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 Thai business owners relocating to Portugal, moving from Thailand to Portugal tax issues may involve personal income tax, dividend and capital gains taxation, Thai tax exposure on departure, and possible corporate tax consequences if the company’s place of effective management shifts to Portugal.
Moving From Thailand to Portugal Tax: Why Business Owners Need to Plan Ahead
For business owners, moving from Thailand 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 Thailand to Portugal?
Dividends and capital gains on shareholdings
If a shareholder owning a Thai company relocates from Thailand 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 Thai 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.
This means that capital gains realised after becoming a Portuguese tax resident may include gains accrued prior to immigration. Careful pre-relocation planning is important to manage this exposure.
No step-up for dividends
Dividends distributed by Thai companies to a Portuguese resident shareholder are fully taxable in Portugal.
Thailand generally levies withholding tax on dividends, typically 10% for treaty-eligible cases under the Portugal–Thailand tax treaty. This withholding tax may be creditable in Portugal, subject to applicable limitations.
Controlled foreign company (CFC) rules
Portugal’s CFC rules may apply depending on the effective taxation and nature of the Thai company’s income.
Since Thailand may offer preferential regimes in certain sectors or structures, undistributed profits could potentially be attributed to the Portuguese resident shareholder and taxed annually in Portugal.
Anti-abuse provisions and shareholder transactions
Transactions between the shareholder and the Thai company, such as loans or other financial arrangements, must comply with arm’s length principles.
Portuguese tax authorities may recharacterise arrangements that lack economic substance or appear artificial.
Deemed employment or management income
If the shareholder performs management or executive functions from Portugal for the Thai company, remuneration may be taxable in Portugal as employment or self-employment income at progressive rates of up to 48%, plus applicable surcharges.
The Portugal–Thailand tax treaty will be relevant in determining the allocation of taxing rights.
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.
Historically, certain foreign-source income could benefit from favourable treatment, but current eligibility depends on specific transitional rules.
Thai exit tax considerations
Thailand does not generally impose a comprehensive exit tax on individuals leaving tax residency.
However, Thai-sourced income and gains up to the date of departure may remain taxable, and ongoing obligations may apply depending on the individual’s status and income sources.
2. What happens to a Thai company’s tax position if its shareholder relocates to Portugal?
Managing dual residence
A Thai company is generally tax resident in Thailand if it is incorporated there or if its place of effective management is located there.
If the 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 may result in dual residence and potential double taxation on worldwide profits.
Single residence based on the Portugal–Thailand tax treaty
The Portugal–Thailand tax treaty provides mechanisms to resolve dual residence situations, typically based on the place of effective management.
In practice, this may require coordination between the tax authorities of both countries.
Corporate exit tax considerations
Thailand does not generally impose a formal corporate exit tax regime.
However, restructuring or migration of effective management may still have tax consequences depending on asset location and business structure.
3. What would be the Thai 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–Thailand tax treaty.
As in other cases, there is typically no step-up for retained earnings accumulated prior to migration.
4. What would be a Thai entity’s tax position if its residence is relocated to Portugal?
If a Thai entity transfers its place of effective management to Portugal, it may become tax resident there, potentially resulting in dual residence issues.
Portugal does not provide a straightforward mechanism for re-domiciling a Thai 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 group structure, should be carefully evaluated.
Migration may trigger tax consequences in Thailand depending on the structure adopted, including potential taxation on unrealised gains or adjustments linked to asset revaluation or business restructuring.
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, and therefore careful tax planning 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.