Moving from the US to Portugal: tax residency and IRS rules

US citizens and green-card holders are subject to US federal income tax on their worldwide income regardless of where they live. Moving to Portugal does not by itself end your US tax filing obligation. You must still file a US return and report global income; you may claim the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) to avoid double tax. The US–Portugal double tax treaty can allocate taxing rights and allow credits so that income is not taxed twice.

The Substantial Presence Test determines if you are a US tax resident for a given year (for non-citizens). You meet it if you are in the US at least 31 days in the current year and your weighted days over the current year and the two prior years total 183 or more (current year 100%, prior year 1/3, two years ago 1/6). US citizens are always taxed as residents for worldwide income, so the test mainly matters for non-citizens. If you are a US citizen living in Portugal, your US obligation is based on citizenship, not the 183-day test.

In Portugal, you are tax resident if you spend more than 183 days in any 12-month period in Portugal, or if you have your habitual home there with the intention of using it as your main residence. Portuguese residents are taxed on worldwide income (progressive rates up to 48%). As a US citizen in Portugal, you will have both US (worldwide) and potentially Portuguese (worldwide) liability; the US–Portugal tax treaty and the FTC or FEIE help avoid double tax. Portugal does not tax US-source income in the same way the US does, so the treaty and your US elections (e.g. FTC) are important. Consider speaking to a cross-border tax adviser.