As a resident in Portugal, did you know that you can lower your Personal Income Tax or even receive a refund if you benefit from certain tax deductions?
The expenses you have had in 2022 related to education, health, real estate, alimony, nursing homes, VAT and general family expenses qualify for IRS tax deductions in 2023 and can result in benefits for you.
Find out how to benefit from these IRS tax deductions and what are the limits in each category.
How to benefit from Personal Tax Deductions in Portugal
1. Always include your NIF in invoices
The first rule is simple but is often forgotten by taxpayers. To benefit from any tax deduction in Portugal, you must include in each invoice ("fatura") your personal Tax Identification Number number, also known as "NIF" (“Número de Identificação Fiscal”).
Don't forget that only the invoices that include your NIF will be considered by the Portuguese Tax Authority!
Whenever you make any purchase, you should always request the invoice with your tax number in order to benefit from tax deductions available to residents in Portugal.
2. Validate all your invoices on the e-Fatura platform
All invoices related to expenses made in 2022 must also be validated on the e-Fatura online platform, within the deadline established by the Portuguese Tax Authority (which is usually in February of the following tax year).
All expenses included in your annual IRS are based on the e-Fatura system. This means only invoices with your taxpayer number will be communicated by companies to the Portuguese Tax and Customs Authority.
Through this communication, the Tax Authorities will make your expenses available on your personal page on the Finance Portal, which can be consulted at any time, and then proceed to pre-fill your income tax return for the year 2022, to be submitted in 2023.
What expenses are eligible for IRS tax deductions and what are the limits?
Not all payments you make in Portugal benefit from the same type of tax deduction. The maximum amount you can deduct also varies depending on the category of expenditure.
This means that, in some situations, you may not be able to deduct all of your expenses because they exceed the limit.
Below are the personal expenses and the maximum amount you can deduct in 2022:
35% of general family expenses This category includes, for example, supermarket, clothing, petrol, utilities and other general expenses, up to a maximum deductible amount of €250 per taxpayer. In single-parent families, the percentage rises to 45%, with a limit of €335.
15% of health expenses, up to a maximum deductible amount of €1,000 These expenses include medical appointments, surgical operations, hospital stays, treatments, medication, prostheses, orthodontic braces, eyeglasses and health insurance.
30% of costs with education This category has a limit of €800 and includes fees with schools, daycare centres, kindergartens, college/university tuition, textbooks and school books, tutoring, meals, transportation and rent for displaced students. The general limit of €800 can be increased to €1000 if there are extra expenses with rents for displaced students that justify this increase. The maximum deduction for student rent is €300. For families with students enrolled in schools in the Interior region of Portugal, deductions can go up to 40%, with a limit of €1000.
15% of housing costs, up to a maximum deductible amount of €502, or 15% of home loan interest expenses for contracts celebrated before December 31, 2011, up to a maximum deductible amount of €296.
25% of expenses with senior nursing homes, up to a maximum deductible amount of €403.75 This category includes expenses with senior home support, nursing homes and other institutions that support the elderly. It also includes expenses with nursing homes and residences for disabled people, dependents, ascendants and collateral family members up to the third degree whose income is less than the national minimum wage.
20% of alimony payments, without limit;
15% of the VAT, up to a maximum of €250 per tax payer, on expenses with:
- restaurants and hotels;
- hairdressers/beauty salons;
- car and motorcycle repairs;
- veterinary costs;
- sports club and gym/fitness activities.
100% of VAT paid on social transportation passes, up to a limit of €250.
If you have any questions regarding IRS Tax in Portugal, our team of experienced Accounts will be happy to help you. Please contact us for more information.