Understanding the Double Tax Treaty Between Portugal and the UAE

In this guide, we examine the key provisions and residency rules under the double tax treaty between Portugal and the UAE.

We also explain how taxing rights are allocated across various income types—such as business profits, capital gains and personal services—and how the treaty can support effective tax planning. This has become increasingly important following the closure of Portugal’s Non-Habitual Resident (NHR) regime to new applicants in 2024.

What Is a Double Tax Treaty Between Portugal and the UAE?

The double taxation avoidance agreements (DTAA) between Portugal and the UAE was signed on 23 September 2008 and entered into force on 1 January 2012.

The DTAA aims to mitigate the effects of double taxation for the tax residents of the signing parties by clearly dividing the taxing rights for specific income categories, such as business profits, capital gains, and remuneration for personal services. The treaty also provides clear guidelines for determining tax residency in both jurisdictions.

The DTAA applies to the following taxes in each country:

Unlike Portugal, the UAE doesn’t impose tax on income generated from employment, capital gains, property, or inheritance. It also has no withholding tax on dividends, interest, and royalties. Consequently, these categories of income are effectively exempted from double taxation.

The primary objective of the DTAA is to allocate taxing rights equitably between the two jurisdictions and to preserve the UAE’s authority to tax specified income should it decide to do so. Although the UAE currently refrains from taxing most types of income, the treaty’s provisions will remain effective in the event of future changes to its tax policy.

For instance, the UAE recently introduced a federal corporate tax on specific categories of businesses earning more than AED 375,000 annually. Therefore, the treaty may be used to mitigate taxation of the same business income in both the UAE and Portugal.

What Are the Tax Residency Rules Under Portugal’s Double Taxation Avoidance Agreement With the UAE?

You’re eligible for tax relief under the DTAA between the UAE and Portugal if you’re considered a tax resident of either of the two jurisdictions. The following sections outline the provisions for determining tax residency in Portugal and the UAE, respectively.

Criteria for Portuguese Tax Residency

You are considered a Portuguese tax resident if you spend over 183 days in Portugal in a single tax year (ending on 31 December). If you were physically present in Portugal for less than 183 days, you may still be treated as a resident if you meet one of the following criteria:

• Your permanent residence on 31 December of a given tax year is in Portugal.
• The head of your household is a tax resident in Portugal.
• You work for the Portuguese state regardless of where you live.
• You’re a crew member on a Portuguese-owned aircraft, a ship, or a yacht.

If you qualify as a Portuguese tax resident, you may be subject to taxation on your worldwide income, which includes any income or gains derived from the UAE. Conversely, Portugal taxes its non-residents only on income sourced within Portugal.

Portugal’s Expat Tax Regime: NHR Replaced by IFICI

Until recently, individuals relocating to Portugal could apply for the Non-Habitual Resident (NHR) regime, which offered beneficial tax treatment on foreign income—including pensions, dividends, and capital gains—for a period of ten years.

However, as of 1 January 2024, the Portuguese government closed the NHR regime to new applicants. Those already registered under NHR may continue to benefit for the remainder of their ten-year term, provided they maintain eligibility.

A new regime—Incentivo Fiscal à Investigação Científica e Inovação (IFICI)—replaced NHR for new residents. Unlike NHR, IFICI is narrowly available and applies only to specific categories of professionals, such as those in scientific research, innovation, and higher education.

Importantly, under IFICI:

• Foreign pension income is no longer exempt and is taxed at Portugal’s standard progressive income tax rates, which can exceed 45%.
• Fewer income categories benefit from reduced tax rates or exemptions.

These changes may significantly impact the tax planning strategies for new arrivals, particularly those with pension or investment income from the UAE.

Individuals relocating to Portugal should seek professional advice to determine if they qualify for IFICI or must comply with Portugal’s general tax rules.

Criteria for the UAE Tax Residency

The United Arab Emirates does not levy personal income tax on individuals, regardless of residency status or the income’s country of origin.

However, since the double taxation avoidance agreement between Portugal and the UAE allocates taxing rights based on residency, individuals must meet the UAE’s residency conditions to benefit from treaty protections.

To be considered a UAE tax resident for treaty purposes, individuals must meet specific domestic criteria and obtain a Tax Residency Certificate (TRC) issued by the UAE Federal Tax Authority (FTA). This certificate is required to claim treaty relief and is not granted automatically.

As of 2023, an individual may be deemed a UAE tax resident if they satisfy either of the following:

• Spend 183 days or more in the UAE during a 12-month period; or
• Spend 90 days or more in the UAE, maintain a permanent home in the country, have their centre of vital interests (e.g. employment, family) located there, and are either:
  • a national of the UAE or a GCC member state, or
  • a foreign national holding a valid UAE residence visa.

It is important to note that while UAE residency may not create a personal tax obligation—since the UAE currently imposes no income tax—it is still essential for accessing treaty benefits under the Portugal–UAE DTAA, including relief from Portuguese withholding taxes.

Because the treaty’s residency rules may differ from domestic interpretations, individuals should seek professional advice to determine their status and eligibility. The advisers at Titan Wealth International can evaluate your residency position and assist with securing treaty-based tax relief.

Mutual Agreement Procedure (MAP)

If you encounter a dispute over tax residency or face double taxation not resolved by domestic relief, you may invoke the Mutual Agreement Procedure (MAP) provided under the Portugal–UAE double taxation avoidance agreement.

This treaty-based mechanism enables the competent authorities of both countries to resolve conflicts regarding the interpretation or application of the agreement. MAP can be especially valuable in cases of dual residency, permanent establishment disputes, or conflicting income classifications.

