As of 2015, if opting for joint taxation, the income tax rate continues to be determined considering the total income of the household, but the Family Coefficient becomes 2 plus 0.3 per dependent. If assessed individually, the taxable income of each spouse is divided by 1 plus 0.15 for each dependent. Depending on a couple’s income differential, joint taxation may lead to lower IRS when compared to separate taxation (the greater the difference between partners, the higher the savings).

Choosing what’s best for you
Beyond any potential savings from a joint return, there may be other criteria that come into play. First and foremost, some couples prefer to keep their financial affairs separate. The balance between dependence and autonomy can be delicate in any relationship. Couples should find their own equilibrium point and declare as they see fit.
Also keep in mind that while separate returns may not have been an option before 2015 for a married couple, each partner has always been dealt with individually within their return, with each filing separate annexes to report respective income. Tax credits have always been determined individually and then added together when calculating the final tax due.
Finally, reporting separately does not mean that a couple files two distinct tax returns. On the central form Modelo 3, you tick the box of your choice: separate or joint and attach the respective annexes. It does not mean that each partner actually files different forms.

Portugal and the EU
Finally, it should be noted that one of the main purposes behind this change is to bring Portugal in line with practices in other European countries. Portugal has stood out in the past due to the lack of a separate filing option for married couples. Respect for taxpayers’ preferences is more important in creating a sound ethic of compliance than any associated minor savings or increase in tax revenues collected.

Dennis Swing Greene is chairman and International Tax Consultant for euroFINESCOs.a.
eurofinesco.com