Portuguese income tax: Filing a Portuguese tax return as an expat
Find out who has to pay Portuguese income tax, including what tax rates and deductions apply when filing a Portuguese tax return as an expat.
Whether you relocate, work or retire in Portugal as an expat, you will typically be liable to pay Portuguese income tax on worldwide earnings, unless you qualify as a non-resident taxpayer. Portugal income tax law was reformed in recent years to incorporate favourable tax conditions to attract expat residents and employees.
Portuguese income tax law covers personal income tax (Imposto Sobre das Pessoas Singulares or IRS) and corporation income tax (Imposto Sobre das Pessoas Collectivas or IRC).
This guide explains income tax in Portugal for expats, including who has to pay Portuguese income tax, what forms of earnings are subject to income tax, Portugal's income tax rates and what deductions and allowances you can claim when filing your Portuguese tax return. It also includes a Portuguese income tax calculator and additional income tax benefits for expats, such as the Non-Habitual Resident (NHR) tax scheme.
Who has to pay Portuguese income tax?
All tax residents in Portugal have to pay income tax in Portugal to the Portuguese tax authority Autoridade Tributária e Aduaneira on their worldwide income.
You are considered a tax resident in Portugal if you:
- have lived in Portugal for at least 183 days (consecutive or not) in total during a tax year or
- have lived there less than 183 days but had a permanent residence there on 31 December
Those who have lived in Portugal for less than 183 days and don't have permanent residence are not considered tax residents, and will only pay Portuguese income tax on earnings or salary in Portugal.
Tax residents have to file an annual, self-assessment Portuguese tax return. Married couples are taxed on their joint income and have to submit a joint tax return. Read more in Expatica's extensive guide on taxes in Portugal.
What earnings are subject to income tax in Portugal?
Personal income tax in Portugal is spread across the following six categories:
- Category A – employment income (wages and salaries in Portugal, remunerations, commissions, percentages and other fringe benefits)
- Category B – self-employment income from a profession or business in Portugal
- Category E – investment income (profits from assets and investments)
- Category F – rental income (from any properties that are rented in Portugal)
- Category G – capital gains (profits from selling a property in Portugal, assets or shares)
- Category H – pensions in Portugal, including Plano Poupança Reforma (private pension plans).
Portugal income tax rates
|Grade||Annual taxable income||Portugal income tax rate|
|1||up to EUR 7,035||14.5 percent|
|2||EUR 7,035–20,100||28.5 percent|
|3||EUR 20,100–40,200||37 percent|
|4||EUR 40,200–80,000||45 percent|
|5||over EUR 80,000||48 percent|
Non-resident taxpayers are instead subject to a flat Portuguese income tax rate. This is currently 2 percent for categories A, B and H, and 28 percent for categories E, F and G.
Filing your Portuguese tax return
The Portuguese tax year runs concurrently with the calendar year from 1 January to 31 December. If you are employed in Portugal, your employer will deduct income tax contributions from your salary (Pay-As-You-Earn tax) but you will still need to fill out an annual Portuguese tax return if you are a classed as a tax resident.
The deadlines for completing your Portuguese tax returns are:
- between 15 March and 15 April for employment and pensions income;
- between 16 April and 16 May for all other types of income.
For tax owed on income that hasn't been deducted through Portugal's PAYE tax system, you can make payments in instalments. These can be made in July, September and December. Information on Portugal's tax calendar is available here.
There are financial penalties for filing late or incomplete Portuguese tax returns ranging from EUR 200 to 2,500, while making late payments can be penalised from 10 percent to double the tax's value up to maximum of EUR 55,000 (plus interest).
You can fill out a paper version of Portugal's tax return or submit your Portuguese tax return online. Before you can complete a Portuguese tax form, and before you can engage in any employment or professional activity in Portugal, you will need to fill out a registration form. This needs to be submitted to your local tax office, who will then issue your Portuguese income tax number and can also provide you with a tax return form (along with guidelines) if you want to file a paper copy. You can locate your local tax office here.
