IRS Portugal Expat: How to File Taxes

What is IRS?

IRS, short for "Imposto sobre o Rendimento das Pessoas Singulares," translates to Personal Income Tax.

This tax applies to the annual income of individuals, both residents and non-residents, who earn income within Portugal. The tax is determined based on your earnings, with the applicable rate varying according to established income brackets.

The Portuguese IRS system operates on a progressive scale, meaning that as your income increases, the tax rate also increases. This progressive nature is designed to promote social equity.

Who needs to file an IRS return?

Generally, the following individuals are required to file an annual IRS return:

• Residents: Individuals considered tax residents in Portugal.
• Non-Residents: Individuals who earn income within Portuguese territory that hasn't been taxed at the source.

Who is a Tax Resident?

You are considered a tax resident if you meet any of the following criteria:

• You remain in Portuguese territory for more than 183 days (consecutive or not) within a 12-month period.
• You have accommodation (owned or rented) that you intend to maintain and occupy as your habitual residence.
• You are a member of the crew of a vessel or aircraft providing a service to bodies domiciled or based in or actually managed from Portugal.
• You perform public functions or commissions abroad, at the service of the Portuguese State, including functions of a Member of the European Parliament.
• You have Portuguese nationality but a tax residence in another country, territory, or region subject to a tax regime that is appreciably more advantageous, and that is on the list approved by the Portuguese tax authorities.

Even if your tax is fully withheld at the source by your employer, you might still be required to submit a return to declare other income or claim deductions. Married couples or those in civil partnerships have the option to file jointly, which may offer certain tax advantages. However, this option is valid only for the year concerned, meaning you can choose to file individually or jointly each year.

Are there Double Taxation Agreements (DTAs) for expats?

To prevent the double taxation of income, Portugal has established Double Taxation Agreements (DTAs) with numerous countries worldwide. These agreements ensure that income earned in one country is not taxed twice by both countries, providing relief for individuals who have income sources in both Portugal and another country.

How DTAs work?

When an individual is a resident of both Portugal and another country that has a DTA with Portugal, the treaty determines which country has the primary right to tax the income. DTAs typically include tie-breaker rules to determine residency in cases where an individual meets the residency criteria in both countries. These rules often consider factors such as the location of the individual's permanent home, their center of vital interests, and their habitual abode.

A foreign national from a country that has signed a tax treaty with Portugal may benefit from lower withholding tax on their foreign-source income. You can consult the official Tax Authority (Autoridade Tributária e Aduaneira—AT) website for a comprehensive list of countries with which Portugal has a DTA. Understanding these agreements is particularly important for expats, cross-border workers, pensioners, and anyone with income sources outside of Portugal.

Accessing the Official List of Countries with Double Taxation Agreements (DTAs) with Portugal

The most reliable and current information regarding countries with DTAs with Portugal can be found on the official website of the Portuguese Tax Authority (Autoridade Tributária e Aduaneira—AT).

Steps to Access the Information:

1. Visit the AT Website: Go to the official website of the Autoridade Tributária e Aduaneira (AT).
2. Search for "Convenções para Evitar a Dupla Tributação": Use the search function on the AT website and enter keywords like "Convenções para Evitar a Dupla Tributação" (Double Taxation Agreements) or "CDT."
3. Navigate to the Relevant Section: Look for a section or page dedicated to international tax agreements or double taxation treaties.
4. View or Download the List: The list of countries is typically available as a downloadable document (PDF) or presented as a webpage.

What are the key dates for IRS in Portugal for expats?

• Tax Year: January 1st to December 31st.
• IRS Filing Period: April 1st to June 30th of the following year (e.g., for income earned in 2024, the filing period is April 1st to June 30th, 2025).
• Tax Payment Deadline: August 31st.

Where to file your IRS return as an Expat in Portugal?

All IRS returns must be filed online through the official Portuguese Tax Authority portal, the Portal das Finanças.

What are the income categories for IRS Portugal?

