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Tax Season – Procedures – Taxable Income

Last updated on 5th March 2022

IRS 2021 – Procedures 1-7nº 7: Taxable Income

Until June 30, taxpayers with an obligation to submit the IRS declaration must do so through the Internet.

To submit the declaration, you must have an authentication password, sent by the Finance Department. It is the combination of the password with the taxpayer number that gives access to the IRS submission page on the Finance Portal. It is mandatory to have a password for each member of the household, including children.

Non-residents who are subject to a withholding tax which represents a final payment are not required to file a tax return for income arising in Portugal. However, if non-residents are in receipt of income or gains on Portuguese real estate not subject to final withholding tax, they are obliged to file a tax return.

Filing Exemptions

All those with earnings in 2021 are required to submit a tax declaration with the following exceptions:

  a)   those who only have earnings subject to final withholding tax (except dividends) and accept the tax paid as final.

  b)  those receiving salary or pension income below €8,500.

  c)   “Isolated Acts” up to €1,676.

Question:  The only income that I received in 2021 was from bank interest, taxed at source. Do I have to declare ?

EuroFinesco:  If the interest and withholding is in Portugal, no declaration is required.  Nevertheless, if your tax rate falls below 28%, you may achieve a small savings in reporting and submitting a return. In other words, you may be entitled to a refund.

If the interest that you received came from outside of Portugal and you are resident for tax purposes, this income should be reported, regardless of the withholding.

Question:  My Old Age Pension falls below the Portuguese minimum wage. I also had a small amount of income from dividends abroad. Do I still have to submit a tax return?

EuroFinesco:  Yes. The true purpose of this reporting waiver is to exempt the large number of small Portuguese pensioners who would only clog up the system without bringing in any appreciable income to the State’s coffers. All others must file. Any investment income from abroad must be reported on Anexo J  (Income from Abroad).

Question:  Is there an advantage to filing an “IRS” declaration?

EuroFinesco:  Yes. In addition to being required to issue other official documents in Portugal, your tax return is essential to be eligible for a home mortgage loan. As a tax resident, you should pay a lower rate of interest.

This is the final article in the series

Dennis Swing Greene
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