Portugal has become a popular destination for expats in recent years due to its beautiful scenery, friendly people, excellent healthcare system and relatively low cost of living.

For this reason, it is important for expats to understand the Portuguese tax system and how it may affect them.

In Portugal, residents are subject to personal income tax on their worldwide income. Non-residents are only subject to Portuguese taxes on their Portuguese-source income.

The Portuguese tax system is based on a progressive tax rate. The tax rate for non-residents is higher than the rate for residents, with a maximum rate of 28%.

However, there are several deductions and exemptions available to both residents and non-residents. Expats should be aware of these in order to reduce their tax liability. Residents of Portugal are required to declare all of their income, including income earned outside of Portugal.

Expats who are employed in Portugal will have taxes deducted from their salary at source. Non-residents are only taxed on their Portuguese-source income.

This includes income from employment, dividends, pensions and other investments. Non-residents are also subject to a flat-rate of 20% withholding tax on Portuguese-source income.

In addition to income tax, expats may also be subject to capital gains tax and property tax. Capital gains tax is applicable when selling Portuguese real estate and is calculated at a flat rate of 28%. Property tax is also applicable on real estate, and is based on the value of the property.

In addition to taxes, expats in Portugal are also required to register for social security. This is done through the local Social Security Office and includes a one-time registration fee.

Expats who are employed in Portugal will have their social security contributions deducted from their salary.

Overall, the Portuguese tax system is relatively straightforward and expats should familiarise themselves with the applicable rules and regulations in order to ensure they are in compliance. With the right planning and preparation, expats can minimise their tax liability and enjoy their time in Portugal.

Non-Habitual Resident Tax in Portugal

The Non-Habitual Resident (NHR) status is a special tax regime that is available to individuals who are not Portuguese residents for tax purposes and who have not been residents in the country in the previous five years.

NHR status allows individuals to benefit from a reduced rate of tax on certain types of income, such as pension income, for a period of 10 years.

The exact tax rate will depend on the individual's circumstances, but it is typically much lower than the standard rates of tax in Portugal. NHR status is intended to encourage individuals to move to Portugal and contribute to the economy, and it can be a useful option for expats who are considering living and working in the country.

—> Read more about residency in Portugal

Inheritance Tax in Portugal

Inheritance tax in Portugal is levied on the transfer of assets upon the death of an individual. The tax is calculated based on the value of the assets transferred and the relationship between the deceased and the beneficiary.

Spouses and direct descendants are typically exempt from inheritance tax, while other beneficiaries may be subject to rates ranging from 10% to 35%.

Non-residents may also be subject to inheritance tax in Portugal on certain types of assets, such as real estate located in the country. It is important for expats to understand the inheritance tax laws in Portugal and seek professional advice if necessary to ensure that their assets are transferred in accordance with the law.

Tax Rates

Tax Deadlines

The Portuguese tax year runs from 1 January until 31 December with tax returns submitted by the deadline of 30 June the following year.

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—> Tax residency in Portugal

—> Residency in Portugal

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