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Income Tax in Portugal: how does is work for non-habitual residents?

If you have opted to live in Portugal, and you fit the criteria to be considered a non-habitual resident, there are several tax advantages you can benefit from. Nonetheless, you do need to pay some taxes. In this article we’ll show you how the Income Tax (IRS) works for non-habitual residents in Portugal.

The Portuguese non-habitual resident status includes a number of very attractive benefits for foreigners with pensions or other forms of foreign based income. But the non-habitual residents must also pay income tax in Portugal. We tell you how the IRS works for these special residents.

First of all, to benefit from this status you need to satisfy a number of conditions:

  • Not have had resident status in Portugal during the five years preceding your request to be taxed as a non-habitual resident;
  • Be considered a resident in Portuguese territory for tax purposes, which means having spent 183 days – not necessarily consecutive – in the country over a period of one year, and have a residence in Portuguese territory;
  • The request to be registered as a non-habitual resident should be filed by March the 31st of the year following the one in which you became a resident in Portugal.

The request should be addressed to the Director of the Taxpayer Register Services, or submitted at any Tax Office (Loja do Cidadão). Alternatively, you can mail the request to the Directorate of the Taxpayer Register Services.

You must register on the website of the tax authority (Portal das Finanças)

After having registered as a non-habitual resident, you should request an access code for the website of the tax authority, the Portal das Finanças. Click on “registar-se” and you will be sent an access code which will allow you to declare your taxes and keep up to date with your tax situation and any other tax-related obligations.

Submit your tax form

Once these formalities are dealt with, pay attention to the legal deadlines. Your income tax (IRS) should be submitted between the 1st of April and the 30th of June. All citizens are required to submit their tax form over these three months, which can be done online.

Non-habitual residents are required, just like any other citizen, to fill out the first sheet of the form which identifies the taxpayer and members of their family. Here you should also list your IBAN — in case you are owed a reimbursement – and other details. Besides this, you should fill out form L, which is specifically for taxpayers who enjoy non-habitual resident status in Portugal.

This is the form in which you have to declare income obtained from activities with high added value of a scientific, artistic or technical nature, which are subject to a reduced tax rate of 20% for a period of 10 years.

You should also list any income from abroad – pensions, dependent or independent revenue – and which in some cases may not be subject to taxation in Portugal. For example:

  • If there are agreements between both states to avoid double taxation and taxes have already been paid in the other State;
  • If taxes have already been paid in the other state, regardless of an agreement on double taxation, so long as this income is not considered as having been obtained in Portuguese territory, under the criteria laid out in the first paragraph of article 18 of the tax code.

What happens after 10 years?

Non-habitual residents can enjoy this special status for a maximum of 10 years, which need not be consecutive. If, over a period of 10 years, the citizen did not benefit from this status for one or more of them, then he can do so over the following years, provided he meets the criteria. This maximum of 10 years cannot be prolonged.

Following these 10 years the non-habitual resident will begin to be taxed according to the regular Portuguese tax rates. If they are non-residents, this is, if they have spent less than 183 days in the country over the space of 12 months, then they are only taxed on the income generated in the country.

The tax rates in Portugal are progressive in nature. The higher your income, the more you will have to pay.

Taxable income

up to 7,091 euros 14,5%
7,091 to 10,700 euros 23%
10,700 to 20,261 euros 28,5%
20,261 to 25,000 euros 35%
25,000 to 36,856 euros 37%
36,856 to 80,640 euros 45%
over 80,640 euros 48%

 

The staff at NB Golden Key Account are happy to help you with all phases of your new life, from obtaining non-habitual resident status, to dealing with issues related to taxes. Not only do they know what to do, they also have partners who can help you out.

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