T01E - IRS - Personal Taxation of Individuals

Note: These guidelines are intended only as a summary.  Tax laws and regulations change frequently and sometimes unexpectedly. It is strongly recommended that you seek professional advice.

Personal income tax (IRS) applies to the income of citizens resident in Portuguese territory and non-residents who earn income in Portugal.

The tax is determined with reference to the income earned, the corresponding rate being applied according to the relevant band and taking the deductions laid down by law into account (e.g. education or health expenditure).

IRS is calculated individually, but couples and civil partnerships can opt to file jointly. In this case, tax is charged on the total revenue of the persons in the household.

New model of withholding tables
As of the 1st of July 2023, a new model of withholding tables came into force, following a marginal rate logic, in harmony with the IRS levels that are relevant for the annual assessment of the tax, thus avoiding regressive situations, where increases in gross monthly remuneration correspond to decreases in net monthly remuneration. These tables give continuation of the progressive adjustment between withholding tax and the amount of tax payable. I.e., when a worker, for a given month having a higher gross remuneration value (due to having worked overtime, night shifts or working on holidays) the rate increases in the retention table, ending up receiving a lower net amount.

Who is required to submit the IRS return
People who receive income from employment, business, professional work, capital, property, assets and pensions in Portugal are required to declare such income. In certain situations, however, people are exempted from filing the IRS return.

The IRS return must be submitted by:

• people resident on Portuguese territory - the income of all members of the household is taken into consideration, including income obtained outside Portuguese territory

• non-resident citizens – only for income obtained in Portuguese territory which has not been subject to deduction at source.

Before filing your tax return, ensure that all information relating to your current situation is correctly entered on the website of Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT), the body responsible for finance and for processing IRS.

This applies in particular to reporting your tax address, the address considered to be your official residence. Keeping your tax address up-to-date is not only a statutory requirement but is also very important: to obtain tax advantages (e.g. exemption from municipal real estate tax - Imposto Municipal Sobre Imóveis) and to avoid possible penalties (fines of up to € 375.00).

Changing your tax address is a statutory requirement that can be completed online on the Finanças website.

Individual Income Tax (“IRS”) is levied on the yearly amount of worldwide income, after appropriate deductions, allowances and tax credits.  The tax year corresponds to the calendar year. 

• Category A:         Salary Income and pensions that are considered a continuation of salary, like early retirement Pensions(Modelo 3)

• Category B:         Sole Traders or Isolated Acts

• Category E:         Income from Capital in Portugal

• Category F:         Rental Income

• Category G:        Capital Gains

• Category G1:      Untaxed Capital Gains (i.e. If the property sold was bought before 1st January 1989, the capital gain obtained is exempt from tax)

• Category H:        Pensions. It includes various types of pensions, such as civil service pensions, social security pensions, and occupational/private pensions. Each type of pension may be treated differently under double taxation agreements between Portugal and the pension's country of origin

• Category J:          Income obtained outside Portugal

• Category L:         NHR/Tax incentive for scientific research and innovation

Everyone with income from any of these categories is required to submit a tax declaration with some exceptions, which you will find below

Exempt for filing IRS declaration:
The following cases are exempt from filing an IRS income tax return:

• Salaries or pensions under €8,500.00 that have not been subject to witholding tax

• In the case of alimony payments covered by Article 72(9) of the CIRS, the exemption from submitting the declaration only applies if the amount does not exceed € 4,104.00

• Subsidies from the Common Agricultural Policy

• Isolated Acts up to 4 times IAS* (Indexante dos Apoios Sociais), provided they earn no other income or only income taxed at the standard rates. For 2024 tax year this will be until €2,037.04.

*The IAS for 2024 will be €509.26 and for 2025 this will be € 522.50

Household
The declaration of the IRS starts on the 1st of April. However, the preparation begins some time before and one of the first steps is to communicate any changes in the composition of the family and/or in long-term Rental contracts, until 17th of February.

The communication of household data is to indicate changes throughout the year, such as the birth of a child, a divorce or marriage, a change in the parental agreement or the death of one a couple.

This update must also be used to indicate to the AT (Finanças) a possible change of permanent residence, always taking into account that what matters in this process is the situation recorded on 31st of December of the year to which the income relates (2024 in this case).

Without this household update, AT will use the personal and family information presented in the previous year's IRS declaration.

Once this step is completed, taxpayers then have until 25th of February to consult, register or confirm invoices for expenses incurred in the previous year (see E-fatura below)

When and Where to File
Income tax returns should be made over the Internet. Which can be consulted here the following here. 

On the AT – Autoridade Tributária e Aduaneira website you go to IRS and Entregar Declaração. Under Preencher Declaração you choose ROSTO (Modelo 3).

Modelo 3 must be completed as well as the respective Annexes to report individual categories of income. Of special note is the requirement to file a special Annex (Anexo J) to report any type of income from outside of Portugal. 

The tax year in Portugal corresponds to the calendar year and is from 1st of January until 31st of December.

