In my last post I mentioned that I would be consulting with an accountant about filing taxes in Portugal. The news was all good. However, I did become aware of another step that I need to take in order to not pay income tax in Portugal.
I have until March 31 of the year following the year in which I obtained my Temporary Resident status to file as a non-habitual resident. It is a simple online process to apply, followed up by submitting proof electronically or by mail that I am currently paying taxes in the country of which I am a citizen. So what does that mean for my tax obligations here in Portugal?
Once my status is granted I will need to file a report online showing that I am still residing in Portugal and that I am still paying taxes in the country from which my income originates.
Certain types of income are allowed to be exempt and others are capped at a 20% tax rate. Here is the abbreviated version of how tax obligation is applied if have non-habitual resident status.
- For a period of 10 years, taxation related to IRS (personal income tax) on labour income in Portugal is at a fixed rate of 20%
- No double taxation for pension incomes or for employment and self-employment income obtained abroad for a period of 10 years
I will still need to file a tax return each year in Portugal, with no payment due, and I will also need to update my non-habitual resident status annually for 10 years. Then, a new set of rules regarding citizenship and taxes will apply. I am not going to worry about that yet!