What the OBBB Means for Americans in Portugal and for Portuguese Investments in the U.S.
Sasha Young da Silva, Areia Global (Miami)
Nuno Cunha Barnabe, Abreu Advogados (Lisbon)
New U.S. tax legislation has now cleared Congress, with the One Big Beautiful Bill Act (“OBBB”) finally passed by both chambers. For Americans living in Portugal and for Portuguese residents (or entities) with U.S. income, the new law raises real concerns and some limited opportunities.
While much of the headline coverage has focused on extending Trump-era individual tax cuts, the bigger story in the cross-border context is the fine print. Earlier drafts included proposals that would have chipped away at the benefits available under the U.S.-Portugal tax treaty by increasing U.S. withholding at the source, though the most aggressive of these measures were removed before final passage. The enacted version also reaffirms what won’t be changing, particularly around the federal estate tax threshold, foreign income exclusions, and cross-border reporting.
Estate and Gift Planning: Higher U.S. Exemption, Same Cross-Border Gaps
The OBBB increases the U.S. federal estate and gift tax exemption to $15 million per individual, indexed for inflation. Without the Act, the 2025 exemption of $13.99 million would have sunset to an amount likely around $7 million in 2026 ($5 million 2015 dollars, indexed). The increased exemption is helpful for U.S. citizens and domiciliaries with more than $7 million in assets.
But the exemption increase does not solve any of the existing complications of cross-border exposure. There are no changes to situs rules, tax credit mechanisms, or treaty protections for gifts between spouses of different citizenship.
Portugal abolished its general inheritance and gift tax in 2003 but still imposes a 10% stamp duty on gratuitous transfers of Portuguese-situs assets to non-exempt individuals. This includes Portuguese real estate, shares of Portuguese companies, and bank assets. It also applies to foreign-situs monies (for instance, if distributed upon liquidation of a trust) to resident non-exempt individuals. Because there is no estate and gift tax treaty between the U.S. and Portugal, gifts by a U.S. citizen of Portuguese assets or certain foreign assets to individual beneficiaries can be taxed in both countries with no offset, and gifts to a non-U.S. spouse may trigger U.S. gift tax at low thresholds. The Act does not change this.
Section 899: Proposed, Revised, and Now Removed
Originally, both the House and Senate drafts included a new Section 899, a retaliatory surtax on U.S.-source payments to residents of countries imposing what U.S. legislators considered “unfair foreign taxes.” The House version applied it broadly, including to countries with digital services taxes (DSTs) and the OECD’s undertaxed profits rule (UTPR). The Senate version narrowed the scope by capping the surtax at 15% and delaying the effective date to 2027.
However, the enacted version removed Section 899 altogether. This final change followed a Treasury-led agreement among G7 countries under which the U.S. withdrew the surtax in exchange for other concessions relating to Pillar Two UTPR.
For Portuguese residents or entities, this means the immediate risk of the surtax has receded, at least for now and at least in relation to Pillar Two. However, the Treasury announcement did not clarify whether DSTs or diverted profits taxes would be covered by the same deal. That means countries with DSTs (Portugal among them) could still face renewed legislation or administrative action in the future.
In other words: Section 899 was removed from the final bill, but the underlying policy question of how the U.S. will respond to DSTs remains unresolved.
GILTI, BEAT, and Super BEAT: Mainly Corporate Changes
The OBBB increases the GILTI tax rate on foreign company earnings, eliminates the QBAI exclusion, and requires jurisdiction-by-jurisdiction calculations that prevent blending high- and low-taxed income. It also expands the BEAT regime by increasing rates and introducing a Super BEAT that applies to U.S. subsidiaries of foreign-parented groups, including smaller companies.
These measures primarily impact corporate structures and U.S. taxpayers who own or control Portuguese businesses. Employees, retirees, and passive investors are generally unaffected.
New Remittance Tax: 1% on Cash Transfers
One notable provision included in the final Act is a 1% excise tax on remittance transfers funded by cash or cash-like instruments, such as money orders or cashier’s checks. Earlier drafts had proposed higher rates and exemptions for U.S. citizens, but these were narrowed in negotiations.
The final law exempts transfers funded directly from U.S. bank, credit union, or other regulated financial institution accounts, as well as transfers paid by U.S.-issued debit or credit cards. For all other cash-funded remittances, the 1% tax will be collected from the sender by the remittance transfer provider at the point of transfer, starting January 1, 2026.
For Portuguese residents, American or otherwise, who regularly receive money from U.S. resident senders, this adds a modest but real compliance and cost consideration when using cash to fund transfers disincentivizing transfers overseas. It's worth noting that the tax would not be tax deductible or creditable by the Portuguese resident recipient as it is a liability of the sender and not tax on income.
Child-Focused Accounts: Not Built for Expats
The Act introduces a new type of child savings account with up to $5,000 per year in contributions and a one-time $1,000 federal deposit for eligible children. The account resembles a Roth IRA in structure: after-tax in, tax-free out, for education, housing, or entrepreneurship. These accounts will likely only be available domestically, and their tax-deferred status will likely not be recognized in Portugal.
No Changes to Foreign Earned Income or Foreign Tax Credit Systems
The Act does not change the foreign earned income exclusion (FEIE) or the foreign tax credit (FTC) regime. That means Americans working in Portugal still face the same choice between the two systems, with all the usual complications.
IRS Reporting Rules: Unchanged, But More Aggressive Enforcement Tools
The Act does not change the foreign reporting requirements for trusts, gifts, or financial accounts. What has changed is enforcement capacity. The IRS has been expanding its data analytics and audit coverage. Clients with PFIC exposure and FATCA obligations should assume higher scrutiny going forward.
Final Thoughts
The OBBB is now law, though many provisions will require IRS guidance and further implementation. But the structure and intent are clear: less deference to treaty positions and more U.S. enforcement leverage in cross-border scenarios.
For Americans in Portugal, this is a good time to revisit your tax structure, account routing, and gift planning strategy. The new $15 million estate and gift tax exemption is welcome news for estates expected to exceed the would-be 2026 threshold of about $7 million per person. For smaller estates, it makes no practical difference, and the benefit comes at a cost: independent analysts estimate that maintaining the higher exemption will reduce U.S. federal revenue by tens of billions of dollars over the next decade.
Among all the proposals, Section 899 stood out as an example of how quickly tax policy can evolve, especially when international negotiations and treaty positions are at stake. The saga around this provision shows how retaliatory measures can be proposed, narrowed, and withdrawn in a matter of weeks, and why cross-border planning is best approached proactively rather than reactively. Dozens of countries have enacted DSTs in their tax policy, and the tension around this issue will continue beyond Section 899 and the OBBB.
This communication is for informational purposes only and does not constitute legal, tax, or investment advice. Areia Global is a U.S. based law firm providing U.S. federal tax advice and does not provide Portuguese legal or tax advice. Any references to Portuguese law are based on guidance received from local counsel. Individuals should consult with qualified advisors in each relevant jurisdiction before making any decisions regarding asset ownership or tax planning.