To complete the Portugal tax form online, you will need to register on the government's website and request a password. If you submit a Portuguese tax return online, you can request an electronic invoice or receipt. The Portuguese tax authority has published instructions on requesting an electronic invoice or receipt here.
Portuguese income tax allowances and deductions
There are a number of general income tax allowances in Portugal that residents can deduct from their taxable income or use as tax credits to reduce their income tax in Portugal. Below are some of the tax deductions and tax credits foreigners can consider when filing their Portuguese tax return.
Deductions from taxable income
- A general allowance of 72 percent of 12 x minimum wage (which currently works out at EUR 4,104) for employment income
- 150 percent of the amount paid in union fees (limited to one percent of gross employment income)
- Employee social security contributions to mandatory schemes if higher than EUR 4,104
- Maintenance and conservation expenses paid out on property yielding a rental income.
Tax credits that can be used against your Portugal tax bill
- 35 percent of general family expenses up to a limit of EUR 250 per taxpayer
- 15 percent of health expenses, up to a limit of EUR 1,000
- 30 percent of educational expenses up to a limit of EUR 800
- 15 percent of VAT on invoices issued by car repair shops, restaurants, hairdressers and beauty salons, up to a limit of EUR 250
- 20 percent of alimony pensions arising from court decisions
- 15 percent of rent costs, limited to EUR 502
- 15 percent of interests on housing loans, limited to EUR 296
- 25 percent of donations made to accredited institutions
- 25 percent of expenses incurred with homes and institutions to support the elderly or disabled, limited to EUR 403.75
- 20 percent of premiums paid on pension contributions, limited to EUR 400 for those aged under 35, EUR 350 for those between 35–50 and EUR 300 for those over 50.
In addition to this, certain daily expenses also are exempt from Portuguese income tax, including the following areas:
- Meal allowance up to EUR 4.27 in cash or EUR 6.83 in lunch vouchers per day
- Daily allowance for business travel up to EUR 50.50 within Portugal or EUR 89.35 abroad
- Travel expenses, variable depending on means of transport and number of employees travelling.
Portuguese income tax benefits for expats
The Non-Habitual Resident (NHR) tax code offers a range of preferential tax rates and exemptions in Portugal. Those granted NHR status are given a tax exemption in Portugal on all forms of taxable income (employment, business, investment, rental, capital gains and pension) that they receive from abroad. Income obtained from inside Portugal is taxed at a flat rate of 20 percent. This special status is granted for 10 years.
To be a part of the NHR programme, expats must apply online at the Portuguese government's Portal das Finanças website by 31 March of every year. They must also fulfill the requirements outlined in the Portuguese tax authority's NHR brochure here.
Certain professions such as architects, engineers, doctors, university professors, auditors and tax consultants may also be eligible for a favoured tax status. It is always advised to seek professional advice to understand the tax implications.
Portugal also has tax treaties with all EU countries as well as a number of countries outside of the EU to prevent double taxation. A full list is available here, along with full details of the arrangements with each country (in Portuguese). A 2003 EU directive regarding taxation of interest on savings income moved between one member state to another can also help expats ensure that they are fairly taxed.
For non-EU citizens, there is a Golden Visa scheme that aims to reduce barriers to residence for those outside the EU looking to invest, including property, or transfer/start a business in Portugal.
Portugal income tax calculator
To help you calculate the amount of income tax you have to pay, you can use the government's Portuguese income tax calculator.
You can also apply the following Portuguese income tax calculations:
(gross income of each tax category A–H) – (deductions from taxable income) = (net income) – (loss deductions in any previous years) = (net worldwide taxable income*) x (tax rate**) = (assessed income) – (tax credits) = total payable income tax.
*divided by two in the case of married persons
** multiplied by two in the case of married persons
Appealing your Portuguese income tax assessment
In the event of a dispute over your Portuguese income tax assessment, you can appeal to the tax administration. Read your tax assessment letter to find out which department you need to appeal to and what the appeals process is. If your appeal is rejected, you can then apply to have your case assessed by the tax courts.
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