Thinking of moving to Portugal but unfamiliar with the tax system? Look no further. Portugal is famous for its high quality of life and temperate climate and offers a generous tax regime, making it very popular with expats looking to relocate.
Understanding income taxes and accompanying tax rates is important for Portuguese residents to ensure compliance with government legislation and retain their residency or citizenship status.
This guide is designed to help you navigate taxes in Portugal and the Portuguese tax system as an expatriate, ensuring you understand the legalities, the entities responsible, and how to remain compliant with your annual income taxes.
About The Tax System in Portugal
Portugal’s tax system is comprehensive, with various taxes targeting different income sources and activities. It also provides specific incentives and benefits for new residents and businesses investing in certain sectors. If you’re moving to (or are already in) Portugal and earning an income, you may have to pay taxes. If you reside in Portugal for 183 days or more a year, you must pay income tax on your worldwide income. We’ll discuss these different taxes more deeply in the sections below.
How to Register in the Portuguese Tax System
The process starts by registering as a taxpayer and obtaining your NIF (Número de Identificação Fiscal) number. You can request your NIF tax identification number online through their website or in person at the Finanças office.
Once you’ve received your NIF, you’ll need to fill out this form stating that you’re starting a new tax activity and submit it to your local tax office, which you can find on the Portuguese Tax Agency’s online portal (Portal das Finanças).
With your NIF you can apply for your Social Security number (NISS) to be eligible for unemployment benefits, public health insurance, and other assistance.
As per tax laws, the Portuguese tax year follows the calendar, starting on 1 January and ending on 31 December, with a tax return submitted between April and June of the following year. Returns can be completed online via the Portuguese Tax Authorities’ website or printed forms.
Be sure to file your returns on time to avoid the loss of tax credits and potentially hefty penalties ranging from €200 to €2,500. Hiring an accountant or bookkeeper is recommended if you are doing business in the country.
Who has to pay taxes in Portugal?
So, how do you know if you’re considered a taxpayer in Portugal? Your tax liability as an expat depends on your residency status, which is defined by how much time you spend living and working in Portugal each year.
If you are in Portugal for 183 or more days in a single calendar year, you will typically be considered a Portuguese tax resident.
However, the following may also make you a tax resident:
- You have a permanent residence in Portugal on 31 December of that tax year
- The head of your household is a tax resident in Portugal
- You are crew on a ship, yacht, or aircraft owned by a Portuguese entity
- You work for the Portuguese state, regardless of where you work from
Expat Taxes in Portugal
Non-resident income tax rate in Portugal
Non-resident foreigners are subject to flat rates on all taxable income earned. This tax rate in Portugal for foreigners is 25 percent and applies to all annual income derived from a Portuguese source. Non-residents must also pay a flat percent rate on income earned from interest or dividends. This means that if you earned €50,000 in Portugal during 2023, you would owe €12,500 in taxes. Some income, such as capital gains tax from selling shares, may be exempt from this rate, as per the tax laws.
How to file your income tax return in Portugal
In line with the laws that govern federal taxes, the Portuguese tax year runs from 1 January to 31 December, with returns submitted the following spring. Returns can be completed online or via a paper form.
You can submit your annual tax return statement online with access to the Finances Portal. You can also submit in person at the following locations*:
- Serviço de Finanças offices
- Citizen Shops (Lojas de Cidadão)
- Parish councils (Câmara Municipal)
* In specific locations, you must schedule the service.
Self-employed income tax in Portugal
Sole traders, freelancers, and people who run unincorporated businesses in Portugal will have their income assessed as personal earnings. This results in them paying Portuguese income tax rather than corporate tax.
The Portuguese (NHR) Tax System for Foreigners
Portugal’s Non-Habitual Residency (NHR) tax scheme was introduced in 2009 and offers taxable benefits to foreign residents.
Under the NHR program, individuals who have not been tax residents in Portugal for the previous five years and who apply for NHR status can benefit from either tax exemptions or a flat 20 percent tax rate on their foreign income for a ten-year period. This flat rate can apply to Portuguese-sourced income from self-employment or specific professions.
