The French government signed a tax treaty on 14thJanuary 1971 with Portugal to avoid double taxation for its citizens living in Portugal. Convention
But with the set-up of this RNH regime, a double non taxation is noted even though a citizen has to be taxed in the country in which he/she has his/her tax residence (original country or host country).
The French government considers that the RNH regime is a tax benefit granted by Portugal according to its internal law but not according to article 18 of the OECD (Organisation for Economic Cooperation and Development) convention template, reproduced in article 19 of the Franco-Portuguese tax treaty, which stipulates that the retirement pension and other earnings received from a contracting State for a prior employment are only taxable in this State.
So, the French government claims its right to tax its citizens living in Portugal and exempt from income tax, for their French earnings.
In this context, the notion of “tax resident” has to be explained. What is the tax residence? And what are the rules for?
This notion is defined in article 4 of the OECD template as every person who, according to the legislation of this State, is subject to tax in this State, for his/her home, his/her residence, his/her management headquarters or any similar standard.
In November 2015, two case-law examples agreed with France in judging that a person exempt from tax in a contracting State due to his status or his activity cannot be seen as subject to this tax according to the treaty, or thereby, as a tax resident of this State.
Perhaps, the French government will use these case-law examples to renegotiate the tax treaty with Portugal, if that kind of renegotiation is to be launched shortly, which is not the case for the moment.
An amendment was signed by France and Portugal in August 2016 ajouter lien in which the civil servant regime was specified among other additions. It is indicated that earnings from a State, especially retirement pensions, will be taxable in this State.