WE FINALLY arrive at the perpetual question on everyone’s mind: How can I save on my taxes? Of all the credits and deductions available, medical expenses are customarily the single largest. However, before examining the ins and outs, let’s examine some of the basics about claiming credits.
What kinds of medical expenses are eligible
for a tax credit?
A 30 per cent tax credit is allotted on the following non-reimbursed medical expenses:
– services from medical professionals such as doctors, dentists, physiotherapists, etc
– laboratory analyses
– surgery and hospitalisation, dentures and orthodontic braces
– eyeglasses and hearing aids (when accompanied by a doctor’s prescription)
– prescribed medical treatments
– prescribed and un-prescribed medications (five per cent VAT)
– prescribed treatments taxed at 17 per cent VAT (subject to restrictive limitations)
– ambulances and special transport
– necessary travel outside the country when treatment is unavailable in Portugal
cannot be claimed?
The following expenses do not qualify for a tax credit:
– any reimbursed medical expenses
– non-essential travel expenses
– non-curative products such as cosmetics and hygiene products (which are also sold in pharmacies, readily identifiable by the 17 per cent VAT)
– natural remedies, such as medicinal herbs and teas
– food products
How do I go about substantiating
“Factura, se faz favor!” Always ask for a receipt! You must be able to substantiate any claim with an original receipt, which specifies the name, title and tax number of the pharmacy, laboratory or medical practitioner. Photocopies are not acceptable. If you received partial reimbursement from a state organisation or private health insurance provider, a summary document from the entity, detailing expenses not repaid is necessary.
Last year I had a major operation. Is there an
upper limit to the tax credit?
No. While you can always take a credit or deduction to which you are entitled, you should keep in mind that there are predetermined thresholds, which draw attention and can provoke an audit. Be certain that all of your claims are fully documented.
I had medical treatment abroad. Are these expenses allowable?
While there are medical expenses from abroad that you can claim, the authorities may ask to have translations and authentication of documents. This can be a tedious and expensive process, making it advisable to omit any insignificant claims.
Where do I report medical expenses on my tax return?
In 2004, all expenses are reported on Anexo H. Always report the full amount paid. Finanças will calculate the credit for you. While you need not submit your receipts with the tax declaration, you are required to keep these records for five years in the event of an inspection.
Next week: More tax credits