The NHR rates are highly generous compared to regular Portuguese income tax rates of up to 48 percent.
This program makes Portugal an attractive option for digital nomads, retirees, and anyone looking to live and work in a beautiful and welcoming country while keeping more of their income. Whether you’re seeking a change of pace or a new adventure, Portugal’s NHR program is worth exploring.
To qualify for the NHR regime, applicants must have the right to reside in Portugal either as an EU/EEA/Swiss citizen or through visa schemes such as the Portugal Golden Visa. They must not have been a Portuguese tax resident for five years before taking up residence in Portugal.
Is NHR ending?
The State Budget Law for 2024 determined the end of the NHR regime from 1st January 2024. However, certain individuals can still apply up until 31st March 2025, and the scheme is being replaced by the Tax Incentive for Scientific Research and Innovation, which has now been implemented. To learn more, please refer to Is The Portugal NHR Ending?
Types of Tax in Portugal
Local Taxes in Portugal
Before we get into more specific taxes, such as income tax and VAT, there are a few local taxes to be aware of.
The IMI (Imposto Municipal Sobre Imóveis) is Portugal’s equivalent of council tax and is to be paid by property owners. Each municipality sets different rates according to your property’s area. The IMI goes towards maintaining public infrastructures such as bin collections and street cleaning.
If you own property on the last day of the respective tax year, you are liable to pay IMI tax. Residents with homes valued at more than €600,000 need to pay a higher level of IMI known as AIMI. Many consider the AIMI property taxes as Portugal’s equivalent of a “wealth” tax.
Taxes in Portugal on Goods and Services
Established businesses in Portugal with a turnover of more than €10,000 on taxable goods and services must pay VAT.
VAT in Portugal (Imposto Sobre o Valor Agregado, or IVA for short) was established in 1986 and comes with three chargeable bands:
- Reduced rate: 6 percent in mainland Portugal, 4 percent in the Azores, and 5 percent in Madeira for the goods and services included in the List I of the Value Added Tax Code. The reduced rate applies to goods such as bread, pasta, milk and dairy products, books, newspapers, and chocolate.
- Intermediate rate: 13 percent in mainland Portugal, 9 percent in the Azores, and 12 percent in Madeira on goods and services included in List II of the Value Added Tax Code. The intermediate rate applies to goods like pickles, wine, musical instruments, and condoms.
- Standard rate: 23 percent in mainland Portugal, 18 percent in the Azores, and 22% in Madeira for all remaining taxable goods and services. For more information, please refer to Article 18 of the Value Added Tax (VAT) Code.
Personal Income Tax (IRS) Rates in Portugal
Personal income tax rates (IRS) apply to the incomes of Portuguese residents and non-residents currently working or employed.
Tax is automatically deducted from pay slips, but you must complete an annual tax return. Your income tax rates are determined by calculating your taxable income earned and the corresponding tax rate and removing any legal deductions (e.g., education or health-related expenses).
IRS is considered individual income tax and is filed individually, but couples and civil partnerships can opt to file jointly. In this case, tax rates are charged on the total taxable income of the household members.
The Portugal tax rates for individuals for 2023 are as follows, ranging from 14.5 percent to 48 percent:
Portuguese Income Tax Bands | Portuguese Tax Rate |
up to €7,116 | 14.5% |
€7,117–€10,736 | 23% |
€10,737-€15,216 | 26.5% |
€15,217-€19,696 | 28.5% |
€19,676-€25,076 | 35% |
€25,076-€36,757 | 37% |
€36,758-€48,033 | 43.5% |
€48,034-€75,009 | 45% |
€75,010+ | 48% |
Income tax in Portugal has six categories:
- Employment income
- Self employment income
- Investment income
- Rental income from properties let in Portugal
- Capital gains tax, calculated from selling properties, assets, or shares
- Pensions in Portugal, including private pension plans
Get detailed information about retirement and pensions in Portugal here.
