Tax in Portugal for Expats

Tax in Portugal for expats

Considering moving to Portugal and wondering what the tax regime is like? No worries, we are here to help. Praised for its quality of life and excellent weather, Portugal also has a very generous tax system which makes it attractive for expats. In this article, we tell you all there is to know about tax in Portugal for expats.

Tax in Portugal: an overview

First and foremost, when are you considered a taxpayer in Portugal?

You are considered a Portuguese taxpayer if you reside more than 183 days in a single calendar year in Portugal or if you have a permanent residence in Portugal.

Following your arrival to Portugal, you will need to register as a taxpayer by obtaining an NIF (Numero de Identificacao Fiscal) which you can obtain at a local tax office.

Your taxes will then be calculated based on your salary, rental incomes, and capital gains.

How to pay your tax in Portugal

The Portuguese tax year runs from 1 January to 31 December, with returns submitted between April and June of the following year. Returns can be completed online via the Portuguese Tax Authorities’ website or via printed forms. Note that late return payments will amount to penalties ranging from €200 to €2,500. If you happen to have business activity in the country, then getting assistance from a bookkeeper or accountant is advised.

Non-Habitual Resident tax regime

The Portugal NHR tax regime (non-habitual resident) is a successful scheme offering attractive tax breaks for foreign residents, talented individuals, and investors. Introduced in 2009, it offers many tax benefits to its recipients such as a special personal income tax treatment over a 10-year period; tax exemption on almost all foreign source income; 20% flat rate for certain Portuguese source incomes (from specific professions and from self-employment) — as opposed to normal Portuguese income tax rates of up to 48%; tax exemption for gifts or inheritance to direct family members; no wealth tax; and free remittance of funds to Portugal.

In order to qualify for the NHR regime, applicants must have the right to reside in Portugal either by being an EU/EEA/Swiss citizen or through visa schemes such as the Portugal Golden Visa and not have been a Portuguese tax resident in the five years prior to taking up residence in Portugal.

Property tax in Portugal

Once you’ve purchased property in Portugal, you will be liable to pay several Portuguese property taxes. The Imposto Municipal sobre Imóveis (IMI) is a tax that homeowners have to pay annually. Price rates can range from 0.3% to 0.8% of a house’s registered fiscal value and are determined in different ways including the type of property, its history, and location. If you’ve purchased property for a permanent residency, you may be exempt from paying the IMI. This exemption can range from three to six years, depending on the property’s value.

Another property tax is the AIMI, also referred to as the Portuguese Wealth Tax, which affects owners of real estate properties of a value above €600,000. 

If you are planning to rent your property, you will have to pay a tax on the rental income. The flat rate is 15%, and it applies to the net rental income.

Capital Gain tax

A capital gains tax is applied on the sale of property or other assets. It amounts to 28% for individuals and 25% for companies and non-residents. If the money from a sale is re-invested, residents will only be taxed on 50% of their gains.

Income tax in Portugal for expats

Portuguese residents must pay income tax on their earnings. Most of the time tax is deducted automatically from payslips, but it is still mandatory to complete an annual tax return. The income tax is progressive, starting at 14.5% for income up to €7,112, with the highest rate applying to incomes over €80,883.

Inheritance tax in Portugal for expats

Portugal has a very favorable inheritance tax as there is no inheritance tax applied to direct family members. However, there is a 10% ‘stamp duty’ on Portuguese assets inherited or gifted outside of the direct family.

Frequently asked questions about tax in Portugal for expats

Do I need to pay tax in Portugal as an expat?

As an expat, you are considered a Portuguese taxpayer if you reside more than 183 days in a single calendar year in Portugal or if you have a permanent residence in Portugal.

Can I benefit from tax exemptions as a foreigner?

Thanks to the Non-Habitual Resident tax regime (NHR), foreigners can benefit from a special personal income tax treatment over a ten-year period, with tax exemption on almost all foreign source income.

Does Portugal have an inheritance tax?

Portuguese does not apply any inheritance tax on direct family members, however, it imposes a 10% ‘stamp duty’ on Portuguese assets inherited or gifted outside of the direct family.