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Are you considering moving to Portugal? If so, it’s important to understand the differences between Portuguese residency and tax residency. There are some differences between the two, so it is important to be aware of them.

In this blog article, we will provide a guide for newcomers to Portugal about Portuguese residency and tax residency in Portugal. We will help you understand the differences between the two and how they apply to you.

Portuguese tax residency

 

What is Portuguese residency?

Portuguese residency refers to the status of being a legal resident of Portugal. This means that you have permission to live in the country and are registered with the Portuguese authorities. In order to become a Portuguese resident, you must meet certain requirements such as having a valid visa/ CRUE, proof of accommodation, and sufficient financial means to support yourself.

Portuguese residency can be obtained through a number of different ways, such as employment, study, investment, or family ties. It is important to note that there are different types of residency permits, including temporary and permanent, and each has its own requirements and benefits.

Being a Portuguese resident allows you to enjoy a range of benefits, such as access to healthcare and education, as well as the ability to open a bank account, obtain a driver’s license, and enroll in social security. It also allows you to travel within the Schengen area without needing a visa.

However, it is important to note that being a Portuguese resident does not automatically make you a Portuguese tax resident. This is where things can get a bit confusing, so let’s take a closer look at the difference between Portuguese residency and tax residency.

What is Portuguese tax resident and how do I become one?

In Portugal, being a tax resident means that you are subject to taxation on your worldwide income, whereas non-residents are only taxed on income earned within the country. To be considered a tax resident in Portugal, you must meet one of the following criteria:

  1. You spend more than 183 days in Portugal during a calendar year, either continuously or intermittently.
  2. The address on your NIF (Número de Identificação Fiscal) is a Portuguese one

Becoming a Portuguese tax resident is a relatively straightforward process. You will need to register with the local tax office and provide documentation to support your claim to tax residency. This may include a copy of your residency permit, a rental contract, utility bills, and other relevant paperwork.

Once you are registered as a tax resident, you will be issued a tax identification number (NIF), which you will need to use for all tax-related transactions in Portugal. This number will also be used to track your tax obligations and to ensure that you are paying the correct amount of tax.

Overall, becoming a Portuguese tax resident is a wise decision if you plan to spend a significant amount of time in the country and want to take advantage of its many tax benefits. Just be sure to familiarise yourself with the tax rules and regulations to ensure that you stay on the right side of the law.

What are the benefits of being a Portuguese tax resident?

If you’re considering moving to Portugal, or have already moved here, you’ll want to understand the benefits of being a Portuguese tax resident. While the tax rules can seem complicated, it’s important to understand the benefits of becoming a tax resident in order to make the most of your new life in Portugal.

Firstly, if you’re a tax resident in Portugal, you’ll only pay tax on your worldwide income that is generated in Portugal. This means that if you have other sources of income from outside Portugal, you’ll only need to pay tax on your Portuguese income.

Secondly, becoming a tax resident in Portugal allows you to benefit from the country’s Non-Habitual Resident (NHR) tax regime. The NHR regime offers tax benefits to foreign residents who are non-habitual residents for a period of 10 years. Under this regime, certain types of income, such as pensions, dividends and interest from foreign sources are exempt from taxation in Portugal.

Lastly, Portuguese tax residents can take advantage of Portugal’s Double Taxation Treaties (DTTs). DTTs are agreements between Portugal and other countries that ensure that you’re not taxed twice on the same income. For example, if you receive rental income from the UK, you would only need to pay tax on that income in the UK, not in Portugal.

What are the taxes you need to pay as a Portuguese resident?

As a Portuguese resident, there are a few taxes you need to be aware of. The taxes you pay in Portugal are based on your income and the type of work you do. Here is a rundown of the main taxes you can expect to pay:

  1. Income tax: This is the tax you pay on your income, including wages, salaries, pensions, and rental income. In Portugal, income tax rates range from 14.5% to 48%.
  2. Social Security contributions: If you work in Portugal, you’ll need to make social security contributions. This tax pays for things like healthcare, unemployment benefits, and pensions. The amount you pay depends on your income, but it typically ranges from 11% to 23.75%.
  3. Property tax: If you own property in Portugal, you’ll need to pay property tax. This tax is based on the value of your property and is typically around 0.8%.
  4. Capital gains tax: If you sell a property or an investment for a profit, you’ll need to pay capital gains tax. The rate varies depending on the type of investment and how long you’ve owned it.
  5. Value-added tax (VAT): In Portugal, there is a value-added tax of 23% on most goods and services.

It’s important to note that tax rates and rules can change, so it’s a good idea to keep up to date with the latest information. If you’re not sure about your tax obligations, it’s always a good idea to seek advice from a tax professional.

Speak to an expert

Portuguese residency and tax residency can be a bit confusing. However, we hope that this guide has cleared things up for you. Some important to remember:

  • Portuguese residency is based on the number of days you spend in the country
  • Tax residency is based on other factors such as your income and assets

Becoming a Portuguese tax resident can bring many benefits, including lower taxes and access to the country’s healthcare system. However, it’s important to understand and comply with all tax regulations in order to avoid any legal issues. If you’re considering moving to Portugal, make sure to do your research. We also advise seeking advice from professionals to ensure that you’re meeting all the requirements.

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