Book a one-on-one consultation with our Portugal Tax Specialist
Capital gains tax
Capital Gains Tax in Portugal applies to the profit made from selling any capital asset, including real estate, stocks, and bonds. The tax rate for capital gains in Portugal is 28 percent. This flat rate applies to both residents and non-residents and 25 percent for companies.
However, certain exemptions and reductions may apply to capital gains, such as a 50 percent reduction for assets held for more than two years or a complete exemption for capital gains made from the sale of a main residence. Exemptions on Portugal Capital Gains Tax also apply for residents selling their primary home and buying another property in Portugal or elsewhere in the EU, and those selling a property they purchased before 1989.
Property taxes in Portugal (IMI)
In Portugal, property owners must pay a property tax, Imposto Municipal Sobre Imóveis (IMI). Rates on property taxes are set according to each municipality and area where the house is located.
In urban areas, IMI varies from around 0.3 percent to 0.45 percent of the home’s value. In rural areas, a rate of 0.8 percent applies. The SAPO website (in Portuguese) has the IMI rates in your area for 2023.
Homeowners in urban areas with properties worth less than €125,000 can benefit from a three-year exemption on IMI as long as they live in the property themselves. You can get a further deduction of around €20 for each dependant, and exemptions also exist for people with low incomes or those with energy-efficient homes.
Property wealth tax (AIMI)
Another post-purchase property tax in Portugal is the Adicional Imposto Municipal Sobre Imóveis (AIMI). This relatively new tax is infamously referred to as the Portuguese Wealth Tax, as it affects those with a total real estate worth above €600,000.
The tax is calculated on an individual basis, meaning that if a property is jointly owned, it must be worth over €1.2 mi before it starts owing AIMI.
The tax rates for AIMI are as follows:
- o.4 percent on the total amount of properties held by companies
- 0.7 percent on property valued between €600,000 and €1 mi
- 1 percent on property valued between €1 mi and €2 mi
- 1.5 percent if the total value exceeds €2 million
Tax on rental income
If you decide after purchasing your property to let it out, you will be taxed on any profits you make from rental income. Generally, net rental income is taxed at a flat rate of 28 percent. However, depending on the specific characteristics of the contract, you may benefit from reduced rates or exemptions.
You might be entitled to certain tax deductions when declaring your rental income to the Portuguese tax authorities. Deductions for fire insurance are allowed (as it is compulsory for all rental properties) alongside value expense deductions such as IMI, costs associated with obtaining an energy certificate, and condominium fees, if applicable.
We recommend reading our article detailing Portugal’s property taxes if you consider letting out your property.
Inheritance Taxes in Portugal
Portugal has a favorable inheritance tax scheme, as no tax is applied to direct family members.
However, a 10 percent stamp duty (Imposto do Selo) is imposed on Portuguese assets when an estate is inherited or gifted to a spouse or children, making it important to consider the inheritance tax implications when planning your estate.
Company Taxes in Portugal
In Portugal, if you own a company/business, you must pay Corporate Tax at a flat rate of 21 percent on any taxable profits. Local municipality corporate tax rate surcharges of up to 1.5 percent apply, as do additional charges on profits of more than €1.5 million.
Small- and medium-sized companies can pay a reduced corporate tax rate of 17 percent on their first €15,000 of taxable profit.
Small businesses and sole traders with an annual turnover of less than €200,000 can pay business taxes through a simplified regime, through which they pay tax on their turnover rather than their profit.
The deadline for completing Portuguese corporate tax returns is between 16 April and 16 May each year.
Tax Advice in Portugal
Filling a tax return and navigating complex administrative work can be confusing and complicated, especially if you are self-employed or managing a business as a non-EU resident in Portugal. It can give you peace of mind to seek help or advice from an accountant or tax expert.
With the help of your tax expert, you can get your tax and social security issued and be sure that everything is on board.
The following sources might also be helpful:
Exploring Visa and Immigration Options for Portugal
If you're considering making the move to Portugal, it's essential to be informed about the various visa and residency options available. The Golden Visa Portugal program is an attractive option for many, offering residency to investors and their families. For those eyeing retirement in this beautiful country, the Retirement Visa (D7) is tailored for you. Digital nomads can take advantage of both short and long stay options with the Nomad Visa (D8). Meanwhile, the NHR - Non Habitual Tax regime provides significant tax benefits for new residents.
