Portugal increasingly relies on automatic and on-request foreign tax information when assessing personal income tax. For expats with income abroad, this can lead to unexpected assessments if foreign reports contain outdated, estimated, or incorrect data. A recent arbitration decision, issued on October 8, 2025, in case 171/2025-T, clarifies the extent to which the Portuguese tax authority may utilise foreign data. It also confirms the rights of taxpayers to challenge foreign-sourced information that no longer reflects reality.
This article explains the ruling in clear terms and shows how it affects individuals who receive income in other countries. It also highlights how MCS can help you navigate the exchange of tax information in Portugal.
A Landmark Case on Foreign Tax Information and the Right to Rebut
The arbitration tribunal analysed a 2020 tax assessment based on information provided by the Greek tax authority. Portugal had received this data through administrative cooperation channels. However, the taxpayer produced recent official documents from Greece, which proved that the foreign information was outdated. The tribunal accepted the taxpayer’s evidence and annulled the part of the assessment based on incorrect foreign data. This confirms a crucial point: foreign tax information is not absolute. It carries substantial evidentiary weight, but it must be recent, accurate, and supported by objective records.
Why the Tribunal Ruled for the Taxpayer
The tribunal highlighted three essential principles that now guide disputes involving foreign-sourced information.
1. Foreign information is strong evidence, but it is not unquestionable
Portugal treats data received through cooperation networks as highly reliable. However, this reliability is only valid when such data is:
- objective
- updated
- traceable to an official source
If the taxpayer presents credible, recent, and certified documents from the foreign authority, this creates reasonable doubt. When doubt exists, foreign information cannot prevail automatically.
2. The burden of proof shifts once the taxpayer presents updated evidence
Expats often assume they must prove everything. However, once the taxpayer provides recent and credible documentation, the Portuguese tax authority must then verify the situation.
The tribunal noted that the authority must:
- Re-check foreign data through cooperation channels
- Request updated information from the partner country
- justify any decision that conflicts with the taxpayer’s documents
Failure to do so constitutes a procedural error and a lack of proper reasoning.
3. Authorities must correct assessments when errors become visible
The tribunal reinforced the administration’s duty to correct mistakes once they become aware of them.
In this case, Portugal relied on information reported by Greece until mid-2022. The taxpayer produced an official 2024 certificate proving that the disputed income did not exist. The authority failed to verify or update its records.
This failure justified the annulment of the assessment and repayment of excess tax, including compensatory interest.
What Actually Happened in This Case
The Portuguese tax authority claimed that the taxpayer had:
- rental income in Greece
- interest income and
- over €18,000 in pension income from Greece
However, the taxpayer demonstrated that the €18,000 figure was merely a Greek estimate of income earned in Portugal for procedural purposes. It was not Greek-source income.
The taxpayer submitted a certified official statement issued in 2024 by the Greek tax authority confirming the correct amounts. The Portuguese authority did not provide updated evidence and relied only on older records.
The tribunal annulled the part of the assessment related to Greek income and ordered repayment of the excess tax.
Practical Implications for Expats With Foreign Income
This decision has broad relevance for anyone living in Portugal and earning income abroad, particularly in countries with complex reporting systems.
1. Always obtain updated official certificates from the foreign country
Foreign tax reports often reflect estimates, provisional data, or historical entries. Portuguese authorities may not receive updates automatically. Therefore, expats should request:
- annual foreign income statements
- tax payment confirmations
- certificates of non-residence, when relevant
- Certified translations are advisable.
2. Challenge foreign information when it is outdated or inconsistent
If foreign data is incorrect, you must provide coherent and up-to-date evidence. The tribunal confirmed that you do not need to prove everything. You only need to create a reasonable doubt.
3. Expect Portuguese authorities to verify the information again
Once doubt exists, the administration must seek clarification from the partner country. They must not rely on old reports. They must reassess the case with updated evidence.
4. Consider using administrative claims or arbitration when needed
Arbitration is often faster and more predictable than regular courts. This decision demonstrates that a well-documented rebuttal can be effective.
How This Affects the Broader System of Exchange of Tax Information in Portugal
Portugal participates in comprehensive information-exchange frameworks. These include:
- Automatic exchange under international agreements,
- On-request exchange through cooperation channels
- Spontaneous exchange when foreign authorities detect irregularities
These mechanisms improve compliance, but they also introduce risks. Not all foreign data is immediately updated. Some countries report estimated values. Others report global amounts without a proper breakdown.
This arbitration ruling reminds both taxpayers and authorities that cooperation does not replace verification.
Why Work With MCS
MCS advises expats facing cross-border income questions, double taxation issues, and disputes arising from foreign reports. We help clients:
- analyse foreign income documentation
- prepare rebuttal evidence
- structure claims and objections
- handle arbitration and administrative procedures
- ensure compliance with Portuguese and international rules
Our team combines local expertise with decades of experience in international tax matters.
If you receive an unexpected assessment based on foreign income, or if you want to review your tax position before filing, we can help. If you wish to understand how this ruling may affect your foreign income reporting in Portugal, you may contact the MCS team for a confidential review and tailored guidance.
This article provides general information about “Exchange of Tax Information in Portugal” and does not constitute legal or tax advice. Tax outcomes depend on individual circumstances and on evolving administrative practices. You should seek professional advice before acting on any information contained herein.
