The calculation of expenses to consider in your annual IRS tax declaration is based on the “e-fatura” system. Be sure to give your tax number (“NIF”) so that shops and businesses can automatically report the transaction. Based on these communications, the Portuguese Tax Authority (“AT”) will automatically list all of your eligible expenses on your personal page on their website, which you can consult and approve online.
Tax Credits
You should always ask for invoices with your tax number (“NIF”) to be entitled to tax credits:
• 35% of family expenses (i.e. supermarket spending, clothing, fuel, water, electricity, gas or other) up to a maximum per taxpayer of €250 (corresponding €715 pp in expenses);
• 15% of health expenditure, up to a maximum of €1,000;
• 30% of education expenses up to a maximum of €800;
• 15% of the costs of housing rent, up to a maximum of €502 or 15% of the costs of loan interest to housing, in the case of own home, up to a maximum of €296;
• 25% of the costs of Nursing Homes, up to €403.75;
• 15% of the VAT paid on each invoice for the expenses for restaurant, hairdressing and automobile and motorcycle repairs, up to a maximum of €250.
Where taxable income per adult exceeds €7.000, the sum of health, education, property, retirement home and maintenance is capped at €1.250, reducing progressively to nil on incomes exceeding €80.000 (per adult). There is a 10% increase to the cap per dependent child.
Medical Expenses:
a) Remember to ask your health insurance provider for an annual statement about any bills that were not covered by the insurance. When the Insurance Company has the original invoices, the statement of non-reimbursed expenses can serve as substantiation for your tax credit.
b) 15% of Health Insurance premiums may be added to general medical expenses. The maximum limit for the tax credit for the combined expenses is €1,000.
Educational Expenses
If you took a course in Portuguese, computer science or another interest that you might have, be sure to give your NIB when paying so you will be eligible for the tax credit.
Housing
If you rented your abode, be sure to complete a proper rental agreement with your landlord. You will benefit from a tax break of up to €502.
Gifts to Charity
Finanças will give you an uplift of up to 140% on your contribution to a recognised Portuguese charity, one quarter of which will be granted as a tax credit.
Other Expenditures:
a) Alimony - If you pay court-ordered alimony or child support, there is a 20% tax credit when court ordered. You will need to provide the NIB of the recipient.
b) Nursing Homes and Home Care
There is a 25% credit, limited to €403.75, on home care or nursing home fees. Invoices should be in your name with your NIB.
Property Sales and CGT
If you sold a property in 2018, be sure to assemble the following documents so that you will be ready for tax time: a) deed of acquisition; b) deed of sale; c) invoices from expenses such as, notary, estate agent, registrations, etc., d) bills from capital improvements to the property over the last 12 years. Remember that notaries report all transactions to Finanças so your failure to declare will draw the wrath of tax inspectors, even if you move away from Portugal.
Dennis Swing Greene is chairman and International Tax Consultant for euroFINESCOs.a. www.eurofinesco.com