If you have NHR (Non-Habitual Resident) status and earn income from abroad, Portugal offers two methods to avoid double taxation. Understanding which one applies to your income is important — it directly affects how much tax you pay.
The two methods
Exemption method (Art. 81 nº4-6 CIRS)
Your foreign income is completely excluded from Portuguese taxation. It doesn't count toward your taxable income and has no impact on your tax rate for other income.
This is the more favorable method for most people — you effectively pay zero Portuguese tax on that income.
When it applies: - The income comes from a country that has a Double Taxation Agreement (DTA) with Portugal, AND - The DTA allows that country to tax the income, OR - The income is not considered to be sourced from Portugal under the CIRS rules
Common examples: employment salary earned in another EU country, pension income from a country with a DTA.
Credit method (Art. 81 CIRS)
Your foreign income is included in your Portuguese taxable income, but you receive a tax credit equal to the lower of: - The tax actually paid abroad on that income, or - The Portuguese tax that would apply to that income
This prevents you from being taxed twice, but unlike the exemption method, the income still counts in Portugal and may push your other income into a higher tax bracket.
When it applies: - The income comes from a country without a DTA with Portugal, or - The DTA specifies the credit method for that income type, or - You opt for the credit method voluntarily
How to know which method applies to your income
The method depends on two things:
Whether a DTA exists between Portugal and the source country
What the DTA says about that specific type of income (employment, dividends, royalties, pensions, etc.)
Portugal has DTAs with most EU countries, the US, UK, Brazil, Canada, and many others. Each DTA specifies which method applies per income category.
You can find the list of Portuguese DTAs at the Autoridade Tributária website.
What FIZ does
Based on the information you provide in the wizard: - If your foreign income qualifies for the exemption method, we exclude it from the tax calculation entirely. You'll see a warning confirming this. - If the credit method applies, we include the income and apply a tax credit for the foreign tax you've paid. The credit amount is shown in the calculation.
Important notes
If you use the exemption method, you still need to declare the income in your IRS declaration (Anexo J) — it's just not taxed.
The exemption method only applies during your RNH benefit period (10 years). After it expires, standard Portuguese rules apply.
If you're unsure which method applies to your specific situation, consult a tax advisor familiar with international taxation.
Related articles: - RNH/IFICI: Which Activities Qualify for the 20% Flat Rate?
Legal references: - Art. 81 CIRS (foreign tax credit and exemption) - Art. 81 nº4-6 CIRS (exemption method for RNH)