2024 Portuguese Tax Deadline: An American Expat Guide

Written by: Josh Katz, CPA

Understanding the key dates and requirements for Portuguese tax submission is essential to avoid penalties and ensure compliance with both Portuguese and US tax laws.  In this article, we provide an overview of the important Portuguese tax deadlines and the necessary information for filing taxes in Portugal, along with guidance on how to report Portuguese income on a US tax return.

If you’re an American living in Portugal and need assistance with filing your US taxes, Universal Tax Professionals is here to help. We specialize in assisting Americans abroad with their US tax obligations and have extensive knowledge of international taxation. Our wide range of US expat tax services ensures you receive comprehensive support. Additionally, we partner with a Portuguese tax firm to handle your Portuguese taxes, coordinating seamlessly so you don’t have to worry about finding separate accountants.

Portuguese Tax Deadlines

The deadline to file and pay Portuguese taxes can vary depending on the type of tax and the taxpayer’s specific circumstances. Here are some general guidelines:

Personal Income Tax (IRS - Imposto sobre o Rendimento das Pessoas Singulares):

Filing Deadline: June 30

The annual tax return (Modelo 3) must be filed between April 1 and June 30 for the previous tax year. This deadline applies to most types of income, including employment, self-employment, rental income, investment income, and pensions.

No Extensions Generally Available

Unlike in some countries, Portugal does not generally offer extensions for filing tax returns. This means that it is important to meet the June 30 deadline to avoid any late filing penalties.

Payment Deadline: August 31

For the tax year 2023, any taxes owed to the Portuguese government are due by August 31, 2024. This gives taxpayers an additional two months after the filing deadline to settle their tax liabilities. It is necessary to make the payment by this date to avoid late payment penalties and interest charges.

Corporate Income Tax (IRC - Imposto sobre o Rendimento das Pessoas Coletivas):

  • The annual tax return (Modelo 22) must be filed by the last day of the fifth month following the end of the fiscal year. For companies with a fiscal year ending on December 31, the deadline is May 31 of the following year.
  • The first payment on account is due by the last day of the seventh month of the fiscal year, the second by the last day of the ninth month, and the third by the last day of the twelfth month.

Value Added Tax (IVA - Imposto sobre o Valor Acrescentado):

  • Monthly VAT returns must be filed by the 10th day of the second month following the reporting period.
  • Quarterly VAT returns must be filed by the 15th day of the second month following the reporting period.

Social Security Contributions:

  • Social security contributions must be paid by the 20th of the month following the month to which the contributions relate.

These Portuguese tax deadlines are subject to change, and there may be specific rules or exceptions based on individual circumstances. It is always advisable to consult with a tax professional or the Portuguese tax authority (Autoridade Tributária e Aduaneira) for the most accurate and up-to-date information.

Consequences of Missing the Payment Deadline

Failing to pay your taxes by August 31 can result in significant consequences, including:

  • Interest Charges: Interest will be charged on any unpaid taxes from the date the payment was due until the full amount is paid.
  • Penalties: Late payment penalties can also be imposed, increasing the overall amount you owe.
  • Enforcement Actions: Continued non-payment can lead to more severe enforcement actions, such as wage garnishments or asset seizures.

Methods of Payment

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The Portuguese tax authorities (Autoridade Tributária e Aduaneira) offer several methods for paying your taxes:

  • Bank Transfer: You can transfer the amount owed directly from your bank account to the tax authority’s account.
  • ATM Payment: Payments can be made through ATMs (Multibanco) in Portugal using your NIF and the payment reference number provided on your tax assessment notice.
  • Online Payment: You can pay online through the Portuguese tax authority’s portal using your bank account or credit card.
  • In-Person: Payments can also be made in person at designated tax offices or banks in Portugal.

Who needs to file a Portuguese Tax Return?

In Portugal, the obligation to file taxes depends on several factors, including residency status and the type of income earned.

Portuguese Residents: Individuals deemed tax residents in Portugal are obligated to file a tax return encompassing their global income. Tax residency in Portugal is established if:

  • You spend over 183 days in Portugal within a 12-month period.
  • You maintain a permanent residence in Portugal as of December 31st of the tax year.
  • Your principal economic activities or interests are situated in Portugal.

Non-Residents: Non-residents earning income from Portuguese sources must file a tax return for income derived within Portugal. This includes earnings from employment, business ventures, rental proceeds, and capital gains arising from Portuguese sources.

Non-Habitual Residents (NHR): Individuals who qualify for the Non-Habitual Resident (NHR) tax regime may benefit from certain tax exemptions and reduced rates, but they still need to file a tax return.

Non-Habitual Resident (NHR) Regime

The Non-Habitual Resident (NHR) tax regime is a special tax program designed to attract skilled professionals, investors, and retirees to Portugal. Individuals who qualify for the NHR regime may enjoy significant tax benefits, including exemptions and reduced rates on certain types of income. However, it’s important to note that even under this regime, individuals are still required to file a tax return in Portugal.

