Filing a Portuguese Tax Return

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Last updated on June 4, 2024 | Est. Reading Time: 5 minutes

As a resident of Portugal, you’re required to declare not only your income earned globally but also any taxes you’ve already paid in other countries and details of bank accounts held outside Portugal, starting from the moment you become a tax resident. There may be other reasons you have to file a return with the IRS in Portugal too: for example, if you rent a property in Portugal, even if you live abroad.

However, the concept of tax residency itself is complex. It’s possible to live in Portugal and not qualify as a tax resident, just as it’s feasible to be a tax resident without owing taxes, particularly if you’ve been taxed on the same income in another jurisdiction. Basically, it’s not a straightforward topic and an accountant is recommended.

Understanding your tax obligations in Portugal is crucial, as the rules around global income and tax residency can significantly impact your financial planning. The country operates under a system where the deadline for submitting your annual income tax return (IRS) falls between April 1st and June 30th.

While some individuals opt to file their taxes themselves, the intricacies of Portugal’s tax system — with its potential for both pitfalls and opportunities — means that enlisting a professional is almost certainly a wise investment.

Drawing a parallel, it’s like buying a cheap, second-hand car. It might be cheap in the beginning but when you start paying unforeseen costs down the line, it may have just been better to spend a little more and vehicle in better conditions.

Given the stakes involved, consulting with a financial expert who understands the nuances of Portuguese tax law can save you not only money but also considerable time and stress.

How Much Does an Accountant Cost?

Naturally, the cost for filing a tax return varies from firm to firm. Online services like E-Residence.com charge around €500, unless your income is less than €12,500 and the price is cheaper. Bordr.io charges slightly less, with costs starting at $275 but going up to $750.

TaxTeamConsulting, a firm based in the Algarve, charge €200 + VAT (€246) for the main form and one annex, with additional annexes are charged at €40+VAT (€49.20) each, except CGT.

Basically, it varies, depending on how much work is involved. You should expect to pay a few hundred euros, on average.

It’s also important that you find an accountant early on and don’t wait until March or April to begin looking. By then, most accountants will have their books filled and filing someone who has availability to file your accounts will be challenging.

Do I need to file a tax return?

According to ePortugal.gov.pt:

“People who receive income from employment, business, professional work, capital, property, assets and pensions in Portugal are required to declare such income. In certain situations, however, citizens are exempted from filing the IRS return.”

ePortugal also lists certain scenarios in which you may be exempt from filing.

Filing Elsewhere

Although you may need to file in Portugal, you may also need to file in another country as well. This is common with Americans, for example, as they are taxed on their citizenship rather than residency.

Thankfully, there are a number of services that cater to American expats based abroad, such as Greenback Expat Tax Services. Some companies can file your tax return in Portugal as well, however, some companies may only focus on US taxes.

In most other countries, you are taxed on your residency. However, you may have to file a tax return in another country if you have investments or earn income in that country, for example if you own a rental property there.

Will I be Taxed in Both Countries?

Again, this is a good question for an accountant as the answer varies from person to person, depending on their income and the country besides Portugal.

Generally speaking, however, Portugal has tax treaties with many countries around the world, including most of the countries that expats living in Portugal come from. This normally allows you to deduct what you’ve paid in one country from the other.

Deductions

Filing a tax return with the Portuguese IRS isn’t important just because it’s a requirement, it may also save you money.

Did you know that when you include your personal Tax Identification Number or NIF (Número de Identificação Fiscal) on invoices or faturas, you have the opportunity to save money.

Not every payment made within Portugal qualifies for tax deductions in the same way. The tax code outlines various categories of expenditure, each with its own rules and limits regarding what can be deducted from your taxable income.

These categories range from health and education expenses to housing and general family expenditures, among others. The maximum amount you’re allowed to deduct depends on the specific category of your expenses. Understanding these distinctions and planning your finances accordingly can significantly impact your tax liabilities and potential savings.

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James Cave is the founder of Portugalist and the author of the bestselling book, Moving to Portugal Made Simple. He has visited just about every part of Portugal, including Madeira and all nine islands of the Azores, and lived in several parts of Portugal including Lisbon, the Algarve, and Northern Portugal.

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