An Ultimate Guide About Moving To Portugal: Tax Laws In Portugal

Ultimate Guide

Every year, thousands of people decide to move to Portugal, a country in the Mediterranean. This tiny nation, which has a population of over 10 million and thousands of kilometers of coastline, is rapidly becoming one of the best destinations in Europe to relocate. A major life change is relocating to Portugal, where you may enjoy a good standard of living at a relatively low cost of living.

In Portugal, you can expect a year-round average temperature of about 70 degrees, more than 300 days of sunshine, and stunning landscapes. Preparation for your moving journey is essential, whether you choose to relocate to a beach town, a rural area, or a large city like Lisbon.

You can find all the information you need in our helpful article on moving to Portugal. This guide assumes you are fully prepared to relocate and covers everything from where to find housing to the working environment to taxes and living expenses.

Portugal’s Living Standards

Every city in Portugal has a different cost of living. Let’s examine the estimated cost of living in Porto and Lisbon. Naturally, it will be significantly less expensive to reside in rural areas, so take this into account if you are thinking of moving to Portugal.

Some estimates are that you can get by pretty well with €1,500 in destinations like Porto and Lisbon; on the other hand, in less popular areas, €1,000 is sufficient. If you earn over €2,000 a month, you can live pretty comfortably in Portugal. 

The Portuguese Taxation System

If you’re going to Portugal soon or are already there, you’ll need to learn about the taxes as a foreigner in order to comprehend how to register as a taxpayer.

Registration as a taxpayer and acquiring your NIF number are the first steps in becoming a taxpayer. To that end, the NIF being your unique tax number in Portugal is required anytime you register for any financial service or make payments. Normally, you’ll need it to do significant operations like registering for a bank account, renting or buying property, registering for a cell phone plan, or requesting a residency visa.

The next step is to fill out this form and send it to your neighborhood tax office. You can find this form on the Portal das Finanças website of the Portuguese Tax Authority.

The tax year in Portugal is from January 1 to December 31, and returns are filed throughout April and June of the following year. The Portuguese Tax Authorities’ website offers online and printable forms for filing returns. Be aware that delayed return payments will result in fines between €200 and €2,500. Getting help from an accountant or attorney is advisable if you happen to be conducting business there.

How Non-EU Residents Can Obtain a NIF

A NIF typically costs around €135 to obtain through an online specialist, or more when working with a lawyer or moving company.

Most internet businesses claimed to be able to obtain a NIF within a week. Some services require up to 5 or 6 weeks. 

In order to obtain a NIF, you will frequently require a financial representative if you do not reside in an EU/EEA nation. This might be a relative or friend, but given that you most likely don’t know any in Portugal yet, you’ll need to hire a law firm or business to get a NIF for you. It usually costs between €100 and €200, but it may cost more than €500. To receive a NIF, though, you can use an online business and pay less.

Commonly required paperwork includes a passport (or a national identification card if you’re an EU citizen), proof of address (like a driver’s license, bank statement, or electricity bill), and identity proof. You can be required to give a verified translation if the documents are not in English or Portuguese.

Look for certified Portuguese translation services accredited by institutions such as the International Organization for Standardization and the Portuguese Ministry of Foreign Affairs, and that offer notarization for translated documents. Consider Tomedes, which offers certified Portuguese translation services for over 120 languages and maintains ISO compliance. You can also check out the American Translators Association, which connects you with certified Portuguese translators and offers training to members, and the International Association of Professional Translators and Interpreters, which is based in Argentina and provides training and access to certified Portuguese translation professionals.

How to Obtain a NIF as a Resident of the EU/EEA

Residents in the EU/EEA get it slightly easier. In Portugal, they can obtain a NIF number (usually by visiting a Finanças or Loja do Cidado office) without typically needing the financial representative we mentioned before.

You will just have to make a free request for one and taking into account the time you will spend in lines, it can only take a few minutes. 

Non-Habitual Residents

Taxation of Non-Habitual Residents (NHR)

You might be qualified for Portugal’s Non-Habitual Resident (NHR) taxation system if you’re relocating there. By providing lower taxes and even full tax deductions for the initial ten years of residence, Portugal’s NHR tax system attracts thousands of residents. All newly arrived tax residents of Portugal who had not been there for five years prior are eligible for the NHR tax regime, which was instituted in 2009.

Under Portugal’s NHR tax system, anyone who works there (whether as independent contractors or in traditional jobs) simply has to pay a flat 20% personal income tax rate (IRS). A job must be tied to scientific, creative, or technical pursuits in order to be deemed “high value.” 

Federal Taxes

Federal taxes in Portugal are merely the tax rates you expect to be paid on your income as an employee or self-employed person, as well as the corporate income tax and VAT that businesses must pay, the capital gains tax that is imposed on the sale of the estate and other holdings, and the inheritance tax that is levied on estates.

Portugal’s Corporate Tax

Corporate taxation is established at a flat fee – of 21% on taxable income, which is slightly lower than the EU average. On their first €25,000 in taxable profit, small and medium-sized firms paid a reduction charge of 11.9% in Madeira and 12.5% in other locations.

If your firm makes more than €10,000 per year, you must pay VAT. In addition to corporate tax, you must pay a fee to your local municipality, which is typically 1.5% of the profit paid by the regional municipality.

To get the most out of your relocation, don’t overlook the necessity of proactive tax and financial management. Regardless of whether you’ve been living there for a bit, you should evaluate your arrangements on a regular basis to ensure they are up to date.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.