Portugal Double Taxation Treaties: How They Work Around the World

If you’ve made Portugal your home, or are planning to, chances are your life and income already stretch across borders. Maybe your salary is paid from abroad, your savings earn interest in another country, or you rent out your property back home.  

Then tax season arrives, and you realize both Portugal and your home country want a piece of the same income. 

That’s where double taxation treaties come in. Portugal has signed agreements with dozens of countries to ensure that people don’t pay tax twice on the same earnings. These treaties decide who gets to tax what, how much, and under what conditions. 

In this article, we’ll unpack how these treaties work, explore Portugal’ taxation agreements with the United States, United Kingdom, and United Arab Emirates, and explain what they mean in practice for expats, freelancers, and retirees living in Portugal. 

You’ll also find out in more detail about: 

• Understanding double taxation and treaties 
• Overview of Portugal’s double taxation agreements 
• How to check if a treaty applies to you 
• The US-Portugal tax treaty 
• The UK-Portugal tax treaty 
• Practical implications and DTA planning tips 

Double taxation happens when the same income is taxed twice: once in the country where it’s earned (the source country), and again in the country where you live (the residence country). 

Let’s paint a scenario: you’re a British freelancer on a Portugal D8 Digital Nomad Visa, now living in Lisbon, still working with UK clients.  

The UK might want to tax that income because it’s paid from there, but Portugal, where you’re a legal resident, also taxes your worldwide income. Without an agreement, you could end up paying two sets of taxes on the same money. 

This is exactly what double taxation treaties are designed to prevent. 

A double taxation treaty (sometimes called a double tax agreement, or DTA) is simply an arrangement between two countries that decides how income and taxes should be handled when they cross borders. 

Rather than both countries taxing the same income, the treaty sets clear rules for who gets taxing rights and how tax relief is applied. 

Every agreement is a little different, but most cover these essential points: 

• Tax residency and tie-breakers 
• Which country taxes what 
• How to prevent double taxation 
• Tax fairness and transparency 

Portugal has built one of Europe’s most comprehensive networks of double taxation treaties, a major reason why the country attracts so many expats, entrepreneurs, and investors, such as through the Portugal Golden Visa.  

These agreements make it possible to live, work, or invest in Portugal without worrying that your foreign-source income will be taxed twice.

How do Portugal’s tax treaties work?

Under Portuguese tax law, anyone who qualifies as a tax resident in Portugal is generally taxed on their worldwide income.  

By contrast, non-residents are only taxed on income from Portuguese sources, such as rental income from a property in Lisbon or dividends from a Portuguese company. 

Until recently, many expats benefited from the Non-Habitual Resident (NHR) regime, which offered generous tax exemptions or flat rates on certain types of foreign source income, depending on whether a double taxation agreement existed.  

While the NHR scheme has now been phased out and replaced, the underlying Portugal double taxation treaties remain in force, and continue to protect residents from being taxed twice on the same income. 

Portugal’s treaties follow the OECD Model Tax Convention, meaning most of them share a common structure and logic. That makes it easier to understand the treaty’s provisions, even if you move between countries. 

Goals of Portugal’s treaty network 

Each agreement Portugal has with another country is specifically designed to: 

• Prevent double taxation on the same income for individuals and companies
• Clarify taxing rights between Portugal and the partner country 
• Avoid tax evasion and promote transparency through cooperation between tax authorities 
• Offer certainty about tax rates, tax obligations, and tax benefits for people and businesses operating across borders 

Portugal has around 78 double taxation treaties (DTAs) in force, covering countries across Europe, the Americas, Asia, Africa, and the Middle East.

These include agreements with key economies such as the United States, the United Kingdom, Germany, France, Spain, the Netherlands, Canada, Brazil, China, India, and the United Arab Emirates. 

If you’re living in Portugal and earning money abroad, the first step is to see whether your country of income has a treaty with Portugal.

The full, official list is available through the Portuguese Tax and Customs Authority (Autoridade Tributária e Aduaneira). 

When you click on the country where the income is coming from, it will show you: 

• The date of entry into force 
• The types of taxes covered (such as income taxes or capital gains tax) 
• Any special notes, protocols, or amendments 
• The method of relief used is either a credit or an exemption method 

For many Americans moving to Portugal, the question isn’t whether they owe tax, it’s where, how much, and to whom.  

Because the United States taxes its citizens on their worldwide income, even when they live abroad, US expats must juggle both US taxes and Portuguese taxes.  

The US-Portugal Tax Treaty prevents this from turning into double trouble. Its main goal is to decide how income taxes, capital gains, pensions, and other types of foreign-source income are split between Portugal and the United States. 

How the US-Portugal tax treaty works 

Unlike most countries, the United States taxes its citizens and green card holders on their worldwide income, even when they live abroad.  

That means US expats in Portugal are still required to file annual US tax returns and potentially pay US taxes, even if all their income is earned overseas. 

The good news is that the US-Portugal tax treaty works alongside tools like the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC) to help avoid double taxation: 

• The Foreign Earned Income Exclusion allows qualifying US taxpayers to exclude a portion of their foreign income (up to $126,500 for 2024) from US taxation if they meet residence or physical presence tests. 

• The Foreign Tax Credit lets you offset US tax liability with taxes paid to Portugal on the same income. This is particularly useful for higher-income earners or those whose income isn’t fully covered by the FEIE. 

