Is it time to declare your IRS in Portugal and you are not sure how to proceed? In this article we explain everything you need to know about the topic, after all, anyone who lives in the country and has income, whether a Portuguese citizen or a foreigner, needs to submit their annual income declaration to the State. The amount to be paid in taxes is calculated based on the taxpayer’s income.
The IRS is administered by the Portuguese Tax Office and is one of the main sources of revenue for the Portuguese government. The rules and regulations for the IRS are contained in Portuguese tax law and can be subject to change from time to time. So be aware of the deadlines and details regarding 2023 to avoid the fines, which can be as high as 22,000 euros!
What is the IRS in Portugal?
IRS is the acronym for Personal Income Tax. It is the tax paid on income earned by individuals in many countries, including Portugal. It is annual and is levied based on the taxpayer’s income.
Who needs to declare IRS – Personal Income Tax?
All Portuguese citizens with income (salary, pensions, capital gains) must declare the IRS. It is based on this communication that the Autoridade Tributária e Aduaneira (AT) calculates the IRS to be paid.
What is the deadline for filing IRS returns in 2023?
The filing of the income tax return for 2022 begins April 1, 2023 and lasts until June 30th.
Other important dates
Every year the Tax Authority publishes on its website the calendar for filing the IRS. In 2023, besides the date for filing the return, it is necessary to pay attention to other deadlines:
Until January 31:
- Reporting of amounts received in rentals in 2022: electronic obligation for all IRS category F income holders, who are exempt and have not opted for the issuance of the electronic rent receipt.
Until February 15:
- Household reporting: this task is important in a situation where the composition of the family changes: joint custody of dependents, births, deaths, divorce, and dependent children aged 26.
- Communication of education expenses: for students who are part of the household and attend schools located in an area of the interior of the country or in an autonomous region.
- Rental Contract Reporting: Reporting of the duration of a long-term rental (ALD) or communication of the end of a contract.
Until February 27:
- Confirm invoices: consult, register or confirm your invoices on the portal E-Invoice portal. If you find any omission or inaccuracy in expenses or in their calculation, that is the deadline to complain.
From March 16 to 31:
- Deadline for consulting and claiming deductible expenses.
Until March 31:
- Entity to consign: Inform the entity to which you wish to consign the IRS or VAT, or both.
- Registration as a non-habitual resident: aimed at new tax residents in the country who wish to opt for taxation under the NHR regime in the country. We talk about it in detail here.
From April 1st to June 30th:
- IRS 2023 filing: Confirm the automatic IRS or file a model 3 income tax return. You also need to update your IBAN (international bank account number).
Do foreigners need to pay IRS?
Yes, they need to declare those who:
- Have resided in the country for a period of at least 183 days (consecutive or not) during a fiscal year (January 1st to December 31st).
- Even if they have stayed less than 183 days per year in the country, have tax taxable assets.
Do foreign retirees need to pay income tax?
Yes. The government of Portugal offers tax benefits to new residents, including retirees, through the Non Habitual Resident Statute (NHR). These benefits apply for the first 10 years. For retirees there is a tax rate of 10% tax on the value of pensions from abroad (whether taxed or not in the country of origin).
The deadline to join this regime ends at the end of March (the 31st), for those who registered as tax residents in Portugal in 2022 and did not do the procedure when registering as a tax resident in the country. A Atlantic Bridge offers all the necessary support for your registration in the NHR status and also for your IRS declaration.
It is also important to keep an eye on the tax situation in your home country to be sure of your obligations and avoid problems.
And who is exempt from filing the IRS?
According to the CIRS (Personal Income Tax Code), taxpayers are exempt from filing IRS in 2023 if they received, alone or cumulatively, in 2022:
- Income from dependent work or pensions up to 8,500 eurosthat have been subject to withholding tax;
- Income taxed by the rates foreseen in article 71 and not opting, when legally allowed, for its aggregation;
Taxpayers are also exempt if they:
- They receive subsidies or grants from the Common Agricultural Policy (CAP) worth less than four times the value of the IAS in 2022, i.e., 1,772.80 euros, and can accumulate with income taxed at a flat rate and income from dependent work, or pensions, provided that, alone or added together, they do not exceed 4,104 euros;
- Income from isolated acts up to four times the value of the IAS in 2022, or 1,772.80 euros.
The situations of exemption from declaration foreseen in the previous numbers do not include taxpayers who
- Opt for joint taxation;
- They are temporary and lifetime annuities that are not intended for the payment of pensions falling under Article 11(1)(a), (b) or (c);
- They earn income in kind;
- They receive income from alimony payments referred to in Article 72(9) of the Law of more than 4,104 euros.
*The value of the IAS in 2022 was 443.20 euros.
How much IRS to pay: rates and brackets
To calculate the IRS, the taxpayer must follow a tax rate table provided by the government. It is determined through nine brackets with their respective rates. The IRS tax brackets are ranges of taxable income; the more you earn, the higher the tax rate, i.e. the percentage you have to pay on your income.
In this way, the bands are used to calculate how much tax you will pay. You can find the IRS bands in the Personal Income Tax Code, in Article 68.
