Portugal answers, taxes
Does Portugal have a tax treaty with the US?
The convention is published by the IRS with its protocol, and a separate social security agreement has applied since 1 August 1989. Together they decide who taxes what when an American lives in Portugal. They do not make either country's tax disappear.
What the treaty allocates
| Income | Rule in the convention |
|---|---|
| Dividends | Withholding in the source country capped at 15 percent |
| Interest | Withholding capped at 10 percent, with exceptions |
| Royalties | Withholding capped at 10 percent |
| Pensions from past private employment | Taxable only in the country where you live (article 20) |
| Social security and other public pensions | May be taxed by the country that pays them (article 20) |
| Annuities | Taxable only in the country where you live |
The saving clause
Paragraph 1(b) of the protocol says each country may tax its residents, and the United States may tax its citizens, as if the convention had not come into effect. For a US citizen in Portugal this is the line that matters most: the treaty rarely lowers your US tax. What it keeps for you, by exception, includes the relief from double taxation article, the non discrimination article, the mutual agreement procedure and the social security rule in article 20.
So how is double tax avoided?
In practice through credits, not exemptions. Portugal taxes you as a resident on worldwide income. Under article 25 the United States allows its citizens a credit against US tax for the income tax paid to Portugal, and income it may tax only because of your citizenship is treated as arising in Portugal as far as needed to avoid double taxation. You still file in both countries every year.
The second agreement people forget
The totalization agreement removes double social security contributions on the same work and lets periods of coverage in both systems be combined to qualify for a partial benefit. It is the reason a self employed American in Portugal should check which system they owe contributions to before paying both.
What the treaty does not settle
Whether Portugal may also tax US Social Security benefits is read two ways by advisers, as we set out in does Portugal tax US Social Security benefits. How Portugal classifies a US retirement account is another point the table above does not answer.
A treaty position is only as good as the return it is filed on, so use an adviser who prepares both the 1040 and the Modelo 3. For the filing calendar see do US citizens file taxes in both countries, and for the Portuguese side our income tax guide.
Sources
- US Internal Revenue Service, convention between the United States and the Portuguese Republic for the avoidance of double taxation, with protocol (signed at Washington on 6 September 1994, general effective date 1 January 1996; dividends 15 percent, interest and royalties 10 percent; article 20 pensions, social security and annuities; article 25 relief from double taxation; protocol paragraph 1(b) and (c) saving clause), accessed .
- US Internal Revenue Service, Portugal tax treaty documents, page reviewed 8 August 2026 (income tax treaty of 1994 and technical explanation), accessed .
- US Social Security Administration, POMS GN 01727.001, overview of the totalization agreement with Portugal (effective 1 August 1989, removes dual coverage and taxation of the same work, allows combined coverage for partial benefits), accessed .
- PwC Worldwide Tax Summaries, Portugal: taxes on personal income, reviewed 24 July 2026 (residents taxed on worldwide income), accessed .
Facts in this answer last verified .
Read the full guide
- Portugal income tax for digital nomads in 2026: tax residency, the IRS brackets and what you actually pay
Digital nomads pay Portuguese tax once resident. The 183 day and habitual home tests, the 2026 IRS brackets, D8 and IFICI facts, and worked take home examples.