Living in Portugal with Income from Work Abroad:
Navigating Taxation and Social Security Contributions
Living in Portugal with Income from Work Abroad:
Navigating Taxation and Social Security Contributions
Remote work, which became more prevalent after the COVID-19 pandemic—forcing many companies and freelancers to adapt to working from home—offers numerous benefits but also presents challenges, particularly in fiscal matters. This is especially true when workers, taking advantage of the ability to fulfill professional duties from anywhere, decide to emigrate and live in a country different from their employer’s headquarters.
For remote workers planning to establish residence in Portugal, whether through a Digital Nomad Visa or other permits allowing similar flexibility, it is essential to understand Portuguese tax rules to avoid unpleasant surprises.
The obligation to declare income applies universally to those who have their fiscal residence in the country, even if the income is earned abroad and taxed only in the source country. In other words, if you spend at least 183 days per year in Portugal—or even less, under legislatively defined circumstances where fiscal residence still applies—you must declare all income sources.
For employees living in Portugal and working for foreign employers, it is important to review the tax rules outlined in the Double Taxation Agreement between Portugal and the other state. By analyzing the 81 treaties signed between Portuguese authorities and other countries, one can understand the applicable tax rules. Generally speaking, taxation may occur in both jurisdictions—the source state and the state of residence.
However, even with the end of the Non-Habitual Resident regime, this does not mean double taxation on the same amount. It is worth noting that these treaties usually apply a tax credit method, meaning the amount already paid in the other state is deducted from what is owed in Portugal in most cases. In some scenarios, which should be analyzed on a case-by-case basis, exclusive taxation by the state of residence may apply.
For self-employed workers, the process is more straightforward: they must register their activity with the Portuguese Tax Authority and issue invoices and receipts using the Green Receipts system.
Beyond understanding how to handle tax matters, employees must also determine whether they need to contribute to Portuguese Social Security.
Although it is not straightforward to determine at first how these contributions will work, traditional cases of remote workers (i.e., those residing in a country different from their employer) need to consider where most of their functions are performed. If at least 25% of substantial activities are not carried out in the country of residence, they may continue contributing to the other state’s social security system. However, if a significant portion of work is performed in Portuguese territory, registration and potential contributions to the Portuguese Social Security system will be required.
For self-employed individuals, contributions are almost always made in the country of fiscal residence unless the worker spends substantial time in multiple locations without establishing a new residence. In such cases, social contributions should be paid to the authorities of the country where the center of their professional activities is based.
In summary, all situations require detailed analysis. We recommend seeking legal advice to ensure proper compliance and the continuity of your residence without setbacks.
Living in Portugal with Income from Work Abroad:
Navigating Taxation and Social Security Contributions