Portuguese tax law categorizes income into distinct groups, each with its own specific rules and potential deductions. Understanding these categories is essential for accurately reporting your income and calculating your tax liability. The main categories are:

• Category A - Income from Employment (Trabalho Dependente): This type of income includes salaries, wages, commissions, bonuses, and any other remuneration received as an employee.
• Category B - Business and Professional Income (Trabalho Independente): This category covers income earned from self-employment, freelancing, and business activities. It's further divided into:
  • Simplified Regime (Regime Simplificado): For taxpayers with lower annual income who meet certain requirements.
  • Organized Accounting (Contabilidade Organizada): For taxpayers with higher income or who choose to maintain formal accounting records.
• Category E - Investment Income (Rendimentos de Capitais): This subsection includes income from investments such as interest, dividends, and profits from financial instruments.
• Category F - Property Income (Rendimentos Prediais): This category covers rental income from properties located in Portugal.
• Category G - Capital Gains (Incrementos Patrimoniais): This subsection includes profits from the sale of assets, such as real estate or shares.
• Category H - Pensions (Pensões): This category covers income from pensions, retirement funds, and other similar sources.

Types of tax filing in Portugal

The Portuguese Tax Authority offers two primary methods for filing your IRS return: Automatic IRS and Modelo 3. Selecting the appropriate method depends on the complexity of your income and deductions.

• Automatic IRS (IRS Automático): This feature is a simplified filing option designed for individuals with straightforward tax situations. You are generally eligible for automatic IRS if you meet all of the following criteria:

  • You earn income only from Categories A (Employment) and H (Pensions).
  • You do not receive gratuities or alimony payments not attributed to the employer.
  • If you have Category B income, it must be under the simplified regime and fall within article 151º of the CIRS (excluding "other service providers").
  • You are a resident in Portugal for the entire year.
  • You do not have Non-Habitual Resident (NHR) status.
  • You have not earned income abroad.
  • You are not claiming deductions beyond those automatically calculated (e.g., PPR investments).
  • You do not choose to aggregate income taxed at a flat rate.

  If you meet these requirements, the tax authority will pre-fill your tax return with the information they have on file. You simply need to review the information for accuracy and confirm the return.

• Modelo 3: This document is the standard IRS form and is required for individuals with more complex tax situations. You must file Modelo 3 if any of the following apply to you:

  • You earn income from categories apart from A and H (e.g., B, E, F, G).
  • You have deductions that are not automatically calculated (e.g., alimony payments, certain expenses).
  • You have Non-Habitual Resident (NHR) status.
  • You earn income from sources outside of Portugal.
  • You choose to aggregate income taxed at a flat rate.
  • You are not a resident in Portugal for the entire year.
  • You need to correct or add information to the pre-filled data in the Automatic IRS.

What you must know about filing your taxes in Portugal as an Expat

• Even if you are eligible for Automatic IRS, it's crucial to carefully review the pre-filled information to ensure its accuracy. If you find any errors or omissions, you must file Modelo 3 to make the necessary corrections.
• It's advisable to file Modelo 3 if you are uncertain about your eligibility for Automatic IRS.
• The Tax Authority may request documentation to support the information you provide on your tax return, regardless of whether you file Automatic IRS or Modelo 3.

By carefully considering your income sources and deductions, you can determine the appropriate filing method and ensure that you accurately report your income to the Portuguese Tax Authority.

Filing your IRS taxes in Portugal as an Expat

This section provides a comprehensive overview of the filing methods available, the income tax brackets, and the deductions and credits you can claim to reduce your tax liability.

Types of filing

As previously mentioned, you have two primary options for filing your IRS return:

• Automatic IRS (IRS Automático)
• Modelo 3

The choice depends on the complexity of your tax situation.

What is Automatic IRS?

Automatic IRS is a simplified, pre-filled tax return offered by the Portuguese Tax Authority. It is designed for individuals with straightforward tax situations, primarily those earning income only from employment (Category A) and/or pensions (Category H). The tax authority automatically populates the return with the information they have on file, such as your income, withholdings, and certain deductions.

Key Features of Automatic IRS

• Pre-filled Data: The tax authority automatically fills in the return with available information.
• Simplified Process: You simply review the pre-filled information for accuracy and confirm the return.
• Eligibility Requirements: Strict criteria apply regarding income sources, residency, and deductions.
• No Corrections Allowed: If you find errors, you must file Modelo 3.

What is Modelo 3 IRS?

Modelo 3 is the standard, more comprehensive IRS form used for individuals with more complex tax situations. It allows for detailed reporting of various income sources, deductions, and credits.

