Basic Tax Guide for Digital Nomads in Portugal: what every digital nomad needs to know to avoid tax problems in Portugal?
The demand for a digital nomad visa in Portugal has grown exponentially, not only because of the Portuguese culture, the Mediterranean climate and the ease of the language, but also because of the low cost of living (compared to other European countries) and tax benefits.
But before we get into the issue of a digital nomad visa for Portugal, here's the question: what does a digital nomad, or an individual seeking such a visa, need to know in order to avoid tax problems such as double taxation and tax evasion?
There are 4:
1. Tax residency;
2. IRS - Personal Income Tax;
3. The new NHR: Tax Incentive for Scientific Research and Innovation;
4. Double taxation treaty.
We'll cover each of these topics in this article.
What is Tax Residency?
Tax residence is nothing more than the place where an individual carries out their vital economic activities. This place can be their fixed residence or their habitual residence.
Digital nomads do not have a fixed residence, but they do have a habitual residence. Therefore, the belief that you don't need to file your taxes anywhere because you don't have a fixed abode is debunked.
It doesn't matter if you travel every 3 months, every month or every week, anyone in the world will have a tax residence somewhere.
If you declare taxes for two countries at the same time, you have double tax residence.
IRS – "Imposto sobre o Rendimento de Pessoas Singulares"
Portugal levies income tax on individuals (in Portugal they are called pessoas singulares) through the Imposto sobre o Rendimento das Pessoas Singulares - IRS (Personal Income Tax).
All citizens who qualify as tax residents under Portuguese law are obliged to declare and pay the IRS.
To do this, they add up all the income earned during the year and apply the following rates, depending on the progressivity of the income (table updated for 2024):
Taxable income | Rates |
Up to 7.703€ | 13,25% |
From 7.703€ to 11.623€ | 18% |
From 11.623€ to 16.472€ | 23% |
From 16.472€ to 21.321€ | 26% |
From 21.321€ to 27.146€ | 32,75% |
From 27.146€ to 39.791€ | 37% |
From 39.791€ to 51.997€ | 43,5% |
From 51.997€ to 81.199€ | 46% |
More than 81.199€ | 48% |
Portugal adopts the principle of universality of income. In other words, taxpayers are obliged to declare all their income, regardless of where it comes from. It is therefore extremely important to plan your move to Portugal in advance.
If you are interested in hiring professional legal services related to tax planning for Portugal, we are a law firm specializing in the subject. To do so, contact us via Whatsapp or e-mail: contato@trpuppioadvocacia.com.br
However, there is a more beneficial tax regime, currently called the Tax Incentive for Scientific Research and Innovation, which we will talk about in the next topic.
Tax Incentives for Scientific Research and Innovation - the new RNH
As of 2024, the Non-Habitual Resident (NHR) regime has been replaced by the Tax Incentive for Scientific Research and Innovation regime.
Anyone wishing to register under the old Non-Habitual Resident regime will have a general deadline of 12/31/2024, provided they meet the legal requirements.
The big difference between the old NHR regime and the new Tax Incentive regime is the list of economic activities, which will be more restricted.
However, those who fall under the new Tax Incentive regime will benefit from a flat rate of 20% for income earned in Portugal and exemption for income earned abroad.
I have commented in detail on the new Tax Incentive regime and its transition in this article.
If you are interested in hiring professional legal services related to tax consultancy, verification of the framework of the new NHR tax regime for Portugal, we are a law firm specializing in the subject. To do so, please contact us via Whatsapp or e-mail: contato@trpuppioadvocacia.com.br
Double Taxation Convention
Double Taxation Treaties, as their name implies, are designed to ensure that tax residents' income is not taxed twice.
The Double Taxation Conventions specify which taxes will be covered by it, the qualification of each income and which method will be applied to avoid double taxation on each income.
Although the Double Taxation Conventions are similar, each country stipulates specific issues in order to sign the Convention. In other words, what is included in the Double Taxation Convention in Portugal will not necessarily be included in the Double Taxation Convention in Spain, for example.
The Double Taxation Convention between Brazil and Portugal has supreme application over the domestic law of each country. In other words, the Convention is above any and all tax laws issued by Brazil or Portugal.
Any tax resident in Brazil or Portugal, or in both countries, who receives income from these countries will be entitled to the application of the Convention, under penalty of nullity of the charge.
If you are interested in hiring professional legal services related to tax consultancy, assistance in administrative or judicial tax actions, we are a specialized law firm. To do so, please contact us via Whatsapp or e-mail: contato@trpuppioadvocacia.com.br
Alert for Double Tax Residency
Those who have dual tax residency need to declare their taxes for two countries at the same time.
However, what few people know is that when you are a tax resident in a particular country, the principle of universal income declaration prevails. In other words, taxpayers must declare all their income, regardless of its origin.
What most people do is declare income from their country of origin only in their country of origin, and income from Portugal only in Portugal. However, by failing to comply with the duty to declare assets universally, the taxpayer commits a crime called tax evasion.
In addition to the risk of being held criminally liable for tax evasion and thus having your passport invalidated, the amounts evaded can be charged to the taxpayer, with interest and monetary correction.
Portugal exchanges information on tax matters with various countries around the world. This exchange of information is carried out using artificial intelligence, which searches and cross-checks the data of its taxpayers in order to detect fraud.
It is therefore extremely important to carry out tax planning, as in addition to optimizing tax payments, it avoids various problems, such as tax evasion and double taxation.
If you are interested in hiring professional legal services related to tax planning, we are a firm specializing in the subject and we can help you, just get in touch via email: contato@trpuppioadvocacia.com.br, or via WhatsApp.
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