Benefits of NHR Regime

  • Tax Exemptions: Under the NHR regime, qualifying individuals may be eligible for tax exemptions on certain types of income, such as foreign pension income, dividends, interest, and capital gains from the sale of assets.
  • Reduced Tax Rates: For income that is not exempt, such as employment income, the NHR regime offers reduced tax rates for a period of up to 10 years. This can result in significant tax savings compared to standard tax rates.
  • Wealth and Inheritance Tax Exemptions: NHR beneficiaries are also exempt from wealth tax and inheritance tax on assets located outside Portugal.
  • International Tax Planning: The NHR regime provides opportunities for international tax planning, allowing individuals to optimize their tax affairs while residing in Portugal.

Eligibility Criteria

To qualify for the NHR regime, individuals must meet certain eligibility criteria, including:

  • Residency: Applicants must become tax residents of Portugal, either by spending more than 183 days in Portugal in a given tax year or by establishing a permanent residence in Portugal with the intention of residing there indefinitely.
  • Not Having Been Tax Residents in the Previous Five Years: Individuals applying for the NHR regime must not have been tax residents in Portugal in the five years preceding their application.
  • Eligible Professions: Certain professions, such as high-value-added activities, scientific research, and cultural or artistic activities, may qualify for the NHR regime.

Filing Requirements under NHR

While beneficiaries of the NHR regime may benefit from tax exemptions and reduced rates, they are still required to fulfill their tax obligations in Portugal.

This includes filing an annual tax return (Modelo 3) to report their income, deductions, and any taxes owed to the Portuguese tax authorities. Failure to comply with filing requirements can result in penalties and the loss of NHR benefits.

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Americans Living in Portugal

Americans living in Portugal are subject to both Portuguese and US tax laws. As residents in Portugal, they are required to file Portuguese taxes on their worldwide income, similar to Portuguese citizens. This means that they must report all sources of income, including income earned within Portugal and income earned abroad.

In addition to filing Portuguese taxes, Americans living abroad must also file US taxes. The US follows a citizenship-based taxation system, meaning that US citizens are taxed on their worldwide income regardless of where they reside. This includes income earned in Portugal, which must be reported on their US tax return.

There isn’t a strict order in which Americans living in Portugal need to file their taxes, but it’s typically advisable to start by filing Portuguese taxes first. This ensures compliance with local tax laws and avoids any potential penalties for late filing.

The Portuguese tax deadline is June 30 with no extension. Meanwhile, the deadline to file US federal tax returns is typically extended to June 15th, with an additional extension available until October 15th upon request. However, any taxes owed to the US government are still due by the original April deadline to avoid interest charges and penalties.

How to report your Portuguese Income on your US tax return?

Reporting Portuguese income on your US tax return is a crucial step for Americans living in Portugal to ensure compliance with US tax laws. Here’s how you can accurately report your Portuguese income on your US tax return:

Forms to Use

Form 1040: Your main US tax return form where you report your worldwide income, including income earned in Portugal.

Form 2555: Used to claim the Foreign Earned Income Exclusion (FEIE), which allows you to exclude a certain amount of foreign-earned income from US taxation. If you qualify, you can exclude up to a specified limit (adjusted annually) of your foreign-earned income from US taxes.

Form 1116: Used to claim the Foreign Tax Credit (FTC), which allows you to offset US taxes on income that was already taxed in Portugal. This ensures that you don’t pay taxes on the same income to both countries.

Steps to Reporting Portuguese Income

Step 1: Determine Your Tax Residency

Confirm whether you meet the requirements for tax residency in both Portugal and the US. As a US citizen, you are generally taxed on your worldwide income, regardless of where you live.

Step 2: Gather Income Documents

Collect all relevant documents related to your Portuguese income, including pay stubs, bank statements, and any tax documents issued by Portuguese authorities.

Step 3: Convert Income to USD

Convert your Portuguese income into US dollars using the applicable exchange rate for the tax year. The IRS provides guidelines on how to calculate foreign income conversions.

Step 4: Report Income on Form 1040

On your Form 1040, report your Portuguese income in the appropriate sections, such as wages, self-employment income, interest, dividends, or other sources of income.

Step 5: Apply Exclusions or Credits

If you qualify, claim the Foreign Earned Income Exclusion (FEIE) on Form 2555 to exclude a portion of your foreign-earned income from US taxation. Alternatively, use Form 1116 to claim the Foreign Tax Credit (FTC) for taxes paid to Portugal, reducing your US tax liability.

Step 6: Provide Supporting Documentation

Attach any required documentation, such as Form 2555 or Form 1116, to your tax return to support your claims for exclusions or credits.

Step 7: File Your US Tax Return

File your US tax return by the applicable deadline, including any required payment of taxes owed to the IRS.

With the Portuguese tax deadline typically falling on June 30th and the US tax deadlines offering extensions, expatriates must plan accordingly to meet their obligations in both countries. By staying informed, seeking professional advice when needed, and proactively managing their tax affairs, expatriates can navigate the tax landscape with confidence and peace of mind while living abroad in Portugal.

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