Foreign Tax Credit — Crédito de Imposto por Dupla Tributação

The Foreign Tax Credit (DTAA credit) allows Portuguese tax residents to offset taxes paid in another country against their Portuguese IRS liability on the same income — preventing double taxation. The credit is limited to the lower of: (a) the foreign tax actually paid, or (b) the Portuguese IRS that would have applied to that income. The credit is claimed in the Modelo 3 annual return. Specific rules depend on the applicable DTT between Portugal and the source country. For income not covered by a treaty, Portugal provides a unilateral credit mechanism (Art. 81 CIRS). The Foreign Tax Credit is particularly important for US persons (who face US worldwide taxation regardless of residence), UK pension recipients, and those with dividend income from high-withholding countries.