Key Features of Modelo 3 IRS

• Manual Data Entry: You are responsible for entering all relevant information.
• Flexibility: Allows for the reporting of various income categories and claiming a wide range of deductions and credits.
• Complexity: Requires a thorough understanding of Portuguese tax laws and regulations.
• Corrections Allowed: You can correct errors and correct the return.

What are the income brackets for taxes (2025)?

Portuguese income tax rates are progressive, meaning they increase as your income rises. The 2025 income tax brackets are as follows:

What is Considered a Deductible for IRS Portugal?

Deductibles reduce your taxable income, lowering your overall tax liability. Common deductibles include:

• General Allowance: A standard deduction for all taxpayers (€4,349 in 2025).
• Social Security Contributions: Mandatory contributions to social security.
• Union Fees: A percentage of union fees is paid.
• Alimony Payments: Payments made under a court order.
• Maintenance and Conservation Expenses: Expenses related to rental properties.
• Dependent Deduction: A fixed amount per dependent child.

What is Considered a Credit for IRS Portugal?

Tax credits directly reduce the amount of tax you owe. Common tax credits include:

• General Family Expenses: A percentage of general family expenses, such as groceries and clothing.
• Healthcare Expenses: A percentage of eligible healthcare expenses.
• Education Expenses: A percentage of eligible education expenses.
• VAT on Certain Services: A percentage of VAT paid on specific services, such as car repairs and restaurant meals.
• Rent Costs: A percentage of rent paid for permanent housing.
• Interest on Housing Loans: A percentage of interest paid on housing loans (subject to limitations).
• Donations: Donations made to accredited institutions.
• Premiums Paid on Pension Contributions: Premiums paid on pension contributions (subject to age-based limits).

Step-by-step guide to filing your IRS Portugal return online

This section provides a detailed, step-by-step guide on how to file your IRS return online through the Portal das Finanças.

Prerequisites:

Before you begin, ensure you have the following:

• NIF (Número de Identificação Fiscal): Your Portuguese Tax Identification Number.
• Password for the Portal das Finanças: If you don't have a password, you'll need to request one through the portal.
• Address Information: Your current address and, if applicable, the address where you resided on December 31st of the tax year.
• IBAN: Your bank account details (IBAN) for any potential tax refunds.

⚠️ It must be a Portuguese IBAN.

• Income Statements (Declarações de Rendimentos): These documents contain details of your income and withholdings, provided by your employer, pension provider, or other sources.
• Receipts for Deductible Expenses: Gather all receipts for expenses you intend to claim as deductions, such as healthcare, education, and rent.

Step-by-Step Instructions

1. Access the Portal das Finanças:

• Open your web browser and go to the official website of the Portuguese Tax Authority: add link here.

2. Log In:

• Enter your NIF and password in the designated fields.
• Click the "Entrar" (Enter) button.

3. Navigate to IRS Filing:

• In the search bar, type "IRS" and press Enter.
• Select the option related to "IRS" or "Entrega do IRS" (Submission of IRS).
• Alternatively, you can find the IRS section under "Serviços" (Services) > "IRS."

4. Choose the Filing Year:

• Select the relevant tax year for which you are filing (e.g., 2024 for the 2025 filing period).

5. Select Filing Method (Automatic IRS or Modelo 3):

• If you are eligible for Automatic IRS and choose to use it, select the "IRS Automático" option.
• If you need to file Modelo 3, select the "Modelo 3" option.

6.a. Automatic IRS (If Applicable):

• Review Pre-filled Information: Carefully review all the pre-filled information, including your income, withholdings, and deductions.
• Confirm or Reject: If the information is accurate and complete, click the "Confirmar" (Confirm) button. If you find any errors or omissions, you must reject the automatic IRS and file Modelo 3.
• Submit: Once you confirm the information, follow the prompts to submit your return.

