PORTUGAL - Tax relief for returners

December 2018

The 2019 Government Budget has approved a new special tax regime aimed at motivating returners to regain local tax residency in 2019 and 2020.

This relief is applied to 50% of income subject to IRS (personal income tax) on income from dependent work (Box A of IRS) and from self-employment/professional activities (Box B of IRS). This relief is applied to 50% of income subject to IRS (personal income tax) as on income from dependent work (Box A of IRS) and from self-employment/professional activities (Box B of IRS).

It will be applied to taxable persons who become tax resident in Portugal in 2019 or 2020 under the domicile tax rules and:

Have not been considered as resident on Portuguese territory in any of the preceding three years;
Have been tax resident in Portuguese territory before 31 December 2015;
Have their tax situation regularised.

Individuals who have applied for their local registration as a Non-Habitual Resident cannot have access to this new regime, so no overlap of the two highly beneficial schemes. The option for one or the other needs to be made on a case by case basis, depending on the type of income, and BDO in Portugal has the expertise and know-how to assist you with this.

This tax relief is valid for 5 years, which means until 2024 or 2025 depending on whether the individual come back to Portugal in 2019 or in 2020.

As well as this relief, it is also possible to apply a reduction of taxation on professional activities during the first and second year on the simplified tax regime, of 50% and 25% respectively, which is already in force in Portugal.

Paulo Ferreira Alves
paulo.alves@bdo.pt

Miguel Nuno Cardica
miguel.cardiga@bdo.pt