Whether you pay tax in Portugal comes down to where you live and where your income comes from. Spend more than 183 days a year in the country and you’re a Portuguese tax resident, which means Portugal taxes your worldwide income. Stay under that, and you pay tax only on income with a Portuguese source.
Portugal’s tax system is run by the Autoridade Tributária e Aduaneira (AT). Resident income tax rates run from 12.5% to 48% across nine bands, while non-residents pay a flat 25% on employment income earned in Portugal. There’s no wealth tax, no gift tax, and no inheritance tax between close family members.
This article covers who counts as a tax resident, the taxes you’re likely to meet, the IFICI incentive, how to register with the AT, and how double taxation is handled.
Taxes in Portugal: Key Takeaways
About The Tax System in Portugal
Portugal’s tax system is run by the Autoridade Tributária e Aduaneira (AT), and you deal with it through the Portal das Finanças.
Residents are taxed on worldwide income at progressive rates. Non-residents are taxed only on Portuguese-source income. There’s no wealth tax, and no gift or inheritance tax between close family members.
Portugal also has double-tax treaties with more than 80 countries, so income already taxed abroad usually isn’t taxed twice.
Key areas where most people pay tax include:
- Income tax: IRS, or Imposto sobre o Rendimento das Pessoas Singulares
- Corporate tax: IRC, or Imposto sobre o Rendimento das Pessoas Coletivas
- Value-added tax: IVA, or Imposto sobre o Valor Acrescentado
- Property tax: IMI, or Imposto Municipal sobre Imóveis
Who has to pay taxes in Portugal?
You pay tax in Portugal if you earn income from a Portuguese source, or if you become a Portuguese tax resident. Residents are taxed on their worldwide income at progressive rates. Non-residents are taxed only on income they earn in Portugal, starting at a flat 25% on employment income.
Your status is set by how long you spend in the country. You’re a Portuguese tax resident if you spend more than 183 days here, consecutive or not, in any 12-month period that starts or ends in the tax year.
Foreign taxpayers in Portugal can be broadly divided into two categories:
- Residents, like those who relocated to Portugal through the Portugal D7 Visa and live in the country for most of the year, pay tax on their worldwide income, which can range from 12.5% to 48%.
- Non-residents, people who don’t meet the country’s tax residency criteria but still earn income from Portugal, pay a flat rate of 25% tax on income from a Portuguese employer. Other types of income, such as rental income or capital gains, are subject to different rates.
You can also become a tax resident without reaching the day count. That applies if:
- You have a home in Portugal on any day of that 12-month period, held in conditions that suggest you intend to keep and occupy it as your habitual residence. Simply owning property doesn’t necessarily make you a tax resident.
- 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
If you are unsure, it is always a good idea to arrange for a Portugal tax consultation.
Types of Tax in Portugal
The taxes you’ll meet in Portugal depend on what you earn, what you own, and what you buy. Residents and non-residents both pay IRS on Portuguese income, IMI if they own property, and IVA on goods and services. Company owners pay IRC on profits. Rates, deductions, and exemptions vary by income type.
Taxes on goods and services
If you run a business in Portugal, you must charge VAT (IVA for short in Portugal) once your annual turnover passes €15,000. Under that figure, you can use the small-business exemption in Article 53 of the VAT Code. VAT comes with three chargeable bands:
- Reduced rate: 6% in mainland Portugal, 4% in the Azores, and 4% in Madeira for the goods and services included in 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% in mainland Portugal, 9% in the Azores, and 12% 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% in mainland Portugal, 16% 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. Sole traders, freelancers, and people running unincorporated businesses in Portugal will have their income assessed as personal income. This means they pay Portuguese income tax, not corporate tax.
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 and the corresponding tax rate, then subtracting any deductions.
Portugal has six categories of personal income tax:
- Employment income
- Self-employment income
- Investment income
- Rental income from properties let in Portugal
- Capital gains tax, calculated from selling properties, capital investments, and assets, or shares
- Pensions in Portugal, including private pension plans
IRS is also considered an individual income tax and is filed individually, but couples and civil partnerships can opt to file jointly. In this case, tax rates are applied to the household members’ total taxable income.
| Portuguese Income Tax Bands | Portuguese Tax Rate |
|---|---|
| up to €8,059 | 13% |
| €8,059–€12,160 | 16.5% |
| €12,160-€17,233 | 22% |
| €17,233-€22,306 | 25% |
| €22,306-€28,400 | 32% |
| €28,400-€41,629 | 35.5% |
| €41,629-€44,987 | 43.5% |
| €44,987-€83,696 | 45% |
| €83,696+ | 48% |
Capital gains tax
Capital gains tax in Portugal applies to profits from the sale of any capital asset, including real estate, stocks, and bonds. How the gain is taxed depends on what you sold.
