Portugal’s Tax for Expats – Laws, Rates, and Key Benefits

In this guide, we outline who needs to pay tax in Portugal and how expat tax applies to income, capital gains, and inheritance. We also explain the current status of the non-habitual resident (NHR) regime and highlight potential tax benefits available under Portuguese law.

Is Portugal Tax-Free for Expats?

No – Portugal’s expat tax regime does not exempt foreign nationals from taxation. Both residents and non-residents must file an annual Portuguese income tax return between April 1 and June 30 for the preceding tax year.

The amount of tax you pay depends on your residency status and the source of your income. Portuguese tax residents are taxed on worldwide income, while non-residents are only taxed on income earned in Portugal.

How To Determine Your Residency Status in Portugal

You’re generally considered a Portuguese tax resident if you:

• Spend 183 days or more in Portugal during any 12-month period starting or ending in the relevant tax year, or
• Maintain a habitual residence in Portugal on December 31, even if you stay fewer than 183 days.

You may also be classified as a tax resident if:

• You work abroad for the Portuguese state,
• You are part of a Portuguese-flagged vessel or aircraft crew,
• The head of your household is a Portuguese tax resident.

Importantly, if you meet any of these criteria, you’re typically considered a tax resident of Portugal for the full tax year.

For UK expats unsure of their residency status or cross-border tax exposure, Titan Wealth International provides repatriation and tax planning services. A qualified tax adviser can assess your position and help you navigate the Portuguese tax landscape with clarity and compliance.

Portugal’s Tax Rate for Expats Considered Tax Residents

Expats who are tax residents in Portugal are subject to various taxes, including personal income tax, capital gains tax, inheritance tax, property tax, dividends and interest tax, and corporate tax.

Understanding how Portugal’s tax rates for expats apply across different income types is essential for expats planning to live, work, or retire in Portugal.

Personal Income Tax in Portugal for Expats

In 2025, Portugal’s personal income tax (PIT) rates for residents are progressive, ranging from 13% to 48%. An additional solidarity surcharge applies: 2.5% on taxable income exceeding €80,000 and 5% on income over €250,000.

PIT, known as IRS (Imposto sobre o Rendimento das Pessoas Singulares) in Portugal, includes these six income categories:

1. Employment income.
2. Self-employment income.
3. Returns from investments.
4. Rental income.
5. Capital gains income.
6. Pension schemes.

The income tax brackets for 2025 are as follows:

Residents must file an annual tax return, even if taxes are withheld at source. Joint filing with a spouse or civil partner is permitted, with combined income taxed according to the above rates.

If you or your partner were a Portuguese resident for only part of the year, you must report all income earned up to the final day of residency.

Capital Gains Tax Rate in Portugal for Expats

Capital gains tax (CGT) applies to profits made from selling capital assets, including property, stocks, and bonds. For Portuguese tax residents, the rules are as follows:

• Real estate: Only 50% of the gain is subject to personal income tax (PIT), and this amount is added to your total taxable income and taxed at progressive rates (ranging from 14.5% to 48% as of 2025).
• Shares and securities: Gains are usually taxed at a flat rate of 28%, although residents may opt to have these gains taxed at progressive rates if more favourable.

Key Exemptions and Reductions for Residents

• Primary residence exemption: If you reinvest the full proceeds from the sale of your primary home into another primary residence in Portugal, the EU, or EEA within a qualifying window (24 months before or 36 months after the sale), the gain may be exempt from tax.
• Pre-1989 asset exemption: Capital gains from the sale of assets acquired before 1 January 1989 are fully exempt from tax.
• Pension reinvestment: If you’re aged 65 or older, and reinvest the proceeds from a sale into a pension fund or life insurance product within 6 months, the gain may be partially or fully exempt.

Inheritance Tax in Portugal for Expats

Portugal does not levy a formal inheritance tax. The Inheritance Tax (Imposto sobre Sucessões e Doações) was abolished in 2004. However, a 10% Stamp Duty (Imposto do Selo) still applies to Portuguese-based assets passed through inheritance or gifts that are not between close relatives.

This tax is applicable only to assets located in Portugal and is levied when assets are transferred to:

• Non-spouses or civil partners,
• Non-lineal heirs (e.g. siblings, nephews, friends).
• Transfers between spouses, descendants, and ascendants (parents, children, grandparents) are exempt from Stamp Duty on inheritance and gifts.

For UK expats who are tax residents in Portugal, it’s essential to structure your estate planning carefully to avoid unnecessary tax charges on Portuguese property or other local assets.

