Portugal-UK Double Taxation: the essentials for residents with income in both countries

Portugal and the United Kingdom have a Double Taxation Convention in force since 1968, approved by Decree-Law No. 48 497 and signed in Lisbon on March 27, 1968. This Convention remains valid and regulates the way in which salaries, pensions, investments and other income are taxed when there is a tax link between the two countries.

The objective is simple: to prevent the same income from being taxed twice — once in the United Kingdom and once in Portugal.

⚖️ What the treaty covers

The Convention applies to income taxes and sets out clear rules for:

• Public and private pensions

• Wages and income from dependent work

• Dividends, interest and royalties

• Business income

• Real estate and capital gains

Portugal lists this Convention among its international tax agreements.

🧩 How the treaty avoids paying tax twice

The Convention uses two mechanisms:

1️⃣ Tax Credit

Portugal allows you to deduct the tax paid in the United Kingdom from the IRS due in Portugal.

2️⃣ Exemption with progressivity

Some income is exempt in Portugal, but influences the rate applicable to the remaining income.

📌 Practical examples

✔ British pensions (State Pension and private)

They can be taxed in the United Kingdom, depending on the type. In Portugal, tax credit or exemption is declared and applied.

✔ Salaries

If the work is carried out in the UK, tax may be payable there. Portugal avoids double taxation through tax credit.

✔ Dividends, interest and royalties

The treaty limits the maximum rates of withholding tax applied by the United Kingdom.

✔ Real Estate in the United Kingdom

They are taxed exclusively in the United Kingdom. Portugal applies exemption progressively.

⚠️ Important Note

This information is general and does not dispense with the consultation of a tax expert or the competent tax authorities, as each situation may have particularities that change the applicable framework.