SOURCING AN ACCOUNTANT IN PORTUGAL
We recently decided to source an Accountant to assist us with our first joint tax return. If you understand Portuguese language then you might be brave enough to submit your own tax return online. It looks very complicated and I struggle to navigate my way around the Finance online portal so we decided the best thing to do would be source a professional. The tax year in Portugal runs from 1st January – 31st December instead of U.K tax year of 1st April – 31st March. I personally find the tax system very complexed here. There is a double taxation treaty law between Portugal and the U.K and as hubby works for a U.K company it’s a bit complicated. If you are a resident of Portugal you must pay taxes on your worldwide income at progressive rates varying from 14.5% to 48% for 2020. You can submit a single or joint tax return if you are legally married. There is also the NHR scheme where in certain professions you can benefit from a flat rate of 20% income tax for a 10 year period. You usually have to be employed by a Portuguese company or self employed to receive this benefit but it is also for some foreign income. As I said before you are best off sourcing an accountant who specialises in the double taxation treaty and NHR. Don’t forget to give your fiscal number (NIF) when you purchase goods and services as there are certain tax credit deductions that can be applied.
We initially had a meeting with a local Accountant who was lovely but explained that we wouldn’t be entitled to NHR and tax at the 20% flat rate as it was only for people who work for a Portuguese company here in Portugal. We challenged this a few times but she was adamant. We had heard differently so sourced a second opinion and it turned out that we actually are entitled to NHR for the 10 years. Tax rates in Portugal are tiered and are very high. Now we have a copy of the tax return we could submit our own next tax year. To be honest I think we will pay the €80 and leave the hassle to our accountant as hubby has recently been notified that he will no longer be paying income tax in the U.K. He will be paying all of his income tax here in Portugal from March of this year. He will continue to pay N.I in the U.K which goes towards his state pension. I see so many Facebook posts asking questions about paying tax in Portugal and so many people are offering false information or the wrong advice. My advice would be to consult with an Accountant. Their fees are very small considering and it’s going to be a lot more hassle trying to sort out if your tax return is filed incorrectly.
The cost of hiring an Accountant to submit your tax return for you can cost as little as €25 for a simple tax return. This is what we were quoted by a local Accountant. We decided to go with a more specialised Accountant who has good knowledge of overseas income, the double taxation treaty and NHR. He originally quoted us €120. He came highly recommended and we found him to be superb. Ours was a simple tax return so the bill came to €80 for our joint tax return.
Failing to correctly submit your Portuguese tax return and payment on time can be costly. Penalties for late filing start at €200, but can rise to €2,500. Late payment penalties can range from 10% of the amount owed, to double the total amount – but is capped to €55,000. Any penalties may also attract interest. We are very pleased with the outcome of our tax return and would highly recommend using an accountant especially if it’s your first tax return. We can now eventually buy a new dining room table. We have been holding off any big purchases until we knew the result of our tax return. I am actually thinking about buying 2 Stand up paddle boards and a huge outdoor sofa instead of the indoor dining table and chairs. What can I say, I LOVE the outdoors!