Declaring Foreign Income in Portugal: What You Need to Know

Portugal residents must declare all foreign income and bank accounts via IRS Annex J. Learn how to report correctly and avoid double taxation.

If you are a resident taxpayer in Portugal and receive income from abroad—whether it's from employment, pensions, rental properties, or dividends—you are required to declare this income to the Portuguese Tax Authority. This must be done through Annex J of the IRS (Imposto sobre o Rendimento das Pessoas Singulares) tax declaration.

According to recent clarifications from the Autoridade Tributária e Aduaneira (AT), all income earned internationally must be reported, along with any foreign bank accounts, even if taxes were already paid in the country where the income originated.

What Needs to Be Declared?

When filling out Annex J, you’ll need to include:

• Gross income earned abroad (before any taxes were deducted);

• Any mandatory Social Security contributions paid in the country of origin;

• The amount of tax paid abroad, which may be used as a credit to avoid being taxed twice on the same income.

How Does Double Taxation Relief Work?

To protect taxpayers from being taxed twice on the same income—once in the source country and again in Portugal—the Portuguese tax system allows for a foreign tax credit. This means that the tax you paid abroad can be deducted from the IRS you owe in Portugal, within the limits set by law.

Tax expert Ricardo Reis from Deloitte emphasizes that the Portuguese IRS allows deductions of taxes paid abroad, provided the legal conditions are met. Similarly, Francisco Furtado from Broseta illustrates the process with an example:

“If a taxpayer resident in Portugal owns a rental property in France, they will be taxed in both countries. However, Portugal will offer a tax credit equivalent to the tax paid in France—or the tax that would be owed in Portugal—whichever is lower, thereby eliminating double taxation.”

Stay Compliant and Avoid Penalties

Failing to declare foreign income or overseas accounts can lead to penalties and audits. If you’re unsure about how to proceed, it’s recommended to seek guidance from a tax advisor experienced in international taxation.

Understanding and fulfilling your tax obligations helps ensure compliance and may even reduce the overall tax burden thanks to double taxation relief mechanisms.