In 2023 the brackets are as follows:
|Up to 7,479 euros
|Over €7,479 to €11,284
|Over €11,284 to €15,992
|Over €15,992 to €20,700
|Over €20,700 to €26,355
|Over €26,355 to €38,632
|Over €38,632 to €50,483
|Over €50,483 to €78,834
|More than 78 834 €
What income is exempt from IRS?
It is foreseen in the Personal Income Tax Code the exemption from of tax on some incomes. Among the most common we can mention:
- Income from dependent students up to an overall annual limit of five times the Social Support Index (IAS);
- Income of young graduatesbetween the ages of 18 and 26 who are not dependents;
- Single acts up to four times the value of the IAS;
- Subsistence allowance for the use of one’s own car on behalf of the employer.
- Amounts of social passes and insurance borne by the employer (health or sickness insurance for the benefit of their employees or their family members).
- Subsidy meal, unemployment, RSI and family allowance.
- Income from dependent work or pensions up to 8,500 euros annually (if no other income), which has not been subject to withholding tax and which does not include alimony income above €4,104.
- Indemnities for termination of employment contract.
- Pensions and compensation for bodily injury, sickness or death paid or awarded by the state.
- Income of former residents, as long as they meet the conditions to have access to this IRS exemption
- Awards literary, artistic or scientific
- Income from professionals of entertainers or sportspeople
- Scholarships and Prizes awarded to high competition practitioners and coaches
- Capital gains from gratuitous transfers subject to Stamp Tax
- Increases in assets from gratuitous transfers subject to Stamp Duty, for example, inheritances and donations.
Want help declaring your IRS? Click here!
What expenses are deductible from the IRS?
It is precisely when checking tax-deductible expenses that the taxpayer will remember how important it is . to ask for invoices with NIF. This is because many expenses are deductible, reducing the amount of tax to be paid each year.
Expenses related to education, health, real estate, alimony, nursing homes education, health, real estate, alimony, nursing homes, VAT and general family expenses. These deductions can make the difference between paying additional tax or receiving a refund!
For the 2023 IRS, invoices for your expenses in 2022 must have been validated through e-Invoice by February 27. It is important to remember that there are limits deduction limits that vary depending on the income tax bracket you are in, as described in the CIRS.
The sum of the deductions cannot exceed, per household and in the case of joint taxation, the following limits:
- No limit for households with taxable income below 7,112 euros;
- For households with a taxable income between 7,112 euros and 80,882 euros, the limit is defined based on a mathematical formula, and can vary between 1,000 and 2,500 euros;
- For households with a taxable income over €80,882, the limit is €1,000.
Where to declare the IRS?
The IRS declaration must be made directly on the IRS website. You must have a NIF, which is the Tax Identification Number in Portugal. In addition, you must also make a prior registration on the IRS site, whose access password will be sent to your address. A
- log in to the IRS website (with your taxpayer number and password);
- go to “Deliver Statement” and on the “Deliver 1st Statement and Replacement Statements” marker;
- click on “Fill out Declaration”;
- choose the year for the declaration;
- in the tab “Filling in Assistant” choose between the options: “Retrieving a pre-filled declaration”, “Reading a declaration previously saved in a file”, “Retrieving the last declaration submitted” or “Creating an empty declaration”;
- start filling out the declaration on the “Face” tab, and then fill out the necessary attachments according to your tax situation;
- click on validate and finally, if there are no errors, on “deliver”.
- download the proof of delivery of the declaration
To avoid penalties, you have to be very careful when filing your income tax return in Portugal.
- don’t leave your declaration until the last minute. Fill out the form early and calmly;
- go to the Tax Authority’s website and read about it before you start filling out ;
- separate in advance the documents and proofs of your income for the year you are going to declare;
- if you are married or living in a stable union, analyze if it is worthwhile to send the joint declaration. It is possible to do a simulation before submitting the IRS;
- make the submission before the deadline, so you can make changes if you have made mistakes, without losses or fines;
- when you opt for the automatic IRS declaration, confirm the information before sending it;
- check the IBAN (international bank account) number to receive your refund in the time stipulated by the agency;
- if you don’t feel confident about filing your tax return by yourself, seek professional help.
What happens if I am late in filing?
Late filing of the IRS return can generate fines of 3,750 euros. In addition, late taxpayers still lose the right to deductions for general family and health expenses.
Another disadvantage is the loss of the IMI exemption, for those who have the right.
Finally, if those who have any amount to be refunded, they will have to wait longer to receive the money they overpaid in tax.
What if I don’t submit the declaration or make mistakes?
Errors or omissions in the annual income declaration are punishable by a fine of between 375 euros and 22,500 euros, according to article 119 of the General Regime of Tax Infractions (RGIT). The amount of the fine is set according to several factors:
- Period elapsed until the regularization of the infraction;
- Severity of the fact;
- Taxpayer’s fault;
- Economic situation of the taxpayer.
How to make your declaration in a simple and safe way?
With Atlantic Bridge! We help our clients to do the complete tax planning and management. Talk to our consultants and guarantee your tranquility and comfort.
Need help filing your tax return? Talk to our consultants.