Every year, thousands of people choose Portugal as their new home, whether they’re retirees, entrepreneurs, remote workers, or investors. But an important part of relocating is understanding how taxes in Portugal work and what rules will apply to you.
Your tax obligations depend on whether you’re considered a tax resident. Tax residents pay tax on their worldwide income, while non-residents are only taxed on income earned in Portugal, like local salaries, rental income, or property sales.
This difference affects how your income, investments, and assets are taxed. So in this guide, we’ll explain how taxes work in Portugal for both residents and non-residents, what you pay taxes on, and how much you can expect to contribute.
Taxes in Portugal: Key Takeaways
About The Tax System in Portugal
Portugal’s tax system is overseen by the Autoridade Tributária e Aduaneira (AT) through its Portal das Finanças, and balances progressive taxation with incentives and targeted benefits that keep Portugal competitive: no wealth, gift, or inheritance tax for most expats, and it has double-tax treaties with more than 80 countries.
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?
The simple answer is that anyone who earns income sourced in Portugal or becomes a Portuguese tax resident must pay taxes in Portugal.
However, your tax liability as an expat depends on your residency status, which is defined by how much time you spend living in Portugal each year. If you are in Portugal for 183+ days a year, you will be considered a Portuguese tax resident.
While circumstances might be different, 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 14.5 percent to 48 percent.
- 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 percent tax on income from a Portuguese employer. Other types of income, such as rental income or capital gains, are subject to different rates.
However, the following will also make you a tax resident:
- You have a habitual residence in Portugal on 31 December of that tax year. 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
Local taxes
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 the area in which your property is located. 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.
Taxes on goods and services
Established businesses in Portugal with a turnover of more than €10,000 on taxable goods and services must pay VAT (IVA for short in Portugal) and comes with three chargeable bands:
- Reduced rate: 6 percent in mainland Portugal, 4 percent in the Azores, and 4 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, 16 percent in the Azores, and 22 percent 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 results in them paying Portuguese income tax rather than 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. The tax rate for capital gains in Portugal is 28 percent. This flat rate applies to both residents and non-residents, and to companies at 25 percent.
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 from Portugal’s capital gains tax also 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)
Property owners must pay the Imposto Municipal Sobre Imóveis (IMI), a property tax. Property tax rates are set by 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, while in rural areas, the rate is 0.8 percent. You can consult the IMI rates for 2026 in your area on the Portal das Finanças website.
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 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). This tax affects those who own high-value property, with a total real estate worth above €600,000.
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 percent on property valued between €600,001 and €1 million
- 1 percent on property valued between €1 million and €2 million
- 1.5 percent 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 property tax in Portugal 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.
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.
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 essential to consider the inheritance tax implications when planning your estate. The donation of property is also subject to an additional standard tax rate of 0.8 percent.
Company Taxes
In Portugal, if you own a company/business, you must pay Corporate Tax at a flat rate of 20 percent on any taxable profits. Local municipality corporate tax rate surcharges of up to 1.5 percent 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 their turnover rather than their profit. The deadline for completing Portuguese corporate tax returns is between 16 April and 16 May each year.
How to Register in the Portuguese Tax System
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 their website or in person at the Finanças office.
Once you’ve received your NIF, you’ll need to fill out this 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) to be eligible for unemployment benefits, public health insurance, and other assistance.
Under Portuguese tax law, the tax year runs from 1 January to 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 losing tax credits and potentially hefty penalties ranging from €200 to €2,500. If you are doing business in the country, hiring an accountant or bookkeeper is recommended.
How to file your income tax return in Portugal
In line with federal tax laws, 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)
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 Portugal D7 Visa is tailored for you. Digital nomads can take advantage of both short and long-stay options with the Digital Nomad Visa (D8).
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 Identification Number), a crucial step in any relocation process.
