Taxation of Financial Products

Investment Funds

There are two types of Investment Funds:


  • securities– invest in stocks, bonds, or other real estate values
  • real estate– invest in real estate


These funds can be divided into units, that can be:

  • subscribed or bought;
  • redeemed or sold.


These also result in distributed income.

Thus, there are three types of income that result from these funds:

  • distributed income;
  • edemption or liquidation of units;
  • disposal of units.

National Securities Investment Funds

RESIDENT

  • the distribution by these funds of income to resident individuals, earned out of a commercial activity, is income of Category E (capital income). It is subject to a withholding tax at a rate of 28% (or 22,4% in the case of a taxpayer resident in the Autonomous Region of the Azores). They do not have to be declared, but if they are aggregated, they must be declared.

Where to declare?

This income doesn’t need to be declared, since it is subject to withholding. They only need to be declared in the IRS declaration if you choose to aggregate. In this situation, you must declare it in Annex E, Table 4.B, Code E31.

Anexo E quadro 4.A  código E31

  • redemption (capital gains) - income of resident individuals, earned out of a commercial activity; income of Category G (capital gains and other increases in assets). It is subject to a special withholding tax at a fixed rate of 28% (or 22,4% if the taxpayer is resident in the Autonomous Region of the Azores). It doesn’t need to be declared, but if it is aggregated, it needs to be declared.

Where to declare?

You don’t have to declare it on the annual IRS declaration. However, if you choose to aggregate, you must declare it in Annex G, Table 10, Code G31; the option for the respective aggregation is made in Table 15 of the same annex.

Anexo G quadro 10  código G31

You can opt for the aggregation in Table 15 of the same annex.

Anexo G quadro 15

If the resident taxpayer opts for the aggregation, the negative balance between the capital gains and losses determined in a given year may be reported for the following five years and may be deducted from income of the same nature that the holder obtains during these five years.


onerous transfer or disposal of units – this income of resident individuals, earned out of a commercial activity; is subject to a definitive special rate of 28% and is a Category G income.

It’s mandatory to declare it in Annex G, Table 9, Code G22

Anexo G quadro 9 Código G22

NOT RESIDENT

If they are non-residents without a permanent establishment to which this income is attributable:

  • distributed income: exempt
  • disposal/redemption/liquidation (capital gains): exempt

National Real Estate Investment Funds

RESIDENT

About Real Estate Investment Funds:

  • distributed income: - the income distributed to individuals resident in Portugal out of a commercial activity is income of Category F (property income) and is subject to a special withholding tax at a rate of 28% (or 22,4% if the taxpayer is resident in the Autonomous Region of the Azores). They do not have to be declared, but if they are aggregated, they must be declared. However, the holder can opt for the aggregation, in which case they will be taxed at the general tax rates.

Where to declare?

If you opt for the aggregation, you must declare it in Annex F, Table 7, Code E31:

 anexo F, quadro 7
  • redemption (capital gains) - income of resident individuals, earned out of a commercial activity; income of Category G - capital gains, Annex G, and subject to a special definitive tax rate of 28%.

Where to declare?

They do not have to be declared, but if they are aggregated, they must be declared in Annex G, Table 11B, Code G41.

 Anexo G, quadro 11, códigos G40

onerous transfer or disposal of units: - income of Category G (capital gains and other increases in assets).

Where to declare?

This income must be declared, and aggregation is also mandatory – in Annex G, Table 11A, Code G40.

 Anexo G, quadro 11, códigos G40

NOT RESIDENT

Income derived by non-residents from of units in Real Estate Investment Funds is taxed at a withholding rate of 10%. The same tax is applied to the redemption of the units.

International Securities Investment Funds

About the International Securities Investment Funds: :

  • distributed income - income of Category J (income from abroad) that must be declared for its autonomous taxation at the rate of 28%.

Where to declare?

Must be declared in Annex J, Table 8A (capital income) and then select the appropriate option.

Anexo J, quadro 8A
  • redemption/disposal (capital gains): capital gains to be declared in Annex G and taxed at a rate of 28%.

Where to declare?

They are declared in Annex G, Table 9 G22.

Anexo G quadro 15

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