The United States has a network of double taxation agreements (DTAs) with various countries around the world. A DTA is a bilateral agreement between two countries that aims to prevent double taxation of income earned by residents of one country in the other country. A double taxation agreement also regulates the taxation of income derived from cross-border activities such as trade and investment.
One such country with which the United States has a double taxation agreement is Portugal. The United States and Portugal signed a DTA in 1994, which came into effect on January 1, 1996. The agreement has been amended twice since then to reflect changes in tax laws and regulations.
The DTA between the United States and Portugal covers various types of income, including business profits, wages, salaries, and pensions. The agreement also covers taxes on capital gains, dividends, and royalties. Under the DTA, residents of either country are entitled to claim relief from double taxation in the other country.
For example, suppose a U.S. resident earns income from a business in Portugal. In that case, they will pay tax in Portugal on that income. However, they may also be liable to pay U.S. tax on the same income. To avoid double taxation, the U.S. resident can claim relief under the DTA by crediting the tax paid to Portugal against their U.S. income tax liability.
The double taxation agreement between the United States and Portugal also includes provisions to prevent tax evasion and fraud. The agreement provides for the exchange of information between the tax authorities of the two countries to ensure compliance with tax laws.
In summary, the United States has a double taxation agreement with Portugal that aims to prevent double taxation of income earned by residents of either country. The agreement covers various types of income and provides for relief from double taxation. The agreement also includes provisions to prevent tax evasion and fraud. For anyone conducting business or earning income in Portugal, it is essential to understand the DTA`s provisions and claim relief accordingly.