Did you become a tax resident of Portugal in 2022?

The last few months have been marked by a significant flow of citizens who have obtained a residence permit in Portugal under the special temporary protection regime. The necessary tax advice does not always accompany this migration.

These individuals are often faced with doubts about the practical effect of registering as a Portuguese Resident. In fact, the residence permit in Portugal under the special temporary protection regime results in an automatic registration of the beneficiaries as tax residents in Portugal. This means they become subject to the same regime applicable to any other tax resident in Portugal.

In this article, we list the key tax obligations to be considered in early 2023. Indeed, from the validation of invoices to the submission of the annual declaration, there are several deadlines to consider over the coming months, in order not to lose tax benefits and deductions.

There is a deadline of utmost importance: March 31^st, 2023. This is the deadline for registering as a Non-Habitual Resident in Portugal, in the cases and under the terms detailed below.

Tax Residence in Portugal

The IRS Code defines a resident in Portuguese territory as anyone who, in the year to which the income refers:

has remained in Portugal for more than 183 days, consecutive or interpolated, in any 12-month period beginning or ending in the year in question; or
having stayed for less time, have a dwelling in Portugal in such conditions that make the current intention of maintaining and occupying it as a habitual residence on any day of the 12 months beginning or ending in the year in question.

Tax residence is assessed in relation to each taxpayer of the household. As a rule, persons who meet one of these conditions become residents from the first day of the period of stay in Portuguese territory.

Portuguese residents must declare all their income - including income obtained outside of that territory - and identify bank accounts held in institutions based in other jurisdictions in the income tax declaration. For example, a Portuguese tax resident who is self-employed in Portugal but also receives a pension from Ukraine must also include the income from this pension in their tax return.

The main reporting obligations of Portuguese tax residents

The income declaration of tax residents in Portugal has the same deadlines and procedures for employees and self-employed workers. It is submitted online between April 1^st and June 30^th of each year.

In turn, if there is tax to be paid, taxpayers must do so until 31 August of each year.

However, even before these deadlines, there are other complementary obligations and deadlines to respect:

Until 15 February 2023: communication of the household. If there has been any change in the household (e.g., birth of a child, divorce, marriage), you must communicate these changes to the Tax Authority;
Until 25 February 2023: confirmation of invoices on the E-fatura online portal. All invoices issued using the taxpayer's tax number (NIF) are available for consultation on the E-fatura portal. The taxpayer must then confirm that all the invoices he requested throughout the year have been reported to the Tax Authority and validate his information. Self-employed workers must also confirm whether the expenses were incurred as part of their professional activity;
Until 31 March 2023: indication of the entity to which you want to assign the IRS or VAT. Since a few years ago, taxpayers can donate part of the money they pay through the IRS to a social solidarity institution. In other words, instead of giving 0.5% of your IRS to the State, you can help an institution of your choice. This option has no cost to the taxpayer.

Finally, we highlight a deadline of utmost importance: 31 March 2023, the deadline for registering as a Non-Habitual Resident in Portugal, in the cases and under the terms detailed below.

Who can be considered a Non-Habitual Resident in Portugal?

A Non-Habitual Resident in Portugal is anyone who becomes a tax resident in Portugal and has not been a tax resident in Portugal in any of the five years prior to moving to this country.

Although they benefit from some tax advantages, Non-Habitual Residents in Portugal are also subject to the annual submission of an income tax (IRS) declaration.

Advantages of the Non-habitual resident status in Portugal

The special regime for non-habitual residents confers some benefits depending on the type and source of income. This regime is valid for ten years and does not entail any disadvantages for its holder.

Deadline for obtaining NHR status in Portugal

Once the conditions are met, the taxpayer acquires the right to be taxed as a non-habitual resident for a period of 10 consecutive years from the year of registration as a resident, provided that the taxpayer registers with the Tax Authority by March 31st, inclusive, of the year following that in which they become a resident.

Thus, a Ukrainian citizen who becomes resident in Portugal in the year 2022 and has not been resident in Portugal in the previous five years will have until 31 March 2023 to apply for registration as Non-Habitual Resident.

NEWCO has 30 years of experience assisting foreign investors and expatriates in Portugal and a team specialising in international activities.