What is the IRS in Portugal?: 2025 Guide

What is the IRS in Portugal?

The IRS in Portugal (Imposto sobre o Rendimento das Pessoas Singulares) is the tax levied on the income of individuals in Portuguese territory. This direct and progressive tax applies to both Portuguese citizens and foreign residents with income earned in Portugal.

The IRS is regulated by the IRS Code, and its management falls to the Autoridade Tributária e Aduaneira (AT). It covers a wide range of yields, divided into the following categories:

• Category A: Income from employment.
• Category B: Business and professional income (self-employed workers).
• Category E: Capital income (interest, dividends, etc.).
• Category F: Property income (rents).
• Category G: Capital increases (capital gains, transfers of assets).
• Category H: Pensions.

The IRS is calculated annually, but it can be paid in installments through monthly withholdings or payments per account (pagamentos por conta), depending on the nature of the income.

What is the IRS used for in Portugal?

The main purpose of the IRS in Portugal is to fund the state budget to cover public spending. Through this tax, the Government obtains resources to maintain essential services such as:

1. Public education.
2. National health system.
3. Infrastructure and transportation.
4. Social security and pensions.
5. Justice and public administration.

In addition to its collection function, the IRS acts as an income redistribution tool. As it is a progressive tax, rates increase as revenues increase, thus contributing to reducing economic inequalities.

Who benefits from the IRS in Portugal?

Although it may seem paradoxical, the IRS not only entails obligations, but also offers advantages to certain taxpayers through deductions, exemptions, and tax benefits. Let’s look at some of the groups that benefit:

1. Families with children: The system includes deductions for descendants, educational and health expenses, as well as tax benefits for daycare and other family needs.

   But even for those who do not have children, expenses with a workshop, hairdresser, restaurants and many others can be translated into deductions that will benefit the taxpayer when filing their income tax return.

2. Pensioners: In many cases, pensioners on low incomes have access to reduced rates or are even exempt from tax if their annual income does not exceed certain thresholds.
3. Self-employed people with low incomes: Self-employed individuals with annual incomes below certain limits can access the simplified regime, which simplifies filing and reduces administrative and tax burdens.

IRS Portugal Calculator

The IRS Portugal calculator is an indispensable tool for estimating the tax to be paid or the expected refund. These calculators are updated annually with the new withholding and tax deduction tables approved in the General State Budget.

What data does an IRS calculator typically require?

1. Marital status (single, married, with or without children).
2. Income category (A, B, etc.).
3. Annual gross income.
4. Withholdings already made by the employer or on his own account.
5. Applicable deductions (education, health, housing, etc.).

Thanks to these simulations, taxpayers can plan their tax year more accurately and avoid surprises at the end of the year.

Requirements for IRS in Portugal

To correctly declare the IRS in Portugal, it is essential to comply with a number of legal and administrative requirements. Below, we list the most relevant ones:

1.  Tax Identification Number (NIF): The NIF is essential for any tax procedure. Both citizens and foreigners must obtain it in order to declare income, sign contracts or open bank accounts in Portugal.
2. Annual filing of the return: The usual IRS return delivery period runs from April 1 to June 30. This is done electronically through the Portal das Finanças.
3. Record Keeping: All taxpayers must keep their bills and receipts for at least 5 years. The Autoridade Tributária may require this documentation in the event of an inspection.
4. Important Dates Influencing the IRS:

   Any change in marital status, number of dependents or employment situation must be reported until February 15 of each year to the tax administration to avoid errors in withholdings or tax calculations.

   Also until the end of February of each year, each taxpayer must approve invoices for their own expenses and those of their family member that may be pending on the Tax Agency’s website.

Who is required to file the IRS in Portugal?

Persons who, being tax residents in Portugal, have obtained income from dependent work, business, professional, capital, property, property and pensions. In other words, all the worldwide income must be declared in the income tax return in Portugal.

People who, being non-residents, have carried out a self-employed activity in Portugal.

People who, being non-residents, have sold a property in Portugal.

What if the person has been a resident for a period of time and then moved residence to another country?

In Portugal, there is the concept of partial income tax return, that is, even if the person has been in Portugal for 2 or 3 months, he or she must represent his or her return for the period in which he or she has been resident and receiving income.

In summary, understanding the IRS in Portugal is critical to complying with tax obligations while also taking advantage of the benefits and deductions available. This tax not only contributes to essential financial services for society, but also contributes to the redistribution of income through its progressive nature.