Could you be registered incorrectly as a tax resident of Portugal?

If you have a Portuguese fiscal number and you have not updated your address at the tax department, you could be wrongly registered as a tax resident in Portugal.

Fiscal representation was introduced in 2002 and prior this, every person who obtained a fiscal number was automatically registered as being tax resident in Portugal.  

If you have never appointed a fiscal representative or never altered your address at the tax department you may well still be wrongly registered as a tax resident. 

Does your IMI property tax bill get sent by the tax department directly to your property in Portugal?  This means you are registered as a resident at that address.

If you are registered as a resident at the tax department (whether rightly or wrongly) you are liable to submit an annual individual (IRS) tax return in Portugal declaring here your worldwide income.  Being registered as a resident in itself does not (currently) trigger a tax investigation and there are many such residents who do not submit declarations because they do not have any income.

However with the ever increasing exchange of information between official bodies in Portugal and abroad, it is crucial that people check their tax status as, after an event, it can be difficult to convince the tax office that you were non resident.  

A transaction whereby you give your fiscal number can lead to the tax authority presuming that you have generated income in Portugal sufficient to justify that transaction.  

Example 1:  

Mr Jones was wrongly registered as a tax resident in Portugal.  He bought a property for 750,000 euros.   The tax department presumed that he had received an income equal to 20% of the property purchase value and because he did not submit a tax return in Portugal, he suddenly received a tax bill for 60% of the presumed income!

Example 2:

Mr Smith was registered as resident in Portugal and sold his property before returning to the UK.  He submitted the necessary capital gains tax return but he did not remember to alter his address at the tax office from Portugal to the UK.   The tax department wrote to his Portuguese address to audit his accounts and because they did not get a reply they automatic adjustment in the tax return resulted in much higher tax to pay. 

Example 3:

Miss Owen was wrongly registered as a resident in Portugal and had savings in a bank in Scotland.  Due to the double taxation treaty, the bank informed Portugal of the bank interest gained which Portugal deemed as income.  Miss Owen had to pay tax on her savings in Portugal as well as in Scotland. 

It is important you keep the tax department up to date with your residential address.

Ask Sovereign - Consultoria Lda to undertake a Personal Tax Check on your behalf to ensure you are properly registered and fully compliant in Portugal.

Sovereign - Consultoria Lda
Parque Empresarial Algarve
8400-431 Lagoa

Tel: +351 282 340480    
Fax: +351 282 342259

Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, this information does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission.