Taxes

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The Portuguese tax system is constituted by a set of state and local taxes levied on income, in addition to other taxes imposed on certain particular deeds or situations.

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Fiscal Identification Number (NIF)

To start dealing with the Portuguese fiscal administration the first step for an incoming researcher is obtaining the Fiscal Identification Number (NIF). You need this number for any legal act in Portugal, even if you want to open a bank account. For this purpose visit a Tax Bureau or a Citizen’s Shop, and request it exhibiting a valid passport or foreign ID card valid for identification purposes in Portugal. For those who are not residents, a fiscal representative should be assigned (any singular or collective person with residence in national territory).

Income Tax for Individuals (IRS)

Income tax targets both Collective Entities (IRC), and Individuals (IRS), the latter being the one that should concern you as a paid scientific research professional. IRS applies to private individuals residing in Portugal and to non-residents whose income is considered earned in Portugal

Researchers are either subject to or excluded from taxation according to:

  • Employment and legal relationship with the sponsoring entity;
  • Place of residence.

Therefore, one needs to differentiate the situation of the researcher who:

  1. Has employment and legal labor relationship, in which case income is subject to IRS (category A);
  2. Has no employment and legal labor relationship (the income earned is not subject to IRS), as is the case of research grants offered without any employment and legal labor relationship with the sponsoring entities, since these types of income are not covered by this tax.

Research stay based on a grant

If there is no employment and legal labor relationship, as is the case of research grants offered without any employment and legal labor relationship with the funding institutions (Law 40/2004, of 18 August), researchers who only derive income from fellowships or research allowances in Portuguese territory have no tax obligation concerning IRS since that income is not subject to taxation.

Research stay based on an employment contract

If there is an employment and legal labor relationship, one needs to ascertain if the foreign researcher is resident in Portuguese territory or not, since tax obligations concerning IRS will differ accordingly. Residents are taxed on their worldwide income and non-residents on their Portuguese source income only.

Generally, foreign researchers are considered to be resident in Portugal for tax imposition purposes (IRS) when one of the following conditions applies:

  • They have spent more than 183 days in Portuguese territory, with or without interruption, in the year in which the income was earned;
  • Having stayed less than that number of days, they have, on 31 December of that year, housing in Portugal in conditions which may indicate their intention to maintain and occupy it as an habitual residence;
  • Whenever someone who constitutes the household, as head of household, resides here.

Conventions for the avoidance of double taxation

Conditions for residence may eventually be reviewed in case the researchers are nationals of a country with which Portugal concluded a Convention for the Avoidance of Double Taxation and implement the respective Convention, in which case the rules of residence to be applied are the ones established in the Convention.

If a national of a foreign country establishes residence in Portugal, the income earned, wherever it originates from, may be subject to taxation. Double taxation occurs when income earned in a country by a resident of another country is taxed in both countries. In order to avoid that situation, Portugal signed conventions with other countries, in particular with all the members of the EU.

The taxpayer should possess a statement issued by the tax authorities of the country in which the income was derived as proof of income obtained and tax paid abroad, in order to eliminate international double taxation.

Researchers considered non-resident in Portugal for tax purposes

Foreign researchers considered non-resident in Portugal for tax purposes only need to request their Portuguese Tax Identification Number (NIF), as income from dependent employment earned in Portugal is subject to a final withholding tax at the rate of 20%, and no further tax obligations.

Researchers considered resident in Portugal for tax purposes

Researchers considered to be resident in Portugal for tax purposes are taxed in Portugal according to the rules of category A of IRS, with the following main obligations:

IRS tax return filing

IRS is filed in the year following the year of income, involving the submission of tax form Model 3, declaring not only income earned in Portugal, but also abroad. Income earned in Portugal is supposed to be declared in Attachment A of the IRS tax return Modelo 3 and the income obtained abroad is to be declared in Attachment J of the same tax return. Attachment J should also include the tax paid abroad on that income. The taxpayer should have a statement issued by the tax authorities of the country where the income was earned as proof of income obtained and tax paid abroad, in order to eliminate international double taxation.

The IRS tax return Modelo 3 must be submitted by the following deadlines:

Income from dependent employment and/or pensions only (Attachment A and/or Attachment J)
Online
During the month of April
Paper
During the month of March.
Other types of income
Online
During the month of May
Paper
During the month of April

Value Added Tax (VAT)

Value Added Tax applies to transmission of goods, provision of services and importation of goods. Rates vary from 6% to 23%.

Additional information

In Portugal, organization of the tax system is functionally dependent of the Direcção-Geral dos Impostos (DGCI) of the Finance Ministry.

For additional information, contact:

DSRI - Direcção de Serviços das Relações Internacionais
Av. Eng. Duarte Pacheco, 28 - 4º
1099 - 013 Lisboa
351 21 3834200
Fax: 351 21 3834414
dsri-duvidas@dgci.min-financas.pt

Latest update: 15 April 2011 18:10


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