Understanding your tax situation when moving to Portugal

When you decide to move to Portugal, several tax questions arise that need clarification. Here we break down some of the most frequently asked questions, especially for those considering Portugal as a destination:

1. becoming a tax resident in Portugal

Tax residency in Portugal does not occur automatically upon arrival. To be considered a tax resident in Portugal, you must remain in the country for more than 183 days or have a dwelling that characterizes regular residence.

In addition, changing to the status of tax resident in Portugal requires an application to the tax authority, with supporting documentation. It is important to note that this change is not retroactive to the date of arrival, unless a specific request is made.

This applies to those who remain with the “non-resident NIF”. If a change has been made, such as the withdrawal of the tax representative, for example, you may already be listed as a resident before the tax authority. This condition can be consulted on the Finance Portal. And if a mistake is identified, it is possible to assess whether a specific request for a change to the tax authority is appropriate, if necessary.

2. Main consequences of Tax Residency in Portugal

Income earned both in Portugal and abroad, including Brazil, may have to be declared and taxed in Portugal. Hence the importance of carrying out a prior study of the tax impact of this change.

3. Special Taxation Systems (tax benefits)

Each situation must be studied individually, especially in 2024 when we enter a transition period for one of the main tax incentives for new tax residents in Portugal: the so-called non-habitual resident (NHR) system.

Until 2023, from the moment a person became a tax resident in Portugal and provided they had not been a resident for the last 5 years, they could apply to register as a non-habitual resident (RNH), guaranteeing the right to be taxed in this way for the next 10 years. This entitles them to reduced taxation or full exemption for certain categories of income.

As of 2024, the NHR has changed and will be terminated, preserving the rights of those who have already registered. In 2024, it will still be possible to register, provided you meet certain rules that will apply during this transition period.

Therefore, for those who have moved to Portugal by 2023 and have not yet signed up to the NHR, it is highly recommended that you analyze your situation beforehand, while it is still possible to apply for this tax benefit.

4. Consequences of not changing your tax residence in Portugal

Failure to notify the tax authority may result in retroactive recognition of the status of tax resident in Portugal.
In this case, the tax that has not been paid on income earned in Portugal and abroad (such as Brazil, for example) may be demanded, even if it has been taxed in those countries, plus fines and interest.

The same can happen if you change your tax residence to Portugal, but without declaring the income earned in Brazil, which remains declared and taxed only in that country. This is the common event of “double tax residence” which, as we have already explained, is irregular. In this case, Portugal may demand the payment of the tax on income earned in Brazil. And the Brazilian Revenue Service may tax any income earned in Portugal, depending on the type of income and the tax rules and agreements. Hence the importance of studying each individual situation.

5. Regulating your tax situation

Before changing tax residence to Portugal, it is advisable to analyze the impacts and the procedures needed to ensure tax compliance.

In this analysis, it is possible to map out the risks and the procedures that may be adopted to ensure that income, investments, assets and checking accounts in Brazil and/or Portugal and abroad are maintained in the regular and most efficient way possible.

By understanding these tax nuances, you can make more efficient decisions and ensure a smooth transition to Portugal. At FFSA, we are committed to providing expert guidance at every stage of this process.