This guide covers taxes in Portugal and brings to your attention the possible tax benefits of moving to Portugal.
Portugal’s Non-Habitual Residence Regime coming to an end
Portugal’s main financial draw for foreign retirees – the Non-Habitual Residence Regime, under which you paid a flat 10% tax rate on your foreign retirement income for ten years – is no longer available.
From January 1, 2024, you cannot apply for the NHR unless one of the following is true for you:
- You’ve already signed up for NHR before the new State Budget Law starts.
- You met the NHR entry requirements by December 31, 2023, and had a valid residence visa at that point; you can still apply until March 31, 2024.
The existing NHR participants are not affected by the changes
What happens after the 10-year NHR period is over
After ten years, you automatically become ineligible for further NHR tax treatments. You are normally required to pay the standard income tax rates, which are progressive and depend on total wealth and income.
The new NHR rules and eligibility
The new rules kick in from January 1, 2024, and they have a more limited eligibility list than the previous NHR rules.
If you become a tax resident of Portugal from January 1, 2024 (under the new NHR rules) and haven’t been a tax resident in Portugal in the past five years, you might qualify for the new NHR.
The following individuals may qualify for the new NHR rules:
- Teaching in higher education and scientific research, including scientific jobs within the Portuguese science and technology system, as well as positions on the governing bodies of entities recognized as technology and innovation centers;
- Qualified jobs related to ‘contractual benefits towards productive investment’ ;
- Qualified jobs recognized by AICEP Portugal Global – Trade & Investment Agency or by IAPMEI – Agency for Competitiveness and Innovation as relevant to the national economy, especially concerning attracting productive investment;
- Specific research and development specialists;
- Jobs in start-ups under the Portuguese Start-Up Law;
- Activities carried out by tax residents in the autonomous regions of the Azores and Madeira, as specified by regional decree.
The tax incentives of the new NHR
If you meet the requirements above, you might be taxed at a favorable fixed rate of 20% on employment or self-employment income sourced in Portugal from such activities for ten consecutive years (with the option to use lower marginal rates if applicable).
To stay eligible, taxpayers must continue earning active income, with a maximum interim period of six months between activities.
You may also be exempt from taxation on foreign income from various sources, such as employment and self-employment income earned abroad, foreign rental income, and capital gains from foreign assets, excluding pension income (taxed at progressive rates, previously 10% under the old NHR rules).
Income from blacklisted tax havens will be subject to a 35% tax rate.
Foreign pension income taxes
If you intend to move to Portugal starting in 2024, you will be subject to the ordinary taxation regime with 14.5% to 48% income tax rates.
| Taxable income (EUR) | Tax rate |
|---|---|
| 0 – 7,112.10 | 14.5% |
| 7,112.10 – 10,732.60 | 23% |
| 10,732.60 – 20,322 | 28.5% |
| 20,322 – 25,075.60 | 35% |
| 25,075.60 – 36,967 | 37% |
| 36,967 – 80,882 | 45% |
| 80,882 – 250,000 | 48% |
| 250,000+ | 53% |
A special rule applies to money earned from investments like interest, stocks, and bonds. This type of income is taxed at a fixed rate of 28%. If you live in Portugal, you can choose the flat 28% rate or the progressive rate, depending on which one is less expensive.
Other taxes
- Value Added Tax (VAT) – Standard rate: 23%
- Reduced rate VAT – 6% on certain goods and services
- Property Transfer Tax (IMT) – From 1% to 8% depending on the property value and location
- Stamp Duty (Imposto do Selo) – 0.8% of the purchase price
- Property Tax (IMI) – Between 0.3 and 0.5% based on the property’s tax band and location
- A solidarity tax ranging from 2.5% to 5% for higher incomes
- Capital gains tax on property and investment sales: 28% for individuals and 25% for companies and non-residents. Residents pay taxes on just 50% of their capital gains.
- Annual wealth tax, up to 1%, on property holdings exceeding €600,000
You might find useful:
- Living in Portugal – The Expats’ Guide – the pros and cons of living in Portugal, the cost of living, healthcare, taxes and more.
- Best Places To Live In Portugal – a detailed overview of Portugal’s most popular locations for expats.
- Living In The Algarve – the complete guide to Portugal’s hot spot for expats.
- For detailed information on your UK pension options, read our Expat Guide to UK Pensions Abroad.
- Haven’t found what you were looking for? Contact us or comment below with your question and we’ll do our best to help.
Helpful external links:
- All about personal income tax in Portugal – ePortugal.gov.pt
I have bought a house in 2006 and came to live here in 2010.My wife and I own an apt in the UK from which we have a rental income .Having become a card- carrying Portuguese Resident in 2022 we now declare our UK INCOME to the IRS and HMRC, all of our pensions are tax at source in the UK .Our rental income and and all sources of income are submitted on a HMRC Self Assessment tax form, to HMRC .Any net profit from the apt is taxed at the prevailing rate and losses and carried forward and adjusted at the next profitable tax year .However I have been told by my local tax office that I should not only submit my UK rental income but pay all of , the tax due to the Portuguese IRS .Some of my UK colleagues have been told by their Portuguese tax accountants that this is the correct procedure ?
What about double taxation treaties with the USA?
Hello David, it is a pleasure to e-meet you! I am a lawyer at L.V.P. Advogados, a law firm based in Lisbon and I shall be happy to help you with this matter.
Portugal has a double taxation treaty in place with the USA that can also be beneficial to Non-Habitual Residents in Portugal.
If you have further questions, please note we have a knowledgeable team with expertise in Immigration Law who shall be delighted to assist you. Please check this link for more information: https://www.lvpadvogados.com/
I hope this helps,
Joana