A lot of confusion occurs in this area – people often mistakenly believe they have to be in Portugal for at least 183 days to be considered tax resident here, but that is not strictly the case.

The rules state that you are Portuguese tax resident if:

• you spend more than 183 days in Portugal in any 12-month period (these days do not have to be consecutive)
• if your habitual/permanent residence is in Portugal i.e. your ‘home’ (there is no minimum day count for this criterion)

Generally a tax payer is Portuguese resident from the ‘first day’ or day of arrival.

If you move to Portugal mid-way through the year, Portugal allows for ‘split-year’ tax treatment. This means that you will only be liable to tax in Portugal from the time you become resident there i.e. the date you permanently move to Portugal up to 31st December. The same principle applies for those who choose to permanently leave Portugal.

This can provide advantageous tax and financial planning opportunities and that is why it is best to seek advice and start planning early. We have separate guides on visas in Portugal and residency that explain the process of becoming resident in more detail.

If you move to Portugal mid-way through the year, Portugal allows for ‘split-year’ tax treatment. This means that you will only be liable to tax in Portugal from the time you are resident there i.e. the date you move permanently move to Portugal up to 31st December. The same principle applies for those who choose to permanently leave Portugal.

This can provide advantageous tax and financial planning opportunities and that is why it is best to seek advice and start planning early.

Many clients I have helped have been paying tax in the wrong country, often because of incorrect advice received in the past, or just because they were not aware of the rules.

It is critical to establish your tax residency position to avoid complications and possible penalties in future. I discuss these issues in this post and my next post later this week, with the latter focusing specifically on Portuguese tax residency.

If you are a Portuguese tax resident you are required to declare, and pay tax on, your worldwide income and gains in Portugal. If you are non-resident, then you are only liable to pay tax in Portugal on Portuguese source income.

If you have assets and/or income in more than one country, you will always have a “controlling tax authority” (CTA). This is not based on where most of your assets are located, where income is earned, ‘where you have always paid tax’ or where you ‘choose to declare tax’. Your CTA is normally the jurisdiction where you spend most time in that given tax year i.e. where you are tax resident.

Having said this, you may have to pay tax in more than one country. For example, if you are permanently living in Portugal and you have rental income generated in the UK, you will have to pay tax on that rental income in the UK first. However, as Portugal is your country of tax residence, you will also have to report the income in Portugal and potentially pay tax. Similarly, if you own and run a UK business, you may have to declare and pay tax and social security in Portugal instead of the UK if you are resident in Portugal.

Paying tax in the wrong country may not only result in heavy penalties but could also mean that you are paying more tax than you should and may affect any state pension, healthcare or social security rights you have.

There are rules in place between most countries to avoid tax being paid twice (double taxation agreements) but generally the highest rate of tax will always remain payable.