Sovereign’s Portugal office has a full complement of long-standing bilingual personnel and a team of qualified accountants experienced in dealing with residents and non residents’ complex tax returns, fiscal representation and rental income accounting.
Sovereign can assist you with your tax queries whether you are a new resident of Portugal needing to submit your first tax return declaring 2021 income or are looking to appoint a new accountant. Portugal’s tax year runs from January to December and returns are submitted between April – June. Late submission incurs a fine and interest charges on any tax due.
Many enquiries to the Sovereign offices are from people who were not aware of their tax obligations and now find themselves in a precarious tax situation with the Portuguese tax department which has been targeting individuals for backdated tax returns.
It is important for new residents to be aware of their fiscal obligations. Residents must declare, in Portugal, their worldwide income via a yearly tax return called an IRS. Taxation will depend on whether the individual is registered with residency at progressive rates (between 14.5% - 48%) or whether they have Non Habitual Resident (NHR) status, which must be applied for soon after becoming tax resident. Individuals become tax resident the day that the tax department updates their registry with their Portugal address, be it rented accommodation or property purchase.
Sovereign can assist you in finding out if you are eligible for NHR and have a concierge service for applications.
Whilst many people believe the NHR exempts them from paying any tax in Portugal, this is not the case as it depends on the income sources. It is therefore advisable to always consult the Experts, before taking up residency in Portugal, to obtain a full understanding of how this impacts personal circumstances.
Under the NHR programme foreign pension income is taxed at 10%. Non-Portuguese income of most categories including self-employed income, real estate income (rentals), capital income (interest & dividends) and capital gains on property, will be exempt from Portuguese personal income tax if the source country has the right to tax that income under the terms of a Double Tax Treaty (DTT) signed between Portugal and that country, or the income is taxed in the other country and is not considered as obtained in Portugal, or the income is taxable in any other country following the OECD Model of Taxation. Sovereign can assist with the necessary DTT application that must be submitted to the income source country. However, all worldwide income must still be declared on the individuals annual tax return in Portugal. Portuguese source salary or self-employed income derived from one of the eligible professions, has a rate tax of 20%. Income earned in the territories listed on the Finance Department list of preferential tax regimes – the so called “blacklist” would incur higher taxes (35%) and might not be qualified for the NHR regime.
At Sovereign we often hear new clients say “I pay my taxes in the UK, I do not have income in Portugal” but there is a constant exchange of information between countries, and it is no longer a simple matter of paying tax in the country of source. Double tax treaties must be triggered, and all income declared in Portugal.
Many foreign residents are unaware that they can offset certain expenses on their tax returns and should give their fiscal numbers when requesting a ‘Fatura’ for purchasing goods or services so that these are automatically registered on their file at the tax department and may help reduce any income tax due.
• Medical (including pharmacy)
• Children’s Education
• Hairdressers, beauty salons
• Car and motorbike repairs
• General household expenses - supermarkets, utilities etc
• Restaurants and Hotels/accommodation
• Old age residential homes in Portugal.
A percentage of the Faturas is used, with a maximum limit for each member of the household. Faturas, from the previous twelve years, for structural improvements on a Portuguese property may help to reduce a capital gain on the property sale.
The Sovereign Group has over 450 employees spanning Europe, Asia, the Middle East and Africa, offering services across market entry, trustee and director services, accounting, payroll, occupational and personal pension plans, employee benefit packages and incentive plans, local licenses and permits, company secretarial and company management.
Additional specialist services include, residence and immigration (Golden Visa and D7 passive income visa), wealth management, trust management, structuring of corporate entities (CSP), foreign property ownership, pensions, bespoke corporate and private client insurance, as well as yacht and aircraft registration ownership and management.
The Sovereign Group is proud to have a global reach from a local point of delivery so talk to us today.