Gains on shares, bonds, and other securities are taxed at a flat 28%.
Gains on property are treated differently. Half the gain is added to your taxable income and taxed at the progressive IRS rates, so what you pay depends on your total income for the year.
This applies to residents and non-residents alike. Gains made by companies form part of taxable profit and are taxed at the IRC rate.
Exemptions from Portugal’s capital gains tax apply to residents who sell their primary home and buy another property in Portugal or elsewhere in the EU, as well as to those selling a property they purchased before 1989.
Property taxes in Portugal (IMI)
The IMI (Imposto Municipal Sobre Imóveis) is Portugal’s equivalent of council tax and is payable by property owners. Each municipality sets its own rates based on the area where your property is located, and the IMI contributes to maintaining public infrastructure, 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.
In urban areas, IMI ranges from 0.3% to 0.45% of the property’s taxable value (VPT), while in rural areas, it is 0.8%. You can consult the IMI rates for 2026 in your area on the Portal das Finanças website.
Homeowners in urban areas can claim a three-year exemption on IMI if the property’s taxable value is €125,000 or less, their household’s total gross income is €153,300 or less, and they live in the property themselves. Municipalities can extend that exemption by a further two years.
You can get an additional deduction of around €20 per dependent, and exemptions are available for people on 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). It applies to owners of Portuguese residential property with a combined taxable value above €600,000, whether or not they live in Portugal.
The tax is calculated on an individual taxation basis, meaning that if a property is jointly owned, it must be worth over €1.2 million before it starts owing AIMI.
The tax rates for AIMI are as follows:
- 0.7% on property valued between €600,001 and €1 million
- 1% on property valued between €1 million and €2 million
- 1.5% if the total value exceeds €2 million
Tax on rental income
If you decide, after purchasing your property, to rent it out, you might be liable for tax in Portugal on any profits you make from rental income.
Net income from a residential lease is taxed at a flat rate of 25%. Longer contracts bring the rate down: A lease of five to 10 years is taxed at 15%, one of 10 to 20 years at 10%, and one of 20 years or more at 5%.
When declaring your rental income to the Portuguese tax authorities, you may be eligible for certain tax deductions.
Deductions for fire insurance are allowed (as it is compulsory for all rental properties), alongside value-related expenses such as IMI, costs associated with obtaining an energy certificate, and condominium fees, if applicable.
Portugal’s Inheritance Taxes
Portugal has a favorable inheritance tax scheme, as no tax is applied to direct family members.
What applies instead is stamp duty (Imposto do Selo), charged at 10% on Portuguese assets inherited or given as gifts.
Spouses, de facto partners, children, grandchildren, parents, and grandparents are exempt from it. The 10% falls on everyone else, including siblings, nieces and nephews, and unrelated beneficiaries. Gifts of property carry a further 0.8% stamp duty.
Company Taxes
In Portugal, if you own a company or business, you pay corporate tax (IRC) at 19% on taxable profits. Small and medium-sized companies pay a reduced 15% on the first €50,000 of taxable income, and 19% on anything above that. Local municipality surcharges of up to 1.5% apply, as do additional charges on profits exceeding €1.5 million.
Small businesses and sole traders with an annual turnover of less than €200,000 can pay business taxes through a simplified regime.
Under this regime, they pay tax on a set percentage of their turnover, not on their profit. Corporate tax returns (Modelo 22) are due by 31 May each year. For 2026, that deadline was extended to 19 June.
Portugal’s IFICI Tax Incentive
IFICI is a tax incentive for people working in research, innovation, and other highly qualified activities. If you qualify, employment and self-employment income from those activities is taxed at a flat 20% instead of the progressive rates. It replaced the Non-Habitual Resident regime for new applicants.
The IFICI (Incentivo Fiscal à Investigação Científica e Inovação) is a Portuguese tax incentive introduced to replace the previous Non-Habitual Resident (NHR) regime for new applicants. It is also sometimes called the new NHR.
