Does not matter if you are a U.S. Citizen, you always have to pay income tax no matter where you are in the world.
However, I assume that they mean local/state/federal from outside sources are not taxed by Portugal.
This is true in a number of countries I think. I think Belize is also one of these countries doing the same, at least
for 'retiree's' in Belize (over 55 years and spend at least 30 days in-country in 5 years I think, need not be concurrent
either if I remember correctly.
Others on here are a better source than me, just stuff told to me by a buddy in Belize.
later
Brad