6.b. Modelo 3 (If Applicable):

• Fill in Identification Details (Quadro 0): Verify and complete your personal information, including your NIF, name, address, and marital status.
• Declare Income (Anexos):
  • You will need to complete the appropriate "Anexos" (Annexes) based on your income categories. For example:
    • Anexo A: Income from Employment (Category A) and Pensions (Category H).
    • Anexo B: Business and Professional Income (Simplified Regime).
    • Anexo C: Business and Professional Income (Organized Accounting).
    • Anexo D: Income from Investment (Category E).
    • Anexo F: Property Income (Category F).
    • Anexo G: Capital Gains (Category G).
    • Anexo H: Pensions (Category H).
    • Anexo J: Income Earned Abroad.
  • Enter the required information in each annex, using your income statements as a reference.
• Declare Deductions (Quadro):
  • In the relevant sections of the Modelo 3 form, declare any deductions you are eligible to claim, such as healthcare expenses, education expenses, and rent.
  • You will need to provide the NIF of the entity that issued the receipt for each deductible expense.
• Review and Validate:
  • Once you have completed all the necessary sections, carefully review the information for accuracy.
  • Click the "Validar" (Validate) button to check for any errors or omissions.
  • If any errors are found, correct them and validate again.
• Submit:
  • After successful validation, click the "Submeter" (Submit) button to submit your return.
  • You will receive a confirmation message and a reference number.

6. Payment (If Applicable):

• If you owe taxes, you will receive instructions on how to make the payment. You can typically pay online through the Portal das Finanças, at an ATM (Multibanco), or at a bank branch.
• The deadline for payment is August 31st.

Important Tips for your IRS Portugal

• Gather All Documents in Advance: Having all your necessary documents and information readily available will make the filing process smoother and faster.
• Double-Check Your Information: Accuracy is crucial. Double-check all the information you enter to avoid errors and potential penalties.
• Save Your Confirmation: Save the confirmation message and reference number you receive after submitting your return.
• Seek Professional Help If Needed: If you are unsure about any aspect of the filing process, consider seeking assistance from a qualified tax advisor or accountant.

By following these step-by-step instructions, you can successfully file your IRS return online and fulfill your tax obligations in Portugal.

What is VAT (IVA)?

VAT, or Value Added Tax (IVA in Portuguese), is a consumption tax levied on most goods and services in Portugal. It's an indirect tax, meaning it's collected by businesses and remitted to the government. As a consumer, you pay VAT on most purchases you make.

How Does VAT Affect my IRS?

While you don't directly declare all VAT you've paid throughout the year on your IRS return, a portion of the VAT you pay on certain services can be deducted as a tax credit. Specifically, you can deduct 15% of the VAT paid on invoices issued by car repair shops, restaurants, hairdressers, and beauty salons, up to a limit of €250 per family aggregate. To claim this credit, make sure to request invoices with your NIF when making purchases at these establishments and validate them on the e-Fatura portal.

Can I include my family in my IRS?

Yes, including your family in your IRS return can potentially reduce your overall tax liability by allowing you to claim deductions and credits related to your spouse/partner and dependent children.

How to Include Spouses or Partners?

If you are married or in a legally recognized civil partnership, you have the option to file your IRS return jointly or separately. To include your spouse/partner, you will need to indicate your marital status on the cover sheet of the Modelo 3 form. If filing jointly, you will need to provide your spouse/partner's NIF and other relevant information.

What if my Spouse Files the IRS Portugal as Well?

If you and your spouse/partner both have income, you will need to determine whether it is more advantageous to file jointly or separately. Filing jointly combines your income and deductions, which may result in a lower overall tax liability if one spouse has significantly lower income. However, in some cases, filing separately may be more beneficial. It is recommended to simulate both scenarios to determine the most favorable option for your family.

How to Include Kids?

You can claim a deduction for each dependent child. To include your children, you will need to provide their NIFs and other required information in the "Dependentes" (Dependents) section of the Modelo 3 form. There may also be additional deductions or credits available for children under a certain age.

Special tax regimes in Portugal

Portugal offers several special tax regimes designed to attract foreign investment, skilled professionals, and young workers. Understanding these regimes can potentially significantly reduce your tax liability.

Non-Habitual Resident (NHR) Regime

• What is it? The The NHR regime offered significant tax advantages to qualifying individuals who became tax residents in Portugal, although it is now closed to new applicants (applications were accepted until December 31, 2023).hese advantages included a flat 20% tax rate on Portuguese-sourced income from specific high value-added activities and potential exemptions on foreign-sourced income.
• Who can benefit? Individuals who became tax residents in Portugal before January 1, 2024, and who met the eligibility criteria can continue to benefit from the NHR regime for a period of 10 years.
• Important Note: If you are currently benefiting from the NHR regime, it is crucial to ensure you continue to meet the eligibility requirements and comply with all relevant regulations.

