As Benjamin Franklin is famous for saying, “There are only two things certain in this world: Death and taxes.” In that respect, residents of Portugal have the same concerns — and complaints — as Americans.
Taxes in Portugal work basically the same as they do in the US, with a few key differences. There are still property taxes, income taxes, and sales taxes, although the latter are known locally as value-added taxes, or “IVA” or “Eva” as they are called. How much “Eva” you pay on a particular product or service depends on what it is and where you buy it.
Just like in the US, “Eva” is kind of rolled into the price of what you buy. It’s just part of the bill and is listed on every receipt you receive.
Payroll and Property Taxes
Rest assured that income taxes and property taxes are just as Byzantine and confusing in Portugal as they are in the US. Many Portuguese rely on accountants and tax preparers to figure it out for them.
The good news is that in general, property taxes paid in Portugal tend to be significantly lower than those paid in the US, Canada, and the UK. And unlike the US, there is no inheritance tax in Portugal. So when you pass your property on to your heirs, if your affairs are in order the government generally won’t claim a big chunk of it.
Deductions and Tax Rates
Doing your taxes in Portugal is similar to the US (other than it being in Portuguese of course). There are deductions allowed for each type of income — payroll, business, investment, interest, capital gains, and retirement income — so it’s often best to consult a tax preparer, accountant, or tax attorney to ensure you are getting every deduction to which you are entitled.
Keep in mind that if you have dual citizenship, you are responsible for filling out the proper forms and following local tax laws so you don’t end up getting in trouble in either country.
To end in high spirits, great news for those who intend to move to Portugal and, for that, apply for the D7 visa (for retired people, remote workers and with passive income): Portugal has created a total exemption on private pension income for a period of 10 years.
That makes Portugal not only attractive, but also financially lucrative. Just imagine: you live a European adventure and still get financial advantages.
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