This means that most Americans living in Portugal can eliminate or substantially reduce their US tax liability, though careful tax filings are required to claim these benefits correctly. 

Who pays what under the treaty 

As with most things financial, it can get complex and even confusing. But in short, the treaty allocates taxing rights depending on the type of income: 

Employment and self-employment income: Usually taxed where the work is performed. If you’re a US citizen working for a Portuguese employer, you’ll typically pay Portuguese taxes first and use a foreign tax credit to offset your US taxes. 

Business profits: Taxed in one country unless the business has a permanent establishment (such as an office or branch) in the other. 

Dividends, interest, and royalties: Subject to reduced withholding tax rates under the treaty, often between 5 percent and 15 percent, depending on the circumstances. 

Pensions and social security: Generally, pension income is taxed only in the country of residence, while social security taxes may still apply under a separate Totalization Agreement that coordinates benefits between the US and Portugal. 

Capital gains: Capital gains tax on the sale of property is usually payable in the country where the property is located. In contrast, gains on financial assets (like shares) are typically taxed in the country of residence. 

As an example, a US pension received by a tax resident in Portugal is generally taxable only in Portugal under the treaty.

However, dividends paid from a US company to a Portuguese resident might be subject to a reduced withholding tax in the US, with a credit available in Portugal for the taxes paid abroad. 

If you’ve moved to Portugal from the United Kingdom, whether to work remotely, retire in the sun, or simply enjoy a slower pace of life, you’ll quickly realize that your income might still have ties to the UK.  

Maybe you have a pension, rental income, or dividends from a UK company.

The good news? The UK-Portugal double taxation agreement ensures you don’t have to pay taxes twice on the same income. 

Who pays what under the UK-Portugal treaty 

Similar to the treaty with the US, the UK-Portugal double taxation treaty divides taxing rights based on the type of income you receive: 

Employment income: Generally, you’ll pay Portuguese taxes if you live and work in Portugal, even if your employer is UK-based. 

Pensions: Private pensions are usually taxed in the country of residence (Portugal), while UK government pensions remain taxable only in the UK. 

Rental income from UK property: The UK retains taxing rights, but you can claim a foreign tax credit in Portugal to reduce your tax liability on the same income. 

Dividends and interest income: Subject to reduced rates of UK withholding tax, typically around 10–15 percent, with a credit applied against Portuguese taxes owed. 

Capital gains: Portugal usually taxes gains on Portuguese property or assets, while the UK may tax gains from UK-based investments if you’re still deemed UK-domiciled. 

UK’s tie-breaker rules 

Determining your tax residency is often the trickiest part. Under Portuguese tax law, you’re a tax resident if you spend more than 183 days a year in Portugal or maintain a primary residence here. 

But what if you maintain a home in both countries? That’s where the treaty’s tie-breaker rules come in. These look at: 

• Where you have a permanent home; 
• Where your center of vital interests lies (family, business, social connections) 
• Your habitual abode, where you spend most of your time 
• Finally, your citizenship, if all else fails. 

These tests determine which country gets to treat you as a tax resident and which country can tax your worldwide income. 

Understanding Portugal’s double taxation treaties is one thing, using them correctly is another.  

Whether you’re an expat with overseas income, a freelancer billing foreign clients, or an investor with assets in multiple countries, knowing how to apply these agreements can help you stay compliant, claim tax benefits, and avoid double taxation. 

01/ Know your tax residency status 

Your tax residency status is the starting point. Being a tax resident in Portugal generally subjects you to tax on your global income, whereas non-residents are taxed only on income sourced within Portugal.  

If you maintain international ties, such as owning property in the UK or working for a US company, the tax treaty’s tie-breaker rules will decide which country has the authority to tax your foreign income. 

If you’re unsure about your residency status, you can request a certificate from Portugal’s Autoridade Tributária e Aduaneira, which you’ll need later for claiming tax credits or exemptions. 

02/ Understand which country taxes what 

Each tax treaty divides taxing rights between Portugal and the partner country. For example: 

• Employment income is usually taxed where the work is performed. 

• Pensions and social security taxes may be taxed only in one country, depending on the treaty’s provisions. 

• Dividends, interest income, and royalties are often subject to reduced rates of withholding tax abroad. 

• Capital gains tax typically applies in the country where the asset (like property) is located. 

03/ File your taxes properly in both countries 

Even if you’ve claimed relief through a double taxation agreement, you still need to complete all required tax filings. 

In Portugal, that means submitting the annual Modelo 3 income tax return, declaring all foreign income, and attaching the necessary documentation for tax credits or exemptions.  

In the UK or US, you’ll also need to file your local tax return to report foreign income and claim credits under the relevant tax treaty. 

04/ Use the foreign tax credit effectively 

If you’ve already paid taxes abroad on the same income, you can usually claim a foreign tax credit in Portugal to reduce your local debt.  

This credit offsets your Portuguese taxes by the amount you’ve already paid in another country — a core way to prevent double taxation. 

• You’ll need official proof of the taxes paid abroad (statements, certificates, or payslips). 

• The credit only applies up to the amount of Portuguese tax due on that income. 

• Some treaties use the exemption method instead, meaning the income is simply not subject to Portuguese taxes at all. 

For complex cases, for example, self-employed individuals with clients in several countries, a qualified accountant familiar with international tax systems can help you apply the right method.