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Are you dreaming of retiring in Portugal with its sunny beaches and rich history? That’s a fantastic choice! But let’s talk about something not so exciting but super important: taxes. Don’t worry, we’ll keep it simple and guide you through what you need to know.
When Do You Become a Tax Resident in Portugal?
Basically, if you live in Portugal for more than half the year (183 days or more), you’ll likely be considered a tax resident. This means Portugal could tax your income from all over the world. And yes, even if you’re a resident in Portugal, you’ll still need to file tax returns back in the U.S., which could raise concerns about double taxation.
How Does the Portugal-U.S. Tax Treaty Help?
There’s an agreement between Portugal and the U.S. to make sure you don’t pay taxes twice on the same income. This means more of your money stays in your pocket.
Portugal’s Non-Habitual Resident (NHR) Tax Regime
The Non-Habitual Resident (NHR) program is a unique initiative by the Portuguese government designed to attract foreign residents by offering favorable tax conditions. Once you qualify, you can benefit from the NHR regime for up to ten years.
Tax Advantages on Foreign Income:
Eligibility Criteria:
It’s important to note that the NHR scheme will end in 2024, and new applicants need to apply before December 31, 2023, and complete their application/approval by March 31, 2024. The Portuguese government is planning to replace the NHR tax regime with a new Incentivised Tax Status (ITS) program, which may offer a more limited range of tax benefits.
U.S. Taxes for Americans Abroad
Even in sunny Portugal, Uncle Sam expects you to file U.S. taxes on your worldwide income. This includes declaring foreign bank accounts and assets over certain thresholds (FBAR, FATCA). But hey, there might be tax credits and exclusions to help you out.
Let’s Talk About Wills and Estates
Moving to Portugal can have significant implications for how your estate is managed and distributed after your passing. Understanding and planning for these differences is crucial to ensure your wishes are respected and to make the process smoother for your loved ones.
Different Legal System:
Portuguese Wills and Inheritance Laws:
Impact on U.S. Citizens or Residents:
Buying a House in Portugal and Taxes
Owning property in Portugal comes with its own set of tax implications. Being informed about these can help in budgeting and avoiding unexpected costs.
Property Purchase Taxes:
Annual Property Taxes:
Rental Income Tax:
Capital Gains Tax:
It’s important to note that non-Portuguese residents are subject to different tax rates compared to Portuguese residents, and the tax implications can vary based on the property value, location, and individual circumstances.
Contact Us Today
Understanding taxes might not be fun, but it’s key to a happy retirement in Portugal. At DimovTax, our experts in international taxation are here to provide personalized advice tailored to your unique situation. And remember, we’re here to help make your move as smooth as possible!
Call us today at (833) 829-1120, email us at info@dimovtax.com, or fill out the form and we’ll get in touch immediately.
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Dimov Tax is rated 5 stars on all major review platforms including Google, Yelp, Facebook, Angie’s List, Better Business Bureau, TaxBuzz, Thumbtack, Upwork, Bark, and much more.