Sovereign’s Head of Fiscal Representations, Isobel Costa, explains why fiscal representation is important and necessary.

“For twenty years I have been assisting Sovereign clients with their representation queries and I am often asked why a representative is needed especially when clients are capable of paying their own property taxes directly. However, representation is not just about settling bills.

To answer it is helpful to understand the fiscal representation history.

Prior to 2002, when fiscal representation was introduced, everyone obtaining a fiscal number from the tax department (Finanças) was automatically registered as being tax resident in Portugal. If you have never appointed a fiscal representative or have never altered your registration status since then, you may be wrongly registered as a tax resident which can have drastic consequences as many individuals recently found when they received here large tax bills for their worldwide income, because they were registered as tax residents.

I always inform people that if they receive their Finanças correspondence directly to their Portugal property then they are registered as tax residents. With the ever-increasing international exchange of information, it is vital that individuals keep Finanças updated with their change of address, here or abroad, but most importantly if they change from being a resident to non-resident of Portugal or vice versa. At Sovereign we can assist with their fiscal communications, update their status, submit tax returns and even provide residency concierge services for those looking to moving here.

For those wrongly registered my Sovereign accountant colleagues have successfully submitted appeals to prove to the Finanças that the individual was in fact tax resident outside of Portugal and that their registration was a historical ‘mistake’, albeit this is becoming more complex as the tax department requires more and more documentation.

Since 2002 it became a legal requirement for non-resident individuals (or companies), who have a fiscal number, to appoint a fiscal representative who would be the interface between the Finanças and the individual. Sovereign has been providing fiscal representation services ever since.

In 2011, the European Court of Justice ruled that Portugal could no longer force EU nationals to appoint a fiscal representative, as this violated the rights of free circulation of people and capital and thus it became possible for EU residents to cancel the representation and have their Finanças correspondence sent directly to their EU address. However, many Sovereign clients retained the representation for peace of mind, especially as the correspondence is all in Portuguese.

Those residing outside the EU still needed to have a representative, and this is where Brexit has now affected individuals living in the UK who have a Portuguese fiscal number.

Also affected are over 400,000 Portuguese nationals living in the UK so the Portuguese government issued a directive stating that it would become possible for them to register to receive their Finanças correspondence electronically rather than by post. The directive also mentioned the possibility of extending this to foreigners and it was hoped that the system would be in place during 2022. However, currently it is still necessary for existing fiscal number holders living in the UK to appoint a representative before the end of June 2022 or fines could go up to €7,500.

I am often asked what the fiscal representative does.

The fiscal representative receives the client’s Finanças correspondence and is jointly responsible with the client for their fiscal obligations. Sovereign as the fiscal representative will assist with:

  • Payment of the IMI and AIMI property taxes
  • Preparation and submission of tax returns declaring rental income or capital gains
  • Provide rental income accounting services
  • Action correspondence for tax appeals, debts, property or residency registrations etc.
  • Keep clients informed on their Portuguese tax situation

Another popular question is - can my friend be my fiscal representative?

Yes, if they are a tax resident in Portugal. However, is it wise to have a friend responsible for your fiscal obligations and knowing your fiscal information? Can your friend prepare and submit your rental income tax return, deal with the Portuguese correspondence relating to taxes, re-valuations, audits, appeals, refunds? Will your friend be aware of the ever-changing fiscal laws to be able to keep you informed about matters that could affect you?

Owing to the increasing complexities and demands of the tax department it is advisable to appoint a professional representative to avoid costly tax mistakes. Finanças correspondence must be dealt with promptly, often within 15 days. If your friend is absent and correspondence remains in a post box you could incur fines or increased tax bills.

I have been with Sovereign since 1999 when The Sovereign Group established an office in the Algarve. Many of my fully qualified accountant and administrative bi-lingual colleagues have been with the company for over ten years and between us our expertise is unparalleled. As part of the worldwide Sovereign Group, we are able to provide that bit extra to our clients who have the advantage of access to additional specialist services from the Sovereign Group including, residence and immigration (Golden Visa and D7 passive income visa), wealth management, trust management, structuring of corporate entities (CSP), foreign property ownership, pensions, bespoke corporate and private client insurance, as well as yacht and aircraft registration ownership and management.

I am happy to assist The Portugal News readers with their queries and look forward to many more years with Sovereign. “

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