It is designed to attract individuals engaged in research, innovation, and highly qualified activities by offering preferential tax treatment for certain types of income.
Under IFICI, eligible individuals may benefit from a flat 20% income tax rate on employment or self-employment income derived from qualifying activities carried out in Portugal. The standard progressive rates run from 12.5% to 48%.
Eligibility is assessed on the nature of your work and your employer, not on your residency status alone. It is not a broad-based regime; Your professional activity has to match one of the qualifying activities set out in the rules.
How to Register in the Portuguese Tax System
Registering means getting a NIF, your Portuguese tax number, from the AT. You can apply online through the Portal das Finanças or in person at a Finanças office. Once you have it, you declare the start of your activity if you’ll be working, and apply for a Social Security number if you need one.
The process starts by registering as a taxpayer and obtaining your Portugal tax identification number (NIF, or Número de Identificação Fiscal). You can request your NIF online through the Portal das Finanças or in person at a Finanças office.
Once you’ve received your NIF, you’ll need to fill out a declaration 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.
With your NIF, you can apply for your Social Security number (NISS), which gives you access to unemployment benefits, parental leave, a state pension, and other social security support.
Under Portuguese tax law, the tax year runs from 1 January to 31 December. You submit your return between 1 April and 30 June of the following year.
Be sure to file on time. A late declaration carries a fine of €150 to €3,750. If you file voluntarily within 30 days of the deadline and before the AT contacts you, that can drop to around €25. Late filing can also cost you tax credits. If you are doing business in the country, hiring an accountant or bookkeeper is recommended.
How to file your income tax return in Portugal
Returns are filed electronically. Log in to the Portal das Finanças, go to IRS, then Entregar Declaração. Paper forms are no longer accepted.
If you want help in person, you can get it at:
- Serviço de Finanças offices
- Citizen Shops (Lojas de Cidadão)
- Parish councils (Juntas de Freguesia)
How to Avoid Double Taxation in Portugal
Portugal taxes residents on worldwide income, so money you earn abroad can be taxed twice. Relief comes through Portugal’s double-tax treaties and through credits for tax you’ve already paid elsewhere. Which of those applies depends on your tax residency and on how each country classifies the income.
If you are living in Portugal while maintaining financial ties to another country, you’ll need to work out which country taxes what. Portugal taxes residents on their worldwide income, which means income earned abroad may still be subject to Portuguese tax.
To manage this exposure, you rely on a combination of international agreements and domestic mechanisms. In practice, this usually involves:
- Applying tax credits in Portugal for taxes already paid abroad
- Using exemptions where available under Portuguese tax rules
- Structuring income in a way that aligns with treaty provisions
These mechanisms do not eliminate complexity. Each type of income, such as employment income, dividends, or capital gains, may be treated differently depending on the jurisdictions involved. Start by establishing where you are considered a tax resident, then check how each country classifies each type of income you receive.
For US citizens, there’s an additional layer of coordination, as the US taxes on citizenship, not residency.
The Tax Treaty Between the US and Portugal
The United States and Portugal have a bilateral tax treaty designed to reduce the risk of the same income being taxed in both countries. This agreement allocates taxing rights between the two jurisdictions and sets out how relief should be applied.
The treaty determines:
- Which country has primary taxing rights over specific types of income
- How credits or exemptions are applied to prevent duplication
- How residency is defined when both countries could claim it
For example, employment income is generally taxed in the country where the work is performed, while certain types of passive income may be taxed in both countries, with relief provided through foreign tax credits.
For US citizens, this often works alongside the Foreign Tax Credit and, in some cases, the Foreign Earned Income Exclusion, depending on how your income is structured and where it is sourced.
FBAR and FATCA Reporting Requirements
If you are a US citizen or green card holder living in Portugal, your reporting obligations extend beyond standard tax filings.
You are required to disclose foreign financial accounts under two separate regimes:
- FBAR (Foreign Bank Account Report) applies if the total value of your foreign accounts exceeds $10,000 at any point during the year
- FATCA (Foreign Account Tax Compliance Act) requires reporting of specified foreign financial assets above certain thresholds
These are reporting obligations, not taxes in themselves. However, the compliance burden is significant, and penalties for non-reporting can be substantial.
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