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The State Budget Law for the year 2022 (Law 12/2022 of 27 June) introduced amendments to article 12- A of the IRS Code, in order to extend this Tax Regime to taxable persons who become fiscally resident in Portuguese territory in the years 2021, 2022 or 2023.

Benefit of former residents

Pursuant to the provisions in number 1 of article 12-A of the Personal Income Tax Code (CIRS), 50% of the income received from dependant work, business and professional income is excluded from the taxation applied to taxable persons who cumulatively meet the following conditions:

Conditions of access

  1. Become resident for tax purposes in Portugal in 2019, 2020, 2021, 2022 or 2023 pursuant to numbers 1 and 2 of article 16 of the CIRS;
  2. Not have been considered resident in Portuguese territory in any of the previous three years:
    1. upon becoming a resident in Portugal, once again, in 2019, the taxable person cannot have been resident in national territory in 2016, 2017 and 2018;
    2. upon becoming a resident in Portugal once again in 2020, the taxable person cannot have been resident in national territory in 2017, 2018 and 2019;
    3. upon becoming a resident in Portugal once again in 2021, the taxable person cannot have been resident in national territory in 2018, 2019 and 2020;
    4. upon becoming a resident in Portugal once again in 2022, the taxable person cannot have been resident in national territory in 2019, 2020 and 2021;
    5. upon becoming a resident in Portugal once again in 2023, the taxable person cannot have been resident in national territory in 2020, 2021 and 2022;
  3. Have been resident in Portuguese territory before:
    1. 31 December 2015 for taxable persons returned in 2019 or 2020;
    2. 31 December 2017 for taxable persons returned in 2021;
    3. 31 December 2018, for taxable persons returned in 2022;
    4. 31 December 2019 for taxable persons returned in 2023;
  4. Have their tax affairs regularized;
  5. Not have applied for registration as a non-habitual resident.

Article 16 of the CIRS – Residence

  1. Residents in Portuguese territory are persons who, in the year to which the income refers:

    1. Have stayed in Portuguese territory more than 183 days, consecutively or interpolated, in any period of 12 months starting or ending in the year in question;
    2. Having stayed for less time, they have housing therein, on any day of the period referred to in the previous subparagraph, under conditions that imply a current intention to keep it or use it as their habitual residence;
    3. As at 31 December, are crew members of ships or aircraft, provided that they work for entities with residence, registered office or effective management in this territory;
    4. Hold positions or commissions of public nature abroad at the service of the Portuguese State.
  2. For purposes of the provisions in the previous number, a day of presence in Portuguese territory is considered any day, complete or partial, which includes overnight stay.

Procedure to be taken into account if you did not change the Tax Residence when you emigrated

If you did not change your tax residence when you emigrated, you may submit, in any finance service, the application for retroactive effects, using the model available for that purpose. Thus, it should add the appropriate documents proving this, such as:

  • a certificate of tax residence abroad issued by the respective tax administration, expressly stated in the year(s) in which he was considered a resident of that country, or
  • a document attesting to residence abroad, expressly stated in the year(s) in which he was considered a resident outside the Portuguese territory, issued by any official entity of the State, where the taxpayer declares to have resided, or issued by a Portuguese diplomatic or consular authority, in that country.

The supporting documents referred to above must be original or certified copies by the Diplomatic Post of the area of your residence and, when written in a foreign language, must be presented in a copy translated duly certified, in accordance with Portuguese law.

Type of income on which the benefit is applicable

This benefit is applicable to income derived from:

Therefore, the tax system established in article 12-A of the CIRS covers income derived from any business or activity, provided that this business or activity is conducted at an individual level, as a sole proprietor.
Income shall not be excluded from taxation if it arises from a business or activity undertaken through a commercial company, as in this case it would be subject to corporate income tax (IRC) and not personal income tax (IRS).

Duration of the benefit

This benefit extend up to 5 years, being applicable to income earned from the year in which the taxable person once again becomes resident in Portugal and meets all the other requirements and in the following 4 years.

Recognition of the right to the benefit

The benefit established in article 12-A of the CIRS is automatic (does not depend on prior recognition), with its application arising directly from the law from the moment that the taxpayers become resident in 2019, 2020, 2021, 2022 or 2023 and all the other legal prerequisites are observed.

At the time of completion of the standard statement 3, the taxpayers merely have to indicate that they wish to benefit from this system, as indicated in the corresponding completion instructions.

They must also comply with the requirements described below, depending on whether the income refers to that received from dependent work, business or professional income.

Taxable persons returned to Portugal in 2021

Whereas, it was through Law 12/2022, of 27 June (LOE/2022), entered into force on 28-06-2022, that the benefit enshrined in Article 12-A of the CIRS was renewed for the years 2021, 2022 and 2023 and that, only after that date, the possibility for taxable persons, who in 2021 became tax resident in the territory, Portuguese, mention in their income statement that they wish to benefit from the tax regime of former residents was, for a better understanding of the regime, in particular the declarative procedures, the Circular Office No. 20243/2022 of 30 June, to which the consultation is referred.

Income from dependant work

With regard to income from dependent work, and pursuant to article 99 of the CIRS, taxable persons should invoke their capacity as former residents returned to Portuguese territory and covered by the system of article 12-A of the CIRS. To this end, they should submit the corresponding statement to the entity paying the income, so that the entity becomes entitled to make personal income tax deductions at source, only on 50% of the income and at the corresponding rate in the respective Table of Tax Deduction at Source, approved by the order stipulated in article 99-F of the CIRS.

Business and professional income

With regard to business and professional income, taxable persons should invoke their capacity as former residents returned to Portuguese territory and covered by the system of article 12-A of the CIRS, by placing on the respective receipt the statement “Tax Deduction at source on 50%, pursuant to article 12-A of the Personal Income Tax Code (CIRS)”, with the applicable rates being established in article 101 of the CIRS.

Legislation / Useful documentation

State Budget for 2019: Law 71/2018, of 31 December (articles 258 and 259)
Personal Income Tax Code (CIRS): Articles 12 and 16
Circular Letter 20206, of 28-02-2019: Tax system applicable to former residents – Article 12-A of the Personal Income Tax Code (CIRS)
State Budget for 2022: Law 12/2022, of 27 June (article 280)
Circular Letter 20243, de 30-06-2022: Tax system applicable to former residents for the years 2021, 2022 and 2023– article 12-A of the Personal Income Tax Code (CIRS) and Transitional Standards for the Year 2021 – Law do OE/2022
Circular Letter 20210, of 15-04-2019: Article 12-A of the Personal Income Tax Code (CIRS) – Frequently Asked Questions (FAQ)
Guia Fiscal das Comunidades Portuguesas (Tax Guide of the Portuguese Communities)

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