Law 71/2018 of 31st December, which approved the State budget for 2019, introduced the tax benefit of exclusion of taxation of 50% of the income earned by former residents derived from dependent work and business and professional income.
The following cumulative requirements must be fulfilled in order to benefit from this regime:
It should be noted that this tax benefit is temporary, or, in other words, it applies in 2019 and/or 2020, depending on the year in which the taxpayer returns to Portugal and becomes a tax resident there, and for the subsequent 3 years.
In order to clarify some practical aspects, the Tax Department issued Information Sheet no. 20206, of 28-02-2019.
This measure is exceptional and will be automatically verified by the Tax Authority after all legal requirements described above have been fulfilled. In this sense, as a rule, the application of this measure is not dependent on any request made to the Tax Authority.
However, in situations where the Tax Authority does not have all the data to verify all the requirements, if the taxpayer intends to receive this tax benefit, they have to prove all the requirements listed above. For this purpose, a request should be submitted to the Tax Department of the area of their residence when they return to Portugal, and must be accompanied by all the appropriate documentary evidence.
Those who earn income from dependent work should present a declaration to their employers informing that they are former residents and benefit from this regime, according to article 12.º-A of IRS Code, so that the correct withholding tax is applied at source.
In relation to business and professional income, on the receipts issued the following information should be indicated: “Withholding on 50%, according to article 12.º-A of the Income Tax Code”.