sweden requested that the double taxation agreement be amended. The amendment now decided means that Sweden has the right to tax all pensions paid from Sweden to Portugal with the normal SINK tax, i.e., 25% tax. The change is expected to take place on January 1, 2020, i.e., in about a year. A prerequisite for the new agreement to come into force is that it is approved by both countries’ parliaments. Since both countries’ governments have now signed the agreement, it is believed that the parliaments will also approve the agreement.

Changes to Spanish Inheritance and Gift Tax

The inheritance and gift tax is a tax determined by each region. PSOE (the Social Democrats) had been in power in Andalusia since democracy was introduced in 1978 until 2018. In 2019, a coalition between the three conservative parties (Partido Popular, Ciudadanos, and Vox) took office. On April 11, a new law came into effect that essentially abolishes the inheritance and gift tax in Andalusia.

In the case of inheritance and gifts between spouses, parents, children, and grandchildren, each recipient first has a basic deduction of 1 million euros. If the inheritance or gift exceeds 1 million euros, the recipient receives a 99% tax rebate.

It is important to note that the donor pays tax on the profit arising from the difference between the gift’s value and the acquisition value for the property. The municipal so-called Plusvalía must also be paid by the donor.

It should be noted that others than close relatives, as mentioned above, such as cohabitants, do not enjoy the rebate.

Furthermore, the stamp duty on gifts is reduced to 1% compared to at least 8% on purchases. However, the donor must pay tax on the profit the gift entails. Profit means the difference between the donor’s acquisition value and the market value at the time of the gift.

The income tax scale is reduced for those with the lowest wages by 0.5%, and those with an income over €35,000 receive a reduction of 0.5 – 1%.

The capital gains tax remains unchanged, 19% on amounts up to €6,000, 21% on €6,000-50,000, 23% on gains over €50,000. Capital gains refer to interest income, dividends, stock profits, and gains from the sale of property.

There are indications that the wealth tax will be abolished from 2020. It remains to be seen.