France – Portugal tax treaty: what it provides, category by category

A treaty does not exempt. It allocates a right to tax between two States and, where both retain that right, it provides a method to prevent the same income from being taxed twice in full.

The consequence is that a treaty does not necessarily reduce total tax: it determines how it is shared. An expatriate who hopes to pay less because a treaty exists is reasoning the wrong way.

This text follows the OECD model, which makes its structure familiar: income categories are dealt with in a consistent order, and a reader used to one treaty can read another without effort.

The first is the withholding cap on dividends, set at up to 15%¹ of the gross amount. It is a cap, not a rate that applies automatically: the benefit must be claimed, and the formality is completed before payment or through a refund claim afterwards.

The second is the distinction between public and private pensions. A mixed career produces two pensions that do not follow the same rule, and the total taxable in each State is not what one might expect.

For employees on assignment, the presence threshold of up to 183 days² governs the short-stay rule, provided the employer is not a resident of the State where the employment is exercised. Both conditions must be met.

It contains no article on wealth taxes. Each State therefore applies its domestic legislation without restriction in this area, which leaves room for possible double taxation.

We have not yet extracted from the official text: the treatment of capital gains on securities, the regime for interest and any withholding on it, and the method for eliminating double taxation adopted by each State. These sections remain marked “being verified” rather than guessed.

The treaty has also been amended by a protocol and by the OECD multilateral convention. A consolidated version exists, and that is the one to read: the 1971 text on its own no longer reflects the current state of the law.