Understanding your US and Portuguese tax obligations in 2025
Important Disclaimer
This guide provides general information only and is not tax advice. US citizens have unique tax obligations. Always consult with a qualified expat tax specialist before making decisions. Tax laws change frequently.
The US taxes citizens on worldwide income regardless of where you live.
If you're in Portugal 183+ days/year, you become a Portuguese tax resident.
Most D8 visa holders will pay Portuguese taxes on their income AND file US tax returns. However, mechanisms like the Foreign Tax Credit (FTC) and Foreign Earned Income Exclusion (FEIE) often prevent true "double taxation" - you won't pay full tax in both countries, but you must comply with both systems.
You must file a US tax return reporting your worldwide income, even if you owe $0 in taxes.
Deadline:
April 15 (automatic 2-month extension for expats to June 15)
Can request extension to October 15
Report all foreign bank accounts if combined balance exceeds $10,000 at any point during the year.
Penalty for Non-Compliance:
Up to $10,000 per violation (non-willful)
$100,000+ or 50% of account balance (willful)
Deadline: April 15 (automatic extension to October 15)
Report foreign financial assets if they exceed certain thresholds.
Thresholds for Expats:
• Single: $200,000 (year-end) / $300,000 (any time)
• Married filing jointly: $400,000 / $600,000
Includes: Bank accounts, investments, business interests
Claim credit for Portuguese taxes paid to reduce US tax liability dollar-for-dollar.
Example:
You pay €5,000 in Portuguese taxes → Reduce US tax by ~$5,400
Often eliminates double taxation entirely
Exclude up to $130,000 (2025) of foreign-earned income from US taxation.
Requirements:
When to Use FEIE vs FTC:
FEIE: Better if Portuguese tax rate is low or you're under NHR 2.0
FTC: Better if paying high Portuguese taxes (standard 28%+ rates)
⚠️ Can't use both on the same income - choose strategically!
You become a Portuguese tax resident if:
For D8 visa holders: Most will become Portuguese tax residents since the visa encourages long stays. Once resident, Portugal taxes your worldwide income (subject to tax treaty provisions).
| Annual Income | Tax Rate | Effective Tax |
|---|---|---|
| Up to €7,703 | 14.5% | Entry level |
| €7,704 - €11,623 | 21% | Low income |
| €11,624 - €16,472 | 26.5% | Middle income |
| €16,473 - €21,321 | 28.5% | Most digital nomads fall here |
| €21,322 - €27,146 | 35% | Upper-middle income |
| €27,147 - €80,000+ | 43.5% - 48% | High earners |
*Additional solidarity surtax of 2.5% - 5% may apply to income above €80,000
The original NHR program ended December 31, 2023. The new NHR 2.0 launched but is MUCH more restrictive.
💡 Bottom line: Plan for standard Portuguese tax rates (28.5%+) unless you work in R&D or for a Portuguese startup.
If you're self-employed, you'll likely continue paying US self-employment tax (15.3%) on worldwide income.
US-Portugal Totalization Agreement: Prevents double social security taxation. Generally, you pay to the country where you work - so Portugal for D8 visa holders.
Self-employed: ~21.4% of income (capped). Employees: 11% employee + 23.75% employer contribution.
Good news: Portuguese social security gives you access to Portugal's healthcare system and future pension benefits.
Apply for Portuguese tax number (NIF) before D8 visa application. Required for all tax matters and banking.
Work with CPA experienced in US-Portugal taxation. Cost: $500-1,500/year. Saves thousands in mistakes.
US: April 15 (June 15 for expats). Portugal: May-June. Use calendar reminders. Late filing = severe penalties.
Document your days in Portugal carefully. Affects tax residency status. Keep flight records and receipts.
Calculate which method saves more. FTC usually better for high earners. FEIE better for those under $130k.
File FBAR and FATCA. Penalties for non-compliance are severe ($10k-$100k+). IRS is cracking down on expats.
We can connect you with tax specialists and handle your entire D8 application process
Get Expert AssistanceIncludes tax compliance guidance • Free consultation
Do I have to pay US taxes if I live in Portugal on D8 visa? Yes, US citizens must file US tax returns and report worldwide income regardless of where they live. However, you can reduce or eliminate US tax liability using the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE up to $130,000 in 2025). You'll also need to file FBAR if foreign accounts exceed $10,000 and FATCA Form 8938 if assets exceed $200k-$400k.
Does Portugal D8 visa qualify for NHR tax benefits 2025? The old NHR program ended in 2023. The new NHR 2.0 (2025) only applies to workers in R&D, startups, or specific innovative professions. Most D8 digital nomads working remotely for US companies or as freelancers will NOT qualify for NHR 2.0 and will pay standard Portuguese income tax rates (14.5%-48%, typically 28.5% for middle earners). Plan accordingly.
What is the tax rate in Portugal for digital nomads? For most D8 visa holders, Portugal's standard progressive income tax applies: 14.5% to 48%. Digital nomads earning €20,000-€40,000/year typically pay 28.5% marginal rate. If you qualify for NHR 2.0 (rare for most remote workers), you get a 20% flat rate on Portuguese employment income. Self-employed also pay ~21.4% social security contributions.
How do I avoid double taxation on D8 visa? Use the US-Portugal tax treaty provisions along with either the Foreign Tax Credit (FTC) or Foreign Earned Income Exclusion (FEIE). FTC gives dollar-for-dollar credit for Portuguese taxes paid against US liability. FEIE excludes up to $130,000 of foreign earned income from US taxation. Most expats use one or both to eliminate true double taxation, though you still must FILE in both countries.
Do I need to file FBAR and FATCA from Portugal? Yes. FBAR (FinCEN Form 114) is required if your foreign bank accounts exceeded $10,000 combined at any point during the year. FATCA (Form 8938) is required if foreign assets exceed $200,000 (single) or $400,000 (married) at year-end for expats. Penalties for non-filing range from $10,000 to $100,000+. These are separate from your tax return but must be filed annually.
When am I considered a Portuguese tax resident? You become a Portuguese tax resident if you spend 183 days or more in Portugal within a 12-month period, OR maintain a habitual residence there. Most D8 visa holders become Portuguese tax residents, meaning Portugal taxes your worldwide income. However, the US-Portugal tax treaty and FTC/FEIE provisions prevent true double taxation on the same income.