For the entrepreneurial spirit, Portugal offers the Entrepreneurship/startup Visa (D2) - Start-up Visa (open company) tailored for those looking to establish their businesses in the country. Those with specialized skills can explore the Work visa for highly qualified employees (D3). Additionally, if you have Portuguese ancestry, you might be eligible for Citizenship by descent.
However, moving to a new country isn't just about visas. If you're thinking of buying property, our guide on Buying Property in Portugal can offer invaluable insights. Dive deeper into the immigration process with our comprehensive Portugal immigration guide. For Americans specifically looking to relocate, we have curated information on Americans moving to Portugal. Lastly, one can't forget the importance of the NIF (Tax Registration Number), a crucial step in any relocation process.
Frequently Asked Questions About Portugal Tax System
Do I need to pay tax in Portugal as an expat?
As an expat, you are considered a Portuguese taxpayer if you reside in Portugal for more than 183 days in a calendar year or have a permanent residence in Portugal.
Can I benefit from tax exemptions as a foreigner?
Is NHR ending?
The State Budget Law for 2024 determined the end of the NHR regime from 1st January 2024. However, certain individuals can still apply up until 31st March 2025, and the scheme is being replaced by the Tax Incentive for Scientific Research and Innovation, which has now been implemented. To learn more, please refer to Is The Portugal NHR Ending?
However, this update is still in the transitional period and does not apply to everyone.
Prior to the change, the Non-Habitual Resident (NHR) tax regime, foreigners can benefit from a unique personal income tax treatment over ten years, with low tax rates or exemptions on almost all foreign source income.
Does Portugal have an inheritance tax?
Portugal does not apply any inheritance tax on direct family members; however, it imposes a 10 percent stamp duty on Portuguese assets inherited or gifted outside the immediate family.
Does Portugal tax worldwide income?
Residents are taxed on their worldwide income at progressive rates. Non-residents will only be taxed on incomes earned in Portugal (typically at a flat rate).
It’s worth researching Portugal’s double taxation treaties. Portugal has these tax treaties with more than 60 countries, including Germany, Hong Kong, and the United Kingdom.
Does Portugal have a high-income tax?
Portugal’s income tax is proportional to the amount you’re earning and your tax status. If you’re a high earner in Portugal, income taxes can reach over 40 percent.
However, if you’re a non-habitual resident, tax can be fixed at rates of around 20 percent for a ten-year period.
What is income tax in Portuguese?
The Portuguese tax system for personal income tax is known as Imposto sobre o Rendimento das Pessoas Singulares (IRS).
What is Portugal's tax rate?
Residents in Portugal, for tax purposes, are taxed at progressive marginal tax rates from 14.5% to 48% for 2023.
What are the Portugal taxes for expats?
The tax for non-resident expats in Portugal is 25 percent, which is applied to Portuguese-sourced income. For income earned from interest or dividends, foreigners must pay a flat-rate of 28 percent.
Does US citizens have to pay taxes in Portugal?
If you’re living in Portugal, you’ll likely need to file both US and Portuguese tax returns. However, the US has a tax agreement with Portugal, so you won’t have to worry about double taxation on your income.
How much tax do you pay in Portugal?
Residents in Portugal are taxed on their worldwide income at progressive rates varying from 14.5% to 48%.
What is the 10 year tax rule in Portugal?
The NHR program offered a 10-year tax exemption for citizens who became tax residents.
Do you pay property taxes annually in Portugal?
Foreigners living in Portugal must pay taxes when renting or purchasing property. Property tax rates in Portugal range from 0.3% to 0.45%.
Does Portugal have wealth tax?
There are no net wealth taxes in Portugal.
What are the tax deductions in Portugal?
In Portugal, tax deductions include healthcare expenses, education costs, mortgage interest for primary residences, and charitable donations. Pension contributions and general family deductions are also available.
These deductions help reduce taxable income. Consulting a tax professional is recommended to maximize your deductions.
