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When moving abroad, one of the most common concerns is whether you will have to pay taxes in two different countries.
Fortunately, Portugal has signed double taxation agreements (DTAs) with more than 80 countries, helping residents and investors avoid being taxed twice on the same income.
For foreigners relocating to Portugal, understanding how these agreements work is essential. They determine which country has the right to tax certain types of income, such as employment income, pensions, dividends, or capital gains.
This guide explains how Portugal’s double taxation agreements work, who they apply to, and how expats can benefit from them.
What Is a Double Taxation Agreement?
A double taxation agreement is a treaty between two countries designed to prevent the same income from being taxed twice.
These agreements establish rules that determine:
- Which country has the right to tax certain income
- How tax credits are applied
- How residency conflicts are resolved
For example, if an individual lives in Portugal but receives income from another country, a tax treaty helps clarify where that income should be taxed.
Most double taxation agreements follow the OECD model tax convention, which provides a common framework used by many countries around the world.
Why Double Taxation Agreements Matter for Expats
Foreign residents often earn income from multiple sources, such as:
- Salary from a foreign employer
- Pension payments from their home country
- Rental income from property abroad
- Dividends or investments in international markets
Without a tax treaty, this income could theoretically be taxed in both countries.
Portugal’s tax treaties ensure that income is generally taxed only once, or that taxes paid abroad can be credited against Portuguese tax obligations.
For many expats, this makes relocating to Portugal far more financially predictable.
Countries With Double Taxation Agreements With Portugal
Portugal has signed tax treaties with more than 80 countries worldwide, including many of the countries from which expats commonly relocate.
| Country | Country | Country | Country |
|---|---|---|---|
| Angola | Ireland | Qatar | Romania |
| Algeria | Israel | Russia | Saudi Arabia |
| Andorra | Italy | Serbia | Singapore |
| Argentina | Japan | Slovakia | Slovenia |
| Armenia | Kuwait | South Africa | South Korea |
| Australia | Latvia | Spain | Sri Lanka |
| Austria | Lithuania | Sweden | Switzerland |
| Azerbaijan | Luxembourg | Thailand | Tunisia |
| Bahrain | Malta | Turkey | Ukraine |
| Belgium | Mexico | United Arab Emirates | United Kingdom |
| Bosnia and Herzegovina | Moldova | United States | Uruguay |
| Brazil | Montenegro | Venezuela | Vietnam |
| Bulgaria | Morocco | Germany | Greece |
| Canada | Mozambique | Hungary | Iceland |
| Cape Verde | Netherlands | India | Indonesia |
| Chile | New Zealand | Norway | Pakistan |
| China | North Macedonia | Panama | Peru |
| Croatia | Poland | Portugal | France |
| Cyprus | Denmark | Estonia | Finland |
These agreements help individuals moving to Portugal manage their international tax obligations more efficiently.
Example: Portugal–United States Tax Treaty
The Portugal–US tax treaty is particularly important because American citizens remain subject to US taxation on worldwide income, even when living abroad.
However, the treaty helps prevent double taxation in several ways.
Example
An American living in Lisbon may pay income tax in Portugal on employment income earned locally. The US tax system generally allows a foreign tax credit, which offsets taxes already paid in Portugal.
In practice, this means the same income is not taxed twice, although reporting obligations may still exist.
Americans moving to Portugal should also consider US-specific rules such as FATCA reporting requirements.
Example: Portugal–United Kingdom Tax Treaty
The tax treaty between Portugal and the United Kingdom addresses situations where British citizens receive income from both countries.
Typical examples include:
- UK pensions received by residents in Portugal
- Rental income from property located in the UK
- Dividends from UK companies
The treaty defines which country has the right to tax each type of income and may allow a tax credit for taxes paid abroad.
This framework is especially relevant for retirees relocating from the UK to Portugal.
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How Double Taxation Is Avoided
Most tax treaties rely on two main mechanisms to prevent double taxation.
Tax Credit Method
Taxes paid in one country may be credited against taxes owed in the other country.
Example:
A Canadian resident in Portugal pays tax on investment income in Canada. When filing taxes in Portugal, the individual may receive a credit for the tax already paid abroad.
Exemption Method
In some cases, income may be taxed only in one country while being exempt in the other.
For example, certain pensions or employment income may be taxed exclusively in the country where the individual resides.
The specific rules depend on the terms of the treaty between the two countries.
The Role of Tax Residency
Double taxation agreements usually apply once a person becomes a tax resident in one of the countries involved. To understand how this status is determined, see our guide on Tax Residency in Portugal.
In Portugal, tax residency generally depends on factors such as:
- spending more than 183 days in the country during a calendar year, or
- maintaining a habitual residence in Portugal.
Your tax residency status plays a key role in determining which country has the right to tax certain types of income.
Practical Considerations for Expats
Before relocating to Portugal, it is important to review how double taxation agreements apply to your situation.
This includes understanding your tax residency status, checking whether Portugal has a tax treaty with your home country, and ensuring you comply with reporting obligations in both jurisdictions.
Many foreigners also obtain a Portuguese NIF (tax identification number) before establishing tax residency.
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Your Questions Answered
What is a double taxation agreement in Portugal?
A double taxation agreement is a treaty between Portugal and another country that prevents the same income from being taxed twice. These agreements determine which country has the right to tax certain types of income.
Does Portugal have a tax treaty with the United States?
Yes. Portugal and the United States have a double taxation agreement that helps prevent Americans living in Portugal from paying tax twice on the same income.
How many double taxation agreements does Portugal have?
Portugal has signed more than 80 tax treaties with countries around the world, including the UK, Canada, Australia, and many European countries.
Do expats still need to report foreign income in Portugal?
Yes. Portuguese tax residents generally need to declare their worldwide income, although tax treaties may allow credits or exemptions to prevent double taxation.
Do double taxation agreements apply automatically?
In most cases, individuals must declare foreign income and claim the appropriate tax credit or exemption when filing their tax return. The exact process may depend on the treaty between the countries involved.
Portugal’s double taxation agreements play an important role in protecting foreigners from being taxed twice on the same income. With treaties covering more than 80 countries, these agreements help clarify how international income should be taxed and provide mechanisms such as tax credits or exemptions.
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