2024 Tax Return Season

 António Pratas Nunes | Lawyer

Now that March is ending, we find ourselves in the time of year when taxpayers in Portugal need to submit their tax returns. Between April and June, taxpayers need to navigate the complex world of filling in the IRS Model 3 declaration, deciding what must be declared, and understanding how their sources of income will be taxed in Portugal.

Here are some insights and practical recommendations to help you through this process:

• Tax residents in Portugal (2024): Individuals who are considered residents in Portugal during the year 2024 are required to declare their worldwide income in Portugal. This means that all income—both domestic and foreign—must be reported and will be considered for taxation. 

• Non-Residents: Non-residents only need to declare their income from Portuguese sources. For instance, rental income from a property located in Portugal must be declared and will be subject to taxation.

Additionally, before preparing the tax return, in case you have income from different sources it’s always important to confirm the residency status and understand how the income will be taxed under the Double Taxation Treaties signed with Portugal. 

The process of submitting tax returns is essentially done online through Portal das Finanças. To do so, taxpayers need to have: 

• Their tax identification number, as well as the tax identification numbers of any household members, if applicable.
• Access to their Portal das Finanças account, including the access password for themselves and any household members, if applicable.

The income earned in 2024 must be declared between 1 April and 30 June 2025 by submitting the IRS Model 3 declaration. While it is possible to file your declaration after the deadline, doing so typically incurs fines. 

However, there are exceptional cases where the taxpayer may present their tax return outside of the established period. For example, if you’re a Portuguese resident with foreign income and are still waiting for confirmation regarding taxes paid abroad, you may request an extension to file without incurring penalties.

Not all declared income will necessarily be taxed. For example, under the Non-Habitual Resident (NHR) regime, there are scenarios where you are required to declare your income, but certain earnings might be exempt from taxation. For example, an NHR taxpayer receiving dividends from a country not listed on the tax haven blacklist may benefit from an exemption of taxation in Portugal – provided other conditions are met.

On 17 March 2025, the tax authority issued the binding rule nº 20278, which adjusts the IRS Model 3 declaration to reflect recent legislative changes. We highlight the following key changes: 

Capital gains from the sale of company shares are generally taxed at a flat rate of 28%. However, if the capital gains originate from the sale of shares in a micro or small company—whether located in Portugal or abroad – Only 50% of the gains are subject to the 28% tax rate. This policy is designed to encourage the capitalisation and growth of small businesses.

Previously, the IRS Model 3 declaration did not have the option for the application of this measure when capital gains resulted from the sale of shares in micro or small companies located abroad. This limitation often forced taxpayers to file complaints with the tax authorities or even pursue legal action to ensure the law was applied.

With the updated version of the IRS Model 3 declaration, it is now possible to directly request this 50% exemption without resorting to such measures.

Until 2024, taxpayers could allocate 0.5% of their payable tax to public benefit organisations supporting cultural, youth, or sports activities.

Considering the legal change was implemented last year, this allocation has been increased from 0.5% to 1%. The IRS Model 3 declaration has been updated accordingly, allowing each taxpayer to support these organisations even more significantly.

With the introduction of the tax regime for crypto-assets, the IRS Model 3 declaration has been updated to allow the declaration of employment income earned through crypto-assets.

With the implementation of the State Budget for 2024, the Non-Habitual Resident (NHR) regime was repealed, and a new regime was introduced: the Tax Incentive Regime for Scientific Research and Innovation (IFICI+ or NHR 2.0).

Consequently, the sections on the Model 3 tax declaration that were previously dedicated to the NHR regime have been updated to include an option for IFICI+. This ensures that taxpayers can accurately indicate the regime under which they are registered.

In conclusion, filing your annual income declaration might seem like navigating a maze but being well-informed and organised makes the process much more manageable. By understanding who must declare, which incomes are affected, and how the recent changes benefit various taxpayers, you can optimise your tax planning and avoid unnecessary fines. 

Contact us, and we will handle your tax returns with ease and expertise.