Avoiding Double Taxation in Practice:
Foreign Dividends and the Portuguese IRS

1. What is international double taxation?

Double taxation happens when the same income is taxed twice: first in the source country (withholding at source) and again in Portugal, your country of tax residence.

It is the typical situation for anyone investing through brokers such as Revolut, Trading212, DEGIRO, IBKR, XTB or eToro: you receive a dividend from a US company, the US withholds tax at source, and when you file your IRS return Portugal taxes that same dividend at 28%.

Two complementary mechanisms mitigate the problem:

• 1. Double Taxation Treaties (DTTs) - bilateral agreements that cap the rate the source country may withhold (Portugal has around 80 treaties in force);
• 2. The foreign tax credit (art. 81 of the CIRS) - deducting, in your Portuguese IRS, the tax already paid abroad.

Neither works on its own: the taxpayer has to activate them - by filing the right forms with the broker (like the W-8BEN) and declaring the income correctly in Anexo J.

2. How the foreign tax credit works (art. 81 CIRS)

When you declare foreign income in Anexo J, the Portuguese Tax Authority (AT) grants a credit equal to the lower of:

With two rules that make all the difference:

In practice, for dividends taxed at the 28% special rate (no aggregation), the credit normally covers the full treaty-rate withholding (10%–15%), and you only pay Portugal the difference up to 28%.

Legal basis: art. 81 CIRS - elimination of international juridical double taxation.

3. Table: treaty rate vs. withholding actually applied (dividends)

The decisive column is the last one: it shows whether the country withholds more than the treaty allows - and therefore whether there is tax to reclaim abroad that Portugal will not credit.

* Rate applicable to individual (portfolio) investors, per the official DTT rate table (Portal das Finanças). Treaties provide lower rates for qualifying corporate shareholdings, which do not apply to retail investors.
** France applies 12.8% to individuals when residence paperwork is filed before payment (relief at source); otherwise 25%.
*** The UK, Brazil, and most Irish-domiciled ETFs apply no withholding on dividends/distributions paid to non-residents.

Domestic rates change and some brokers have "relief at source" arrangements applying treaty rates directly. Always check the actual percentage withheld on your broker statement.

4. W-8BEN: cutting US withholding from 30% to 15%

The W-8BEN is the US IRS form certifying you are not a US tax resident, unlocking the Portugal–US treaty rate: 15% instead of 30% on dividends.

• 📋 Where to file it: directly on the broker's platform. Revolut, Trading212, IBKR, DEGIRO, XTB, eToro and Lightyear request the W-8BEN at account opening or before your first US trade - it is digital and takes about 2 minutes.
• ⏳ Validity: 3 calendar years after the year of signature (signed in 2026, valid until 31/12/2029). The broker notifies you when renewal is due - don't ignore that email.
• ⚠️ Without a valid W-8BEN: 30% US withholding. Portugal only credits 15% (the treaty cap) and the rest is lost unless you file a refund claim with the US IRS - a slow process that rarely pays off for small amounts.
• 🔍 How to check: look for the tax documents section in your broker account ("Tax forms" / "W-8BEN status") and confirm it is active before the next dividend season.

5. Worked examples

All examples assume a gross dividend of €100 and Portuguese taxation at the 28% special rate (no aggregation).

Example A - USA with W-8BEN (the ideal scenario)

Example B - USA without W-8BEN

Example C - Switzerland (35% withholding)

Example D - Germany (26.375% withholding)

6. Reclaiming tax withheld in excess abroad

When the source country withholds above the treaty rate, the excess is never refunded by the Portuguese AT - it must be claimed from the foreign tax administration. The general process:

1. Get a certificate of tax residence from the Portal das Finanças (Serviços → Certidões → Residência Fiscal). Free and issued immediately.
2. Gather evidence: broker statements showing the dividends and tax withheld.
3. File the claim in the source country within the deadline (typically 2 to 4 years).

7. How to declare in Anexo J (box 8.A) to activate the credit

The tax credit is only applied if you declare the foreign dividends in box 8.A of Anexo J of the Modelo 3 return. One line per source country, with:

• Income code: E11 - "Dividends or profits - without Portuguese withholding" (the normal case with foreign brokers). Use E10 only if a Portuguese paying agent withheld tax.
• Source country: the code of the country of the company paying the dividend (e.g. 840 USA, 276 Germany, 756 Switzerland, 528 Netherlands) - not the broker's country. Exception: for dividends of Portuguese companies received via a foreign broker, the AT deems the income obtained in the country of the broker making it available (binding ruling, Processo 21047 - see section 10).
• Gross income: the dividend before any withholding, converted to euros at the payment-date rate.
• Tax paid abroad: the amount actually withheld at source. The AT then applies the treaty cap when computing the credit.

With dozens of dividends from multiple countries and currencies over a year, this manual work is the main source of errors - and of AT flags. Tax-Wizard reads your broker files (Revolut, Trading212, DEGIRO, IBKR, XTB, eToro and 20+ platforms), converts everything to euros using official ECB rates, aggregates by country and generates a pre-filled Anexo J automatically, including the tax paid abroad.

→ How the automatic Anexo J filling works
→ Simulate your IRS with Anexo J data

8. Aggregation (englobamento) vs. the 28% flat rate

By default, dividends declared in Anexo J are taxed at the 28% special rate. Alternatively you may opt for aggregation (englobamento): dividends are added to your other income and taxed at the progressive IRS rates.

• ✅ Upside of aggregation: if your marginal bracket is low, the effective rate can fall below 28%. Additionally, for dividends from EU/EEA companies, only 50% of the amount is taxed (art. 40-A CIRS).
• ⚠️ Careful: the 50% rule does not apply to US dividends or other non-EU/EEA countries. And aggregation is all-or-nothing for capital income - you cannot aggregate only part of it.
• 💡 The art. 81 tax credit works under both regimes.

When in doubt, simulate both scenarios before filing - Tax-Wizard lets you simulate the return with Anexo J data.

9. 7 strategies to minimise double taxation

10. Trap: Portuguese stocks held at foreign brokers

A recurring source of confusion: holding Portuguese stocks (EDP, Galp, BCP…) through a foreign broker such as DEGIRO. Because the shares sit in omnibus accounts registered to the intermediary rather than the end investor, Portuguese withholding can be applied at the aggravated 35% rate (art. 71 CIRS for accounts held for unidentified third parties) instead of the normal 28%.

• 📋 Where to declare: the AT clarified in a binding ruling (Processo 21047, decision of 14/10/2024) that these dividends are declared in Anexo J, box 8.A, code E11, together with the withholdings suffered: since it is the foreign broker that makes the income available, it is deemed obtained outside Portugal, in the broker's country (art. 18(1)(g) CIRS - the Netherlands, in the case decided).
• ⚠️ The excess over 28% is not automatically credited in your return - recovery means claiming through the broker/registrar or filing an administrative claim with the AT, both with uncertain outcomes.
• 💡 Prevention: for regular dividends from Portuguese stocks, a domestic intermediary (Portuguese bank or broker) avoids the issue - the 28% withholding at source is final and doesn't even need to be declared (unless you opt for aggregation).

→ More details in the Portugal Tax Guide (dividends section)

11. Frequently asked questions