Model 22 for Non-Resident Entities Without a Permanent Establishment
Non-resident entities that do not have a permanent establishment in Portugal remain subject to certain filing obligations whenever they earn income taxable in Portuguese territory.
The most common types of income include:
- Capital gains arising from the disposal of real estate located in Portugal;
- Rental income derived from leasing property situated in Portugal;
- Other income subject to Corporate Income Tax (CIT).
The Portuguese Corporate Income Tax Code establishes specific filing requirements for Model 22 in these situations, including different deadlines depending on the nature of the income earned.
The Practical Issue Faced by Taxpayers
In practice, difficulties often arise when a non-resident entity receives different categories of income during the same tax year.
For example:
- The entity sells a property located in Portugal, generating a taxable real estate capital gain;
- During the same tax period, the entity also receives rental income from Portuguese property.
In such cases, the return relating to the capital gain must be submitted within the special statutory deadline applicable to that type of income.
Later, when it becomes necessary to declare the rental income earned during the year, many taxpayers find that the Portuguese Tax Portal appears to allow only one Model 22 return per tax period, treating any subsequent filing as an amended return.
This operational limitation creates uncertainty regarding the correct way to comply with filing obligations without replacing or overriding information already submitted.
Clarification from the Portuguese Tax Authority
To address this issue, clarification was requested from the Portuguese Tax and Customs Authority.
The Authority confirmed an important interpretation:
There is no restriction preventing a non-resident entity without a permanent establishment in Portugal from submitting more than one Model 22 return for the same tax period when this is necessary due to the different types of income earned.
Accordingly, where an entity has already submitted a Model 22 return relating to a real estate capital gain and subsequently needs to declare rental income, it should submit another Model 22 return relating to that rental income.
The Tax Authority further clarified that this return should be filed as a first return for the tax period, covering the full tax year, from 1 January to 31 December of the relevant year.
Practical Impact for Taxpayers
This clarification is particularly relevant for:
- Foreign companies owning real estate in Portugal;
- Non-resident investment funds;
- International entities investing in Portuguese real estate;
- Foreign companies earning both rental income and real estate capital gains in Portugal.
The position confirmed by the Tax Authority helps reduce uncertainty regarding compliance obligations and minimises the risk of inadvertently omitting income or incorrectly replacing previously submitted returns.
Nevertheless, each situation should be assessed individually, as the correct classification of income and the applicable tax treatment may affect the way the Model 22 return should be completed and submitted.
Best Practices to Consider
To avoid future compliance issues, non-resident entities should:
- Correctly identify the nature of the income earned in Portugal;
- Verify the filing deadlines applicable to each category of income;
- Maintain supporting documentation for all submitted tax returns;
- Seek clarification from the Tax Authority whenever uncertainty exists regarding filing procedures;
- Obtain professional advice to ensure full compliance with Portuguese tax obligations.
Conclusion
The Portuguese Tax and Customs Authority has clarified that non-resident entities without a permanent establishment in Portugal may need to submit more than one Model 22 return for the same tax period when different categories of income are subject to separate filing requirements.
This interpretation is especially important in situations involving both real estate capital gains and rental income, providing greater legal certainty and helping taxpayers comply correctly with their Portuguese tax obligations.
How Can Nominaurea Help?
Nominaurea provides specialised tax and accounting support to companies and investors operating in Portugal.
Our team assists clients throughout the entire process, including tax analysis, preparation and submission of Model 22 returns, real estate transaction tax compliance, non-resident taxation matters, and the fulfilment of reporting obligations before the Portuguese Tax Authority.
If your entity earns income in Portugal and you wish to ensure full compliance with Portuguese tax regulations, Nominaurea can provide tailored support and expert guidance adapted to your specific circumstances.
