In a world of mobility and migration, entrepreneurs often relocate to other countries, taking their businesses with them. When that happens, it is important to assess the tax impact of the move not only on the shareholder, but also on the company they own.
For South African business owners relocating to Portugal, moving from South Africa to Portugal tax issues may involve personal income tax, dividend and capital gains taxation, exit tax issues in South Africa, and possible corporate tax consequences if the company’s place of effective management shifts to Portugal.
Moving From South Africa to Portugal Tax: Why Business Owners Need to Plan Ahead
For business owners, moving from South Africa to Portugal tax planning should cover both the shareholder’s personal tax position and the company’s possible exposure to tax in Portugal.
1. What happens to a shareholder’s tax position if he or she relocates from South Africa to Portugal?
Dividends and capital gains on shareholdings
If a shareholder owning a South African company relocates from South Africa to Portugal, he or she will generally become a tax resident of Portugal for purposes of Portuguese personal income tax (IRS).
As a Portuguese tax resident, dividends received from South African companies are typically taxed at a flat rate of 28%, unless aggregation applies. Capital gains on shares are also generally taxed at 28%, subject to applicable exemptions, reliefs or treaty provisions.
No automatic step-up for capital gains
Upon relocation to Portugal, there is generally no automatic step-up in the tax basis of shares to fair market value.
As such, capital gains realised after becoming a Portuguese tax resident may include gains accrued prior to immigration. For that reason, pre-relocation planning is particularly important.
No step-up for dividends
Dividends distributed by South African companies to a Portuguese resident shareholder are fully taxable in Portugal.
South Africa generally levies a dividend withholding tax, currently 20%, which may be creditable against Portuguese tax under the applicable double tax treaty, subject to limitations.
Controlled foreign company (CFC) rules
Portugal’s CFC rules may apply depending on the effective taxation and nature of the South African company’s income.
While South Africa is not typically considered a low-tax jurisdiction, certain structures or exemptions could trigger CFC inclusion of undistributed profits in the hands of the Portuguese resident shareholder.
Anti-abuse provisions and shareholder transactions
Transactions between the shareholder and the South African company, such as loans or other arrangements, must comply with arm’s length principles.
Portuguese tax authorities may recharacterise transactions deemed artificial or not reflecting economic reality.
Deemed employment or management income
If the shareholder performs management or executive functions from Portugal for the South African company, remuneration may be taxable in Portugal as employment or self-employment income at progressive rates of up to 48%, plus surcharges.
The Portugal–South Africa tax treaty will be relevant in allocating taxing rights and avoiding double taxation.
Non-Habitual Resident (NHR) regime / transitional regimes
Although the traditional NHR regime has been phased out for new applicants as of 2024, transitional or replacement regimes may still apply to certain individuals, potentially offering tax advantages on foreign-source income depending on eligibility.
South African exit tax considerations
South Africa applies an exit tax when individuals cease to be tax resident.
This generally involves a deemed disposal of worldwide assets, excluding certain assets such as South African immovable property, triggering capital gains tax on unrealised gains at the time of departure.
2. What happens to a South African company’s tax position if its shareholder relocates to Portugal?
Managing dual residence
A South African company is generally tax resident in South Africa either by incorporation or place of effective management.
If its place of effective management shifts to Portugal, for example due to relocation of key decision-making, it may also be considered tax resident in Portugal. This creates potential dual residence and exposure to taxation in both jurisdictions.
Single residence based on the Portugal–South Africa tax treaty
The double tax treaty between Portugal and South Africa provides tie-breaker rules to resolve dual residence situations, typically based on the place of effective management.
In practice, resolution may require coordination between the tax authorities of both countries.
Corporate exit tax in South Africa
If a company ceases to be tax resident in South Africa, it is generally deemed to dispose of its worldwide assets at market value, triggering capital gains tax on unrealised gains.
This exit tax can represent a significant cost of migration.
3. What would be the South African company’s tax position once it has become a tax resident of Portugal?
Corporate Income Tax
Once the company is considered tax resident in Portugal, based on its place of effective management, it becomes subject to Portuguese corporate income tax (IRC) on its worldwide income.
The standard rate is 21%, potentially increased by municipal and state surcharges, leading to an effective rate of up to approximately 31.5%.
Step-up for assets and liabilities
Portugal may allow a step-up in the tax basis of assets and liabilities, including goodwill, upon migration, depending on how the relocation is structured.
This ensures that only gains accrued after becoming Portuguese tax resident are subject to taxation.
Depreciation and amortisation
Assets recognised at fair market value may be depreciated or amortised in accordance with Portuguese tax rules, generating deductible expenses over their useful life.
Dividend withholding tax
Dividends distributed by a Portuguese tax resident company are generally subject to a 25% withholding tax, which may be reduced under the Portugal–South Africa tax treaty.
As with other cases, there is typically no step-up for retained earnings accumulated prior to migration.
4. What would be a South African entity’s tax position if its residence is relocated to Portugal?
If a South African entity transfers its place of effective management to Portugal, it may become tax resident there, potentially leading to dual residence issues.
Portugal does not provide a straightforward mechanism to re-domicile a South African company into a Portuguese legal entity, such as a Sociedade por Quotas (Lda). Therefore, restructuring options, such as incorporating a new Portuguese entity or reorganising the business, should be carefully evaluated.
Migration may trigger tax consequences in South Africa, including exit taxation and other adjustments depending on the structure and nature of the business.
Final remarks
Relocation as an individual to another country has significant personal income tax consequences. However, if the individual is also a business owner, the business itself may effectively relocate as well, resulting in a higher level of tax complexity.
This additional corporate tax dimension requires thorough analysis of the impact of the owner’s relocation on the company’s legal and tax status. For that reason, moving from South Africa to Portugal tax planning should be addressed well ahead of the relocation itself.
If you have any questions, please feel free to contact us. We would be more than happy to share our international expertise on the legal and tax matters related to the cross-border relocation of business owners and their businesses.
This edition of our Legal & Tax Series 2026 provides only general information on the highly complex area of cross-border relocation of business owners and their businesses. We strongly recommend involving local legal and tax counsel regarding your particular circumstances.