The filing periods for Modelo 3 are during the months of April, May and June and within 30 days of any change in income of a previously declared tax year.

Documents issued by paying or owing entities, as well as supporting documents to reported values don’t need to be presented when submitting a tax return, nor will they be verified at that time, except in the case of clarifying the legality of a claim or dispelling doubts concerning proper completion of the forms.  The Tax Authorities (Autoridade Tributária e Aduaneira) may notify a taxpayer to present supporting documentation whenever deemed necessary. Records must be kept during a five-year period following the tax year.

Tax Residence
Tax residence is factually determined, and a person is deemed to be tax resident, if:

1. physically present in Portugal for more than 183 days in a calendar year, or 

2. physically present in Portugal for less than 183 days but has established a permanent place of residence at the year end, or

3. an individual owns a dwelling in Portugal that the tax authorities might reasonably considered to be his or her habitual residency, the individual generally is considered resident for that tax year, or

4. the head of a family is resident in Portugal for tax purposes, other family members are also considered to be resident there, even if living separately.  However, if the foreign country has a tax treaty with Portugal, the treaty contains rules to decide in which of the two countries an individual is resident.

Once a Residence Permit (Residência) is granted, one is deemed to be resident whether physically present or not in Portugal.  The AIMA - Agência para a Integração, Migrações e Asilo is insisting with greater frequency that IRS tax declarations be presented for Residência renewals as proof of means.  If a Portuguese national changes his residence to a blacklisted tax haven, he continues to be considered resident in Portugal for the following four years.

Non-Habitual Residents
The NHR status has ended in 2024. Everyone who already have NHR will remain with this status until the end of their 10 years. 

From the 1^st of January 2024, an amended version of the NHR is in effect. The new regime is called “tax incentive for scientific research and innovation”, keeping it accessible to people with income resulting from employment in so called Start Ups, from careers as higher education teachers, scientific research and other qualified jobs in Portugal

Advice should be sought from a reputable accountant that provides this service to their clients. 

Non-Residents
In the case of a non-resident, IRS shall be levied only on income and gains derived within the Portuguese territory. Non-residents are, in general, subject to a withholding tax which represents a final payment and they are not required to file a tax return.  However, if the non-resident individual is in receipt of income from /or capital gains on Portuguese real estate, he is obliged to file a tax return. 

Non-Residents and Fiscal Representation
People (non-Residents) who have an address outside the EU or Schengen area registered with Finanças AND who have a fiscal relationship with Portugal will need a fiscal representative: 

• If you own a property or a vehicle in Portugal 

• If you have income from employment or self-employment 

The reason for needing a Fiscal Representative is that Finanças do not post correspondence outside of EU/Schengen and will need a representative here in Portugal who can receive your correspondence and make sure you comply with declarations, payments and any other instructions from the Finanças etc. This representative can be anyone who has a fiscal number in Portugal and who IS a Resident here or it can be an accountant/document agency/lawyer etc. 

However, a law was introduced in Portugal (Decreto-Lei 44/2022) which dispenses the need for a Fiscal Representative if you activate the new system of electronic notifications and citations (notificações e citações eletrónicas) on the Finance Portal (Portal das Finanças). Please see our Factsheet FS36 with further information about this system and the process of activating it on Portal das Finanças.

Individual Taxable Income
Net taxable income is calculated by reducing taxable income by personal tax deductions (Certain types of income are subject to specific tax incentives).  The tax liability is computed according to tax rates tables and reduced by applicable tax credits.

Currency
All amounts must be reported in Euros, regardless of the original currency of the transaction. 

Tax Adjustments
There is an array of tax breaks which can reduce or even eliminate the tax owed. Any expense or claimed must be substantiated by receipts (faturas).

a)  Deductions (reducing taxable income):   

There are no longer any tax deductions. Instead, only tax credits currently exist (reductions in tax due).

b)  Personal & Family Tax Credits (reducing tax owed)

c) Tax Credits for Qualifying Expenditures (reducing tax owed):

You should always ask for invoices to be issues with your tax number (NIF) for all expenses in order to be entitled to the tax reductions. 

E-Fatura
With the e-invoice system (e-fatura) the Finanças can pre-fill all parts of your annual IRS income tax declaration. You need to confirm and control your individual e-fatura page on the Finanças website. To do this you need a Senha (password) you will find more information in English on the Finanças website.

This Senha is the same as you use(d) to access your individual IRS page, so you or your accountant might have one already. 

On the e-fatura page, you need to choose ADQUIRENTE, then choose on the next page NIF and fill in your personal NIF and Senha to start the process.

Businesses must report invoices by the 25th of the following month. Only at the end of that month they will appear on an individual page on the IRS website.

Finanças has made a personalised, printable ‘e-fatura´-card with your fiscal number and a bar code for quick and accurate reading. At the bottom of the validation page, you will find Cartão e-fatura and by clicking on OBTER CARTÃO E-FATURA you will be able to download, print it and use it in the shops.