Fiscal Incentive for Scientific Research and Innovation (IFICI)

• What is it? The The IFICI regime is a new tax incentive designed to attract researchers and innovators to Portugal.t effectively replaces the NHR regime, with a focus on specific, highly qualified professions.
• Who can benefit? Individuals who become tax residents in Portugal and work in specific scientific research or innovation roles may be eligible for a special tax rate of 20% on their employment income for a period of 10 years.
• Eligibility: The specific eligibility requirements and the list of qualifying professions are still being finalized.
• Deadline: If you move to Portugal in November or December, make sure to apply for NHR 2.0 before March 31st of the following year.

Youth IRS (IRS Jovem)

• What is it? The Youth IRS program is designed to encourage young people to enter the workforce by offering significant tax breaks on their income.
• Who can benefit? Individuals aged 18 to 26 (or 28 if completing a doctorate) who are not considered dependents can benefit from this program.
• Benefits: The program offers a phased exemption on income from dependent work (Category A) and/or self-employment (Category B) for a period of five years, consecutive or interspersed.
• Exemptions: 100% in the first year of employment, 75% from years 2–4, 50% from years 5–7, and 25% from years 8–10
• Maximum earning caps apply and are based on the Social Support Index.

Income, Possessions, Audits, Penalties, and Payment

This section outlines what income is taxable, how possessions are treated, what to expect from tax audits, potential penalties, and payment methods.

• Taxable Income Sources:

  The Portuguese IRS taxes a wide array of income. Key sources include income from employment (salaries, wages, bonuses), business and professional income (self-employment, freelancing), investment income (interest, dividends), rental income from properties, capital gains from the sale of assets, and pensions.

• Taxable Possessions (Cars/Properties):

  While you don't directly declare the value of your car or primary residence on your annual IRS return, they can indirectly affect your taxes. For For instance, the IRS taxes rental income from properties.lso, capital gains from selling a car or property may be subject to the IRS. The IMI (Imposto Municipal sobre Imóveis), a municipal property tax, is separate from the IRS. ISV (Imposto Sobre Veículos) is a tax paid when you first register a vehicle in Portugal.

• Tax Audits:

  The tax authority can conduct audits to verify the accuracy of your tax returns. AudVarious factors, like discrepancies in reported income or deductions, can trigger the audit. you are audited, you will be notified and required to provide supporting documentation.

• Tax Penalties:

  Failure to comply with tax laws can result in penalties. ComCommon penalties include fines for late filing, inaccurate reporting, and failure to pay taxes on time. Penalties can vary depending on the severity of the violation.

• How to Pay:

  You can pay your IRS taxes through several methods:

  • Online: Through the Portal das Finanças using a bank card or MB Way.
  • ATM (Multibanco): Using the reference number provided on your tax assessment.
  • Bank Branch: At an authorized bank branch.
  • CTT (Post Office): At a CTT post office.

Key considerations for Expats

Expats in Portugal should pay special attention to several key areas:

• Residency Status: Determining your tax residency is crucial, as it dictates your tax obligations.
• Double Taxation Agreements: Understand how DTAs between Portugal and your home country can prevent double taxation on your income.
• Foreign Income Reporting: Be aware of the rules for reporting income earned outside of Portugal.
• NHR or IFICI Regime (If Applicable): If you were eligible for the NHR regime, ensure you continue to meet the requirements.
• Language Barrier: Consider seeking assistance from a tax advisor who speaks your language to ensure you fully understand your tax obligations.
• e-Fatura: Make sure to request invoices with your NIF when making purchases and validate them on the e-Fatura portal.

Should I hire an accountant to do my IRS Portugal?

We highly recommend you do, especially if you are not a Portuguese speaker.

Finanças website is in Portuguese, and even for native speakers, filling out can be more complicated than expected.

“As a recent immigrant in Portugal, during my initial years, I always opted to hire an specialized accountant to navigate tax filling in Portugal. I only started to do my own taxes after feeling confidant enough and after familiarizing with the system. As an employee for a Portuguese company, my IRS was in automatic, which made it much easier to get on with it. For any newcomer, I always recommend, get an accountant or tax consultant, at least during your first years, while you try to understand e-fatura, or anything around Portal das Finanças."