As a tax consultant working closely with international clients relocating to Portugal, I often encounter the same question from clients: “Will the Portuguese tax authorities know about my foreign income?” The short answer is yes. The longer and more important answer is that the automatic exchange of financial information (AEOI) is now a cornerstone of global tax cooperation, and expats living in Portugal must treat it with the seriousness it deserves.
This concept is not new, but its practical implications have become more evident in recent years. Whether you are a retiree benefiting from the Non-Habitual Resident (NHR) regime or a remote worker managing international income streams, understanding how AEOI works is crucial for your financial and legal peace of mind.
The Essentials of AEOI
The automatic exchange of information is an international mechanism designed to improve transparency and fight tax evasion. Under this system, financial institutions in one country automatically report details of accounts held by foreign residents to their local tax authority. That authority, in turn, shares the information with the country’s tax authorities where the account holder is resident.
In practical terms, this means that if you are a tax resident in Portugal. You have financial assets abroad, a current account in Funchal (Madeira Island), a securities portfolio in Switzerland, or a pension in the U.S., the Portuguese Tax Authority (Autoridade Tributária e Aduaneira) is likely to receive annual reports with your name on them.
What Gets Reported?
This mechanism covers far more than just account balances. It typically includes identification details such as your full name, tax identification number (NIF), country of residence, account numbers, income from dividends or interest, and in some cases, proceeds from the sale of financial assets. It applies to individuals and certain types of legal entities.
If your offshore income or holdings are not declared in your Portuguese tax return, this data exchange could trigger a review, an audit, or even penalties.
The Importance of Tax Compliance
For many expats, the concept of global taxation can feel intrusive. But if you are a tax resident in Portugal, which is defined as spending more than 183 days in the country in a given year or having your habitual residence here, you must report and potentially pay tax on your worldwide income. Portugal’s double tax treaties mitigate most risks of double taxation, but they do not eliminate the obligation to declare foreign income.
The real issue is not whether information will be exchanged (it will), but whether your financial disclosures are accurate, timely, and legally sound. A single intentional omission can compromise your credibility with the Portuguese authorities and complicate your residency status or future tax filings.
Practical Advice for Expats
From a professional standpoint, my recommendation is always to take a proactive, transparent approach. Ensure your income streams are mapped out. Work with a tax advisor who understands both Portuguese and international reporting requirements. If there are legacy structures, such as foreign trusts, shell companies, or offshore pensions, make sure they are reviewed in light of Portugal’s tax rules.
There are also planning opportunities. Portugal offers a range of beneficial regimes, and with proper structuring, it’s often possible to achieve compliance and tax efficiency. But it requires foresight, not improvisation.
Closing Thoughts
The age of banking secrecy is over. Automatic exchange of information in Portugal is no longer a theoretical risk but a functioning system connecting your financial footprint globally. For expats in Portugal, the best defence is a well-prepared tax strategy that leaves no room for surprises. If you’re unsure whether your current setup meets the expectations of the Portuguese authorities, I invite you to schedule a consultation. At Madeira Corporate Services, we help expats navigate these rules with clarity and confidence. A single session could save you months of stress and potentially significant financial consequences.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
