Taxation – The Changes in Portugal

22 April 2015

On the 31st December 2014 the laws governing taxes in Portugal changed having been revised on 17th December.

For expats this bound to be a surprise especially if you have a trust in place. Any personal income including that from real estate, income earned in Portugal or overseas as well as capital gains are taxable. 

Any distribution from a trust will be taxed at exactly 28% with the assets of any trust due to be wound up being distributed to the person that settles.

If an amount distributed is not due to be paid to someone other than the person that settles then even as a gift the amount will be taxed at exactly 10%.

This may be due to the Portuguese government (or the Portuguese tax authority Direcção-Geral dos Impostos) increasing revenue from tax payments.

For non-residents, you will only be taxed on the amount you earn whilst in Portugal. This is based on a 20% rate but any property income will be taxed at 10%.

Personal income tax can range from 11.5% to 46.5% depending, of course, on your income.

What is a resident?

A resident of Portugal will have resided in the country for 183 days. However if you are living there permanently or part of a family who have permanent residence then you are also classed as a resident. In addition to this if you are working on a ship or plane that belongs to the Portuguese entity you will be classed as a resident.

It’s not as gloomy as it sounds as there are some deductions that can be made to any income received. This includes:

  • In certain health cases
  • Education and training
  • Carer expenses
  • Property and renewable energy
  • Life and insurance policies
  • International double taxation
  • Other income based deductions

For those who arrived or left Portugal on 1st January 2015 the tax is split into periods with residence being determined over the departure or arrival. Simply put, if you spend more than 183 allotted days in the country over a 12 month country from this date then the tax regime will apply.

There are many issues concerning tax in Portugal and it is strongly recommended that any individual obtains advice if you have been unaware of the recent changes. This is especially the case if you are unsure if you are classed as a resident, do not understand the taxes on your personal income whether that is on earnings or real estate, and if you distribute from a trust.

All tax rates, relief procedures and expectations are subject to change and we are here to advise if you have tax issues or questions regarding the Portuguese Tax Authority.

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