💸 Filing in Two Countries?

Happy Sunday, friends ☀️

It’s one of those beautiful Portuguese days where you can feel the season shifting. The first buds are showing up on the trees, the light feels softer, and there’s a gentle reminder that winter doesn’t last forever.

In today’s issue, we’re continuing our practical deep-dive for our American readers with Part Two of Fresh Legal’s tax filing series. If you missed the first article, you can catch up here before diving in, especially if you’re navigating filings in both the U.S. and Portugal this year.

We’re also sharing a little coastal inspiration with a look at Portugal’s tallest lighthouse (a fun one for your weekend wander list), and we’ll wrap things up with a pronunciation lesson from our Portuguese tutor, because sounding local still counts as a hustle win.

Ready? Let’s dive in.

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Standing proudly at the entrance to Aveiro's harbor, the Praia da Barra Lighthouse is the tallest lighthouse in Portugal and one of the tallest in Europe, reaching an impressive 62 meters high with distinctive red and white stripes wrapping around its tower. Built in 1893, this beacon has guided ships safely through the treacherous coastal waters for over a century, and visitors who climb its 288 steps are rewarded with spectacular 360-degree views of the Atlantic Ocean, the sprawling Ria de Aveiro lagoon system, and the colorful striped houses of nearby Costa Nova. The lighthouse sits on a beautiful sandy beach where the lagoon meets the sea, creating a dramatic backdrop for sunset photography. Its striking geometric pattern against the coastal landscape makes it an unexpected Instagram gem, especially during golden hour when the white and red bands glow warmly against the blue ocean.

If you’re a U.S. citizen living in Portugal and you’re now knee-deep in tax season questions, this one’s for you.

This article is especially relevant if:

Fresh Legal breaks down what you should prepare before filing, where many expats make costly mistakes, and how to approach U.S. + Portuguese filings strategically instead of reactively.

If you want clarity before you hit “submit” on anything tax-related this year, read this carefully.

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If you are a U.S. expat living in Portugal, January usually marks the beginning of tax season and, with it, a familiar mix of concern and confusion. As U.S. tax forms start arriving, the immediate question arises: since all my income is sourced in the U.S. and taxed there, do I really need to file in Portugal? Will I be double taxed?

For those already aware that Portuguese tax residency triggers a filing obligation, the questions become more practical. Where should I file first? Is it necessary to rush both filings into the narrow April window every year? And how do capital gains work for U.S. citizens under the NHR or IFICI regimes?

Let us bring some clarity.

As a general rule, worldwide taxation is primarily linked to tax residence and, secondarily, to the source of income. For Portuguese tax residents, this means that all income, even if sourced abroad, must be reported in Portugal. Any tax withheld at source abroad can generally be used as a foreign tax credit to reduce Portuguese tax liability.

The U.S. is an exception. U.S. citizens are subject to taxation based on citizenship, regardless of where they live. All U.S. tax treaties include a saving clause that preserves the right of the U.S. to tax its citizens as if the treaty did not exist. As a result, U.S. citizens must always file a regular Form 1040, not Form 1040-NR, even when living abroad.

A common misconception is that paying tax in one country automatically eliminates tax exposure in the other. That alone does not constitute double taxation relief.

A Portuguese tax resident with U.S.-sourced income must file a Portuguese return and may receive a tax assessment. Double taxation is avoided through the use of foreign tax credits, but credits are limited to the amount of tax attributable to that income in the country of residence.

This matters because tax burdens differ significantly. In 2025, the highest U.S. federal marginal rate is 37%, applicable only to very high levels of income. In Portugal, the top marginal rate is 48% on income above € 86 634, plus solidarity surcharges of 2.5% on income over €80,000 and 5% on income over €250,000.

In practice, a taxpayer may face a higher effective rate in Portugal than in the U.S. If a taxpayer pays an effective 20% tax in the U.S. and is assessed at 25% in Portugal, the U.S. tax can be credited, leaving only the remaining 5% payable in Portugal. This is not double taxation. It is precisely how the credit system is designed to work.

Double taxation would only occur if the same income were fully taxed in both countries without any credit or relief.

There is no universal rule on where to file first. The correct approach depends on the taxpayer’s profile, the type of income involved, and whether exemptions apply in Portugal. For example, if Portuguese tax law grants an exemption, filing first in the U.S. to generate credits that will never be usable in Portugal makes little sense.

As a practical guideline, when Portuguese tax is expected to be due, it is usually preferable to file in Portugal first and then apply the resulting credits in the U.S., often after securing a U.S. filing extension to October.

Trying to file both returns during the narrow overlap in early April is strongly discouraged. This period marks the end of the U.S. tax season and the start of the Portuguese one. Most taxpayers use different preparers in each country, and rushing filings with incomplete information is a reliable way to create errors.

It is also important to remember that a U.S. tax extension only extends the filing deadline, not the payment deadline. Estimated taxes or safe harbor payments must still be made by April 15 to avoid penalties.

Capital gains on securities are another frequent area of confusion. In the U.S., long-term capital gains may be taxed at 0% for lower-income taxpayers. In Portugal, taxpayers under the NHR or IFICI regimes may benefit from an exemption on foreign capital gains.

When properly structured, this can result in lawful double non-taxation, an excellent wealth accumulation opportunity. However, this outcome is easily compromised by small errors on the Portuguese tax return, such as failing to properly indicate U.S. citizenship or incorrectly selecting the exemption method. Correcting these mistakes is often costly, time-consuming, and will most certainly trigger a tax audit and potential litigation.

For expats, the strongest safeguard against costly tax mistakes is accurate information and coordinated advice from specialists in both jurisdictions. International taxation is highly technical, and generalist or purely local advisors often lack the expertise required to manage cross-border issues effectively.

Taxpayers should maintain clear and consistent records for at least five years, aligning with the statute of limitations in both countries. When navigating unfamiliar systems, languages, and laws, relying on experienced international tax professionals is not a luxury. It is a necessity.

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With thanks to our collaborators at FRESH Portugal, for their valuable insights and contributions to this article.

_{The legal team at Fresh Portugal is composed of experienced professionals with expertise in tax, immigration, real estate, estate planning, and corporate law. They advise individuals and businesses on relocation, investment, compliance, and tax planning. With extensive experience working with international clients, the team delivers clear, practical, and forward-thinking solutions to help expats thrive in Portugal.}

Email: [email protected]

Portugal has voted, and if residency, citizenship, or investment routes are part of your long-term plans, this 10-minute video from Fresh Legal Group is worth watching. They break down what the new presidency could mean for immigration policy, nationality reform, and the Golden Visa framework, including how a more moderate political landscape may influence stability, timelines, and protections for those already in the system. Even where formal rules don’t immediately change, political direction and institutional balance can shape how reforms are implemented in practice. If you’re planning a move, waiting on nationality, or considering investment, this gives valuable context for what may unfold next.

In this video, Mia explains how to pronounce “sim” (yes) in European Portuguese.

It’s a very small word, but pronouncing it correctly makes a big difference in how natural your Portuguese sounds.

🗣 Want to learn more words like this? Check out Mia’s free Portuguese course “Kickstart Your Portuguese - The Basics”.

💡 Mia from Mia Esmeriz Academy is a Portuguese teacher from Porto with more than 15 years of experience teaching foreigners. She helps expats become fluent in Portuguese in a clear and practical way. Alongside her courses, she also shares free content on Instagram, Facebook, and TikTok.

Thanks for reading! 💌

Hustle on!

Angelique🧞‍♀️

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