Are you an immigrant worker? What taxes are you obligated to pay?

Although the Portuguese territory is known as a country of emigrants, migrant workers are a reality in Portugal.

And, according to the 2021 Report on emigration, borders and asylum of the SEF (Foreigners and Borders Service), the most relevant reason for the granting of new residence permits was professional activity.

From the moment you earn income in Portugal, you are subject to paying taxes. Basically it is not much different from the obligations of the Portuguese.

In this article we explain what they are.

Essential identification numbers

In order to live and work in Portugal, once you have obtained your residence permit or work visa, you will need to obtain three essential identification numbers (personal and non-transferable):

• NIF. Any migrant worker must have a tax number or NIF (tax identification number). This document identifies the natural person before the Tax Authority for tax purposes. The process to obtain the NIF is free and takes place at the Financial Services, after booking an appointment in person. The documents to be presented to obtain this number depend on your nationality. If you are a foreign citizen of a European Union country, it is sufficient to present your civil identification document or passport and the register of EU citizenship, issued by the Municipality of your area of ​​residence. If you are a citizen of a third country, keep your identity document or passport and residence permit handy.
• CUTE. Your Social Security Identification Number identifies you to Social Security and gives you access to support in case of illness, unemployment and other situations. If you are an immigrant and don’t have it yet, you can request it (or from your employer, if you are an employee) for free, through NISS NA HORA. Belonging to Social Security obviously involves rights and responsibilities, as you will see below.
• SNS. The National Health Service User Code is essential to access healthcare and to prescribe and purchase medicines. As an immigrant worker, you have the right to get it. Simply present your residence permit or work visa and NIF at the Health Center where you live. The service is free and is registered at the Health Centre, where you can go to discuss various health problems. Regardless of access to the National Health System, it is important to have health insurance. This way, you can integrate the SNS or even use it as your main means of taking care of your health, it all depends on the plans you want. Analyze the health insurance comparator by Generali Tranquilidade and find out which covers interest you most and suit your needs.

Payment of taxes on immigrant workers

• If you are an employee: An employee is someone who performs a profession for an employer. If you work for others, your salary may be subject to withholding tax: a rate that the Department of Finance applies to the incomes of retirees and the wages of taxpayers who work for others. As with other taxes, the rate of withholding tax varies depending on the financial and family situation of the taxpayer (you can consult the withholding tax tables here). Thereafter, once a year (between April 1 and June 30), you must file your income tax (IRS) tax return reflecting these tax withholdings. This declaration is completed and submitted online, using the template suited to your situation (form 3 and Annex A). To do it online, you need to register on the financial portal, at www.portaldasfinancas.gov.pt.
• If you are self-employed or a sole proprietorship: An independent contractor is someone who works for themselves and is their own boss. Remunerations relating to work services (whether services, production or sale of goods) are declared via electronic green receipt, issued on the Revenue Agency portal, or by issuing fiscally relevant documents (e.g. invoices), issued by software billing certificate. To do this it is necessary to open a business in Finance by submitting a declaration of commencement of business. You must also pay Social Security and file your annual IRS return (Form 3 and Schedule B). Withholding taxes are made on income throughout the year (except for exempt situations), which does not imply that in the final tax assessment for a given year, ascertained in the IRS return, taxes do not also have to be paid.

Regarding VAT (Value Added Tax), you may be exempt, in the case of the services provided, if the assumptions established in the CIVA (Value Added Tax Code) are met.

In case of sale of goods, VAT exemption does not apply. Those who are not exempt must calculate and pay this tax to the tax authority quarterly (or monthly, depending on turnover). The sole trader (one who creates a company) is taxed by the IRS and the same VAT principles apply, as indicated above.

Other taxes:

Below we present other taxes that an immigrant in Portugal will also have to pay, if he falls into the situations described:

• If you purchase a residential property, you will have to pay the tax at the time of purchase. Municipal Property Transfer Tax (IMT) and the Selo Setup (IS). Then, annually, you are obliged to pay the Municipal Property Tax (IMI).
• If you own a vehicle, you will have to pay the annual one Single Circulation Tax (IUC). This tax is due for ownership of the vehicle. In other words, imagine you have a car, but it never leaves the garage. You will still have to pay the tax once a year, in the month the car is registered. Please remember that anyone who owns a motor vehicle with a license plate and drives on public roads is required to have car insurance (motor civil liability insurance), such asIt is illegal to drive without insurance in Portugaleven if the vehicle is parked on private property, as it continues to pose a risk.

If you do not have car insurance, you will not be protected against any costs, whether related to property or physical damage, and resulting medical expenses.

Contribution to social security

Social Security offers state protection in certain situations such as unemployment, illness and retirement. It exists for all Portuguese citizens or foreigners who work or reside in Portugal. Therefore, the immigrant worker has the right to be covered by Social Security, benefiting from its support. However, you are required to contribute a portion of your income.