The abbreviation IRS stands for "Imposto sobre o Rendimento das Pessoas Singulares" in Portuguese, which translates to Personal Income Tax. This tax is levied on the income earned by individuals. This guide navigates through IRS principles, categories, deductions, submission procedures.
What defines the Personal Income Tax (IRS)?
The Personal Income Tax (IRS) is rooted in a constitutional of progressive taxation, IRS aims to mitigate social inequality, aligning with Article 104 of the Constitution of the Republic.
Who is liable for Portuguese income tax?
Individual people residing in Portuguese territory, or not residing in Portuguese territory but receive income from Portugal, are subject to Personal Income Tax (IRS). Tax residents are required to report their worldwide income, while non-residents must report exclusively income generated within Portuguese territory.
Taxable categories
The different types of taxable incomes are divided into different categories, each with specific assessment methods and tax rates, according to the Portuguese Personal Income Tax Code (CIRS), which are as follows:
(a) Category A – Dependent employment income
(b) Category B – Self-employment or business and professional income
(c) Category E – Capital/investment income
(d) Category F – Real estate/rental income
(e) Category G – Movable and immovable property capital gains
(f) Category H – Pension income
Deductions and allowances
The law prescribes specific deductions for each category, so as to take into consideration specific taxpayer situations, including marital status, number of dependents, type of activity, etc. In this context, the taxable amount cannot be calculated in abstract terms, in other words, without a concrete and defined situation. [Tax simulator available]
At the end of each tax year, the annual taxable income is determined by calculating declared income on the Tax Return. Deductible expenses, such as health, education, housing, and vehicle maintenance, impact the final taxable income amount. [link to e-fatura]
Tax return submission timeframe
Taxpayers must submit the Tax Return (Modelo 3) and applicable Appendixes, corresponding to each type of income earned, from April 1st to June 30th for the previous year's income. Timely submission is crucial to avoid penalties and retain tax benefits. The Tax Administration may confirm data in case of uncertainties or inconsistencies.
How can we assist you?
Relocate Now may assist taxpayers with the required tax compliance and thus keep their tax situation in good standing with the Tax and Customs Authority (AT) by, providing an initial detailed tax simulation and submitting the annual tax return on your behalf.
What is the estimated time to complete?
Our service timings depend on the volume of requests during the tax return submission period (from April to June). However, we guarantee that your tax return is submitted prior deadline.
We cannot assure the service completion for subscriptions in the last week prior to the deadline.
What are our fees?
Our service fee for assisting you with your annual tax return (IRS) submission is as follows:
Service Fee: €50 (Euros) + VAT for the Modelo 3; plus €50 (Euros) + VAT for each required appendix (type of income earned)
This fee covers the convenience and support provided by Relocate Now to ensure a smooth and efficient process of submitting your annual tax return (IRS) in Portugal, which includes a detailed tax simulation.
Frequently Asked Questions
What determines tax residency in Portugal?
What determines tax residency in Portugal?
If an individual meets the criteria for being considered a tax resident in Portugal, they will be taxed on their global income earned. Residents in Portugal are all people who, regardless of their tax authorities registration, in the year respective of the earnings:
Have remained in Portugal for more than 183 days, consecutive or alternate, in any 12-month period starting or ending in the year at stake;
Having remained for less time, maintained property in Portugal, in any given period of the above-mentioned period, under such conditions that may lead to the inference of an intention to occupy the property as regular place of residence;
On the 31st December, is a crew member of a ship or aircraft provided that such person is employed by entities having their domicile, head-office or effective management in Portuguese territory;
Exercises functions or commissions of public character under the Portuguese State, abroad.
In case of having a registered address in Portugal, at the tax authorities, even without complying with any of the criteria mentioned above, you may be considered as a tax resident in Portugal.
Do I have to declare all types of income upon the annual tax return (IRS), namely cash and/or kind?
Do I have to declare all types of income upon the annual tax return (IRS), namely cash and/or kind?
Yes, income, in cash or in kind is taxable irrespective of the location in which it is obtained, of the currency in which it is paid and the form of payment.
What kind of expenses can be deducted from the taxable income?
What kind of expenses can be deducted from the taxable income?
Taxpayers may be able to deduct various types of expenses from their taxable income, including but not limited to: health-related expenses, educational expenses, housing expenses, maintenance and repair costs for vehicles (including cars, motorcycles, and other modes of transportation), public transportation expenses, veterinary costs, and other qualifying expenses. [link to e-fatura]
How can I register expenses for respective deductions?
How can I register expenses for respective deductions?
In order to claim deductions for eligible expenses and accurately calculate the amount of tax owed, it is important for taxpayers to ensure that their tax number (NIF) is included on all invoices for goods or services that could be considered deductible expenses. However, to officially deduct these expenses from the annual income, the invoices for the deductible expenses must be validated in the taxpayer's Portal das Finanças account, namely at [e-fatura].
How can I pay the personal income tax (IRS)?
How can I pay the personal income tax (IRS)?
Payment is voluntary and can be made to the Tax Administration through ATM or ATM reference (multibanco or referência multibanco) at any ATM or online via home banking (only possible through Portuguese bank accounts), according to stipulated deadlines. Wire transfer is also possible, but not recommended, considering it requires a manual reconciliation by the Tax Authority, which can take more time to complete.
Can I be exempt from submitting the annual tax return (IRS) if I don't receive any worldwide income in a given year?
Can I be exempt from submitting the annual tax return (IRS) if I don't receive any worldwide income in a given year?
Yes, in case of not having any worldwide earnings, you are not required to submit the annual tax return (IRS).
What happens if I fail to submit my Tax Return by the legal deadline?
What happens if I fail to submit my Tax Return by the legal deadline?
Failure to submit by the deadline may result in severe penalties and the loss of tax benefits, including deductions for expenses against annual taxable income.
Is there a specific deadline for paying voluntary taxes after submitting the Tax Return?
Is there a specific deadline for paying voluntary taxes after submitting the Tax Return?
Yes, voluntary tax payments must be made within the stipulated deadline, following the submission of the Tax Return, generally included on the settlement notice to be received after the Tax Authorities’ approval.
Can a Tax Return be submitted for a previous tax year after the legal deadline?
Can a Tax Return be submitted for a previous tax year after the legal deadline?
While possible, late submissions may incur penalties and result in the loss of certain tax benefits. It is advisable to adhere to the annual submission deadline.
Note: These FAQs provide general information and guidance. Specific cases may vary, and individuals are advised to seek personalized advice.