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How, when and where to file

By DENNIS SWING GREENE [email protected]

Dennis Swing Greene is Senior Partner and International Fiscal Consultant for euroFINESCO s.a.

This is the second article in the series examining required procedures when declaring Individual Income Tax (IRS):

1) Fiscal residency;

2) Submitting your “IRS” declaration;

3) Non-residents;

4) Exemptions from filing;

5) Marital status;

6) Tables of progressive tax rates

In the “good old days”, many were exempt from submitting IRS tax forms. However, the law changed some time ago and now the overwhelming majority of foreign residents must declare.

In the 2010 tax year, everyone is required to submit a tax return with the exception of those earning only Social Security pensions falling below the minimum wage.

No tax return can put you on the wrong side of the law and vulnerable to undesired queries. If you are from a non-EU country, you will not be able to renew your Residência without one.

For EU citizens, it’s only a matter of time before presenting your “Modelo 3” is compulsory for renewals.

Important dates

All tax returns must be submitted by the following deadlines to avoid penalties. When filing using conventional paper forms:

March: if only salaried and/or

pension income;

April:  in all other cases.

When filing electronically via internet:

April:  if only salaried and/or

pension income;

May:  in all other cases.

Attention: In the past, late returns incurred only a token fine. However, the law has changed and the fines now start at €50 and can be as high as €5,000.

Also remember that the fiscal year in Portugal corresponds to the calendar year (January 1 to December 31). British nationals need to be especially careful since their April-to-April P60s will not correspond to the Portuguese fiscal year.

Where to submit your return

Declarations may be submitted in person at the local tax office (Repartição de Finanças), by post or over the internet:

The website and forms are only available in Portuguese. More and more services are becoming available online, such as checking your newly updated Valor Patrimonial (rateable value) of your home.

Some business related submissions can only be submitted over the internet. 

Attention: Getting a password takes at least a week, so this step should not be left to the last minute!

Tax forms keep changing and this year is no exception. Modelo 3 is now only an information cover sheet.

Different categories of Portuguese sourced income are reported on the appropriate corresponding annexes. Foreign income is reported exclusively on Modelo J.

All expenses have moved to Modelo H. Net taxable income is calculated by reducing taxable income by personal deductions and tax credits.

Certain types of income benefit from specific tax incentives. Tax liability is computed according to tax rate tables, reduced by applicable tax credits.

If non-residents are subject to withholding tax, this payment-at-source represents a final payment and they are not required to file a tax return.

However, any other income arising in Portugal, such as rent or capital gains on Portuguese real estate, must be reported. In fact, your first obligation is to report the income and pay the tax in the country where it arises (in this case, Portugal), then report again in your home jurisdiction to claim the international double taxation credit.

When to pay your Tax Bill

Based your submission, Finanças will calculate what you owe and send a demand later in the year. Income tax is due within one month of the issue of an assessment by the tax authorities. Late payment will incur monthly interest charges. 

Next:  Non-residents and filing requirements

Dennis Swing Greene is Chairman and International Fiscal Consultant for euroFINESCO s.a.  Private consultations can be scheduled in Guia (Albufeira) on 289561333, by email at [email protected] or on the internet at