In June 2025, the UAE issued updated guidance to clarify and streamline the MAP process. To initiate a MAP request:

• You must submit the claim within three years of the date on which the taxation in question was first notified.
• Supporting evidence of residency, tax assessments, and treaty application issues must be included.
• The process does not guarantee relief but aims to reach a mutually agreed resolution between the two tax authorities.

Given the complexity of MAP applications and their implications for treaty relief, it is strongly advised to seek professional guidance before proceeding.

What Are the Tax Provisions of Portugal’s Double Taxation Avoidance Agreement With the UAE?

The double tax treaty between Portugal and the UAE contains provisions clarifying which jurisdiction possesses the primary taxing rights on specific types of income. The DTAA covers income generated from various sources, including the following:

1. Business profit
2. Immovable property
3. Capital gains
4. Dividends
5. Interest
6. Royalties
7. Personal services

Business Profit

The profits of an enterprise of one contracting state are only taxable in that state. However, if you have a UAE company with a permanent establishment (PE) in Portugal, the income derived from the PE may also be subject to taxation in Portugal, and vice versa.

To determine the portion of income taxable in each jurisdiction, the profits attributable to the PE are assessed as if the PE were an independent enterprise engaged in similar activities under comparable conditions. The taxable amount can also be identified using the appointment method, which allocates your business’s profits across jurisdictions based on its capital base, sales, and payroll in each country.

However, expenses incurred in the PE’s regular operations, such as executive and general administrative costs, are deducted when calculating tax liability.

Immovable Property

If a Portuguese resident earns an income from immovable property in the UAE, that income is taxed in the UAE. The same applies if you’re a UAE tax resident with immovable property in Portugal.

Immovable property includes land, accessories attached to the property, livestock, equipment used in forestry or agriculture, and rights related to land property.

These provisions apply to immovable property income you generate from the direct use or renting out of a property, as well as the following:

1. Profits earned by a business from the rental or sale of immovable property
2. Income earned by an individual or a business from permitting the use of immovable property for the provision of professional services (for example, leasing office space within a building)
3. Income or profits from movable property or services related to the use of immovable property, where local tax legislation classifies such earnings as income derived from immovable property

Capital Gains

Besides income derived from selling or renting out immovable property, the DTAA between Portugal and the UAE contains provisions regarding capital gains from the following sources:

Dividends

When a company in one contracting state pays dividends to a resident of the other, those dividends may be taxed in both jurisdictions.

Under the double taxation avoidance agreement (DTAA) between Portugal and the UAE, the source country—that is, the country in which the company paying the dividend is located—may impose a withholding tax, but only up to:

• 5% of the gross amount, if the beneficial owner holds at least 10% of the capital of the dividend-paying company; or
• 15% in all other cases.

However, if a company that is a resident of one state earns profits from the other state, that other state cannot tax the dividends—unless they are paid to a resident of that state or are connected to a permanent establishment (PE) or fixed base in that territory.

If dividends are attributable to a PE or fixed base—such as a branch or office used to provide professional services—they are treated as business profits or income from personal services and taxed accordingly in the country where the PE or base exists.

Interest

Interest arising in one contracting state and paid to a resident of the other may be taxed in both jurisdictions.

However, under the double taxation avoidance agreement (DTAA), the source country may not withhold more than 10% of the gross interest amount, provided the recipient is the beneficial owner.

If the interest is attributable to a permanent establishment (PE) or fixed base located in the source country—such as a branch or office through which a business is conducted—the interest is taxed as business profits or income from personal services in that jurisdiction.

Additionally, if the interest paid exceeds what would be agreed between independent parties due to a special relationship between payer and recipient, the excess amount may be taxed under local domestic law in Portugal or the UAE.

Royalties

Royalties arising in one contracting state and paid to a resident of the other may be taxed in both jurisdictions.

However, under the double taxation avoidance agreement (DTAA) between Portugal and the UAE, the source country may not impose a withholding tax greater than 5% of the gross royalty amount, provided the recipient is the beneficial owner.

Royalties refer to payments for the use of, or the right to use, intellectual property such as patents, trademarks, copyrights, know-how, and similar rights.

If royalties are attributable to a permanent establishment (PE) or fixed base in the source country, they are taxed as business profits or income from personal services in that jurisdiction.

In cases involving a special relationship between the payer and the recipient—such as related companies—any amount paid that exceeds what would have been agreed between unrelated parties may be taxed under the domestic tax laws of the source country.

Personal Services

Residents of one contracting state conducting independent personal services are taxed on income from these services only in that state. However, if they have a fixed base, such as an office or a branch, in the other contracting state, then that other state also has the taxing right, but only on the income attributable to the fixed base.

Independent professional services are those provided by non-government entities, like private companies. These include work performed in educational, artistic, and scientific fields, as well as independent activities of lawyers, doctors, accountants, engineers, and other professionals.

If you provide dependent personal services, meaning you work for an employer and receive salaries or wages, that income is taxable in your country of residence. However, if you physically work in the other jurisdiction, that other country also has the right to tax the income.

If you’re a resident of one contracting state and you’re employed in the other state, you may only be subject to tax in your country of residency if the following applies:

1. You spend less than 183 days in the other state
2. Your employer isn’t a resident of the other state
3. The salary is not paid by a PE that your employer maintains in the other state

If you work as a crew member on a ship or an aircraft operating in international traffic, your income will be taxed in the jurisdiction that effectively manages the company.

It is also important to note that under Portugal’s current tax regime, foreign employment income may be fully taxable under the standard progressive scale, especially if the individual is not eligible for IFICI.

With the NHR regime no longer available to new arrivals, more expats may face full Portuguese taxation on foreign-earned income unless treaty protections or exemptions apply.

To ensure you navigate your tax obligations correctly and understand the provisions of the UAE-Portugal double tax treaty, consider speaking to a financial adviser.