Automatic IRS Reporting
The Portuguese Tax Authority is making available Automatic IRS Reporting to millions of taxpayers in Portugal. Finanças lists the following information on its website for individuals to verify: 

• A provisional declaration of income, one for each reporting status (separate or joint in the case of married or cohabiting taxpayers)

• Provisional settlement of tax corresponding to each provisional declaration

• The elements that used for the calculation of tax credits

The taxpayers can verify this information until 25th of February.

If the information is not correct, taxpayers should not confirm the pre-filled information, but rather complete the IRS as in previous years. If left unconfirmed, the submission automatically becomes final at the end of the reporting period (30^th of June).

Taxpayers not covered by the Automatic Reporting and taxpayers whose tax situation does not correspond to the provisional declaration of income provided by the AT, must submit Modelo 3 and the appropriate annexes, if not already exempt from this obligation.

As the vast majority of foreign residents receive at least some form of income from abroad, currently Automatic Reporting applies in rare instances. 

The Automatic Reporting applies to taxpayers who cumulatively meet all of the following conditions:

1.  Resident in Portugal throughout the fiscal year

2. Not attributed Non-Habitual Resident status

3. All income earned only in Portugal

4. Only those earning income from categories A and/or H as well as taxable income assessed at autonomous rates and not electing, where permitted, aggregate assessment

5. Not paying alimony or child support

6. Not receiving tax breaks (Benefícios fiscais)

7. Without the right to deductions for:

   1. Maintenance payments regarding disabled persons

   2. by double international taxation

   3. Tax breaks (Benefícios fiscais)

IRS Jovem
The IRS Jovem was introduced in 2020 a partial IRS exemption regime. 

According to the State Budget proposal for 2025, the IRS Jovem will now cover all workers (employed and self-employed) up to the age of 35, regardless of their study cycle, and can be used for a maximum of 10 years. 

When young people enter the job market and are no longer part of their parents' household for tax purposes (when they start to have to file their IRS separately), they can benefit from the reduced IRS for ten years, up to the age of 35. Access to this regime is done at the time of filing the annual IRS statement.

In 2025 the IRS Jovem regime will exempt:

• 100% in the first year

• 75% in the second year until the fourth year

• 50% in the fifth until the seventh year

• 25% in the eight until the tenth year.

The amount of exempt income under the above terms is limited to an amount corresponding to 55 times the value of the Social Support Index/IAS* (€ 28,009.30, considering the IAS currently in force and €28,737.50 for 2025).
*The IAS for 2024 is €509.26 and for 2025 will be € 522.50.

This benefit is excluded for persons that have already benefited from certain tax exemptions, please check with your accountant.

Capital Gains 
IRS is levied on the capital gains from the sale of immovable property and on shares, to the extent they are not considered to be commercial, industrial, agricultural or capital income. Please read our Bulletin T07E for more information.

Allowances
Different categories of income have their specific allowance (Deduções Específicas)

It is the taxable income that determines the IRS rate to be applied, corresponding to the gross annual income minus the so-called Deduções Especificas.

Each income category has its own specific deductions. 

The State Budget for 2025 determines that this deduction will be equivalent to 8.54 times the IAS, or 4,462.15 euros in 2025, benefiting workers and pensioners with incomes of up to around 40,000 euros a year.

Taxation of taxpayers who are married or in civil partnerships
As a general rule, taxpayers who are married or in civil partnerships file an individual tax return in which they must include 50% of the income of dependents who form part of the household.

A couple may opt for joint taxation, submitting a single IRS return which includes all income obtained by all members of the household. This option is valid only for the year concerned, i.e., in each year they may choose whether to file their tax return individually or jointly. If a couple opts for joint taxation, the taxable income of that household is obtained by adding the taxable income of the spouses and then dividing the result by two.

Tax Payment Dates
Income tax demands from Finanças are due by 31st of July. The refund is paid less than one month after the declaration is submitted. The law determines, however, that 31st of August is the deadline for AT to proceed with this tax return.

Avoiding dual taxation
If you have settled in Portugal, the Tax and Customs Authority may regard you as a tax resident and tax you on all your earnings, irrespective of where they have been obtained. However, if you have not updated your tax address to Portugal your country’s Tax Authority will continue to consider you to be a tax resident, requiring you to declare all your income, irrespective of the country in which it was obtained. You are therefore in a situation of double taxation of income which may only be corrected after the fact. 

To correct your tax residence in this situation you must apply for a tax residence certificate from Finanças Website (Os Seus Serviços / Obter / Certidões / Efetuar Pedido /Residência Fiscal (Tax Residency) and it may be necessary to present additional supporting information, since the Tax Authority's records are not amended automatically. You can consult the list of countries with which Portugal has conventions to avoid double taxation on the AT portal.

Source: OE 2024/OE 2025

Note: this is only a summary. 

For more information or if you need help, please contact Autoridade Tributária e Aduaneira (AT):
Tel: 217 206 707 or Online: e-Balcão or contact your accountant if you have any doubts.