Property Tax Rates in Portugal for Expats

If you own a property in Portugal, you’ll be subject to Imposto Municipal sobre Imóveis (IMI)—the municipal property tax. This tax is calculated based on the taxable value of the property (Valor Patrimonial Tributário, or VPT) and varies by municipality:

• Urban properties: 0.3% to 0.45%
• Rural properties: fixed at 0.8%
• Some municipalities may apply a higher rate of up to 0.5% if authorised by the Ministry of Finance.

In addition to IMI, high-value properties are subject to Adicional ao IMI (AIMI):

• Individuals: AIMI applies to the total VPT of all Portuguese residential properties owned above €600,000, taxed at 0.7% to 1.5%, depending on the total value.
• Companies and other entities: taxed at 0.4%, or 7.5% if the property is owned in a blacklisted jurisdiction.

Rental Income Tax on Portuguese Property

If you’re renting out a property, rental income is subject to personal income tax (IRS) under Category F. As a tax resident, you’ll be taxed at progressive rates (13.25%–48%) after allowable expenses are deducted. However, simplified flat rates may apply depending on your contract type and duration:

• 5% tax for long-term leases (20+ years, residential use).
• 25% for shorter residential leases (5 years or less).
• 28% for non-residential leases or if no deductions are claimed.

Dividends and Interest Tax in Portugal for Expats

In Portugal, dividends and interest income are taxed at a flat rate of 28%, regardless of your residency status.

However, Portuguese tax residents may choose to include this investment income in their annual tax return. In doing so, the income becomes subject to the progressive personal income tax (IRS) rates, ranging from 13.25% to 48%, plus the solidarity surcharge:

• 2.5% on taxable income between €80,000–€250,000
• 5% on income exceeding €250,000

Electing to aggregate investment income may reduce your overall liability if your effective tax rate is lower than the flat rate. This decision should be made with advice from a qualified expat tax adviser.

Company Tax in Portugal for Expats

Expats who own or establish a business in Portugal are generally subject to Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Coletivas – IRC) at a standard flat rate of 21%.

However, preferential rates and regional incentives may apply:

• Small and medium-sized enterprises (SMEs) benefit from a reduced 17% tax rate on the first €25,000 of taxable income (updated from €15,000 as per recent legislation).
• Micro-businesses and sole traders with annual turnover below €200,000 may be subject to simplified tax regimes, which calculate liability based on turnover rather than profit.

In addition to corporate tax, businesses must comply with Portugal’s Value Added Tax (VAT) system (Imposto sobre o Valor Acrescentado – IVA). VAT applies if your business generates more than €12,500 in annual taxable sales. Standard VAT rates in mainland Portugal are:

• 6% for essential goods (e.g. books, basic food items).
• 13% for intermediate goods (e.g. wine, musical instruments).
• 23% for most goods and services.

Tax Rate in Portugal for Expats Who Are Tax Non-Residents

Expats who are not classified as Portuguese tax residents are taxed only on Portugal-sourced income.

The standard flat tax rate for non-resident employment income is 25%, but other income types are taxed at different fixed rates, depending on the source and classification.

Additional Points

• Rental income is taxed on a sliding scale based on the terms of the lease. Long-term residential contracts – such as those exceeding 20 years – may be taxed at a reduced rate of 5%, while short-term or non-residential agreements can attract the full 28% rate.
• Capital gains exemptions are available in certain cases, particularly for properties purchased before 1989 or when reinvesting under specific EU relocation provisions.
• Additionally, Portugal’s network of double tax treaties can help reduce or eliminate withholding taxes on interest and dividends, depending on your country of tax residence.

Portuguese Tax for Non-Habitual Residents (NHR)

The Non-Habitual Resident (NHR) tax regime was introduced in 2009 to attract foreign professionals and retirees to Portugal by offering favourable tax treatment.

Under this regime, individuals who had not been tax residents in Portugal in the previous five years could apply for a 10-year tax window offering:

• A flat 20% income tax rate on qualifying Portugal-sourced employment and self-employment income from high-value-added activities.
• Tax exemptions on most foreign-source income, including dividends, interest, and rental income (subject to double tax treaty conditions).

Although the NHR regime formally ended on 1 January 2024, expats who registered before that date can continue to benefit from the scheme for the full 10-year duration.

• As a successor to the NHR, Portugal’s 2024 State Budget introduced the Tax Incentive Scheme for Scientific Research and Innovation (IFICI). This scheme offers similar incentives, but eligibility is narrower and targeted primarily at individuals in scientific and academic professions.

Do Expat NHR Landlords Pay Income Tax in Portugal?

If you qualify under the NHR scheme, foreign rental income is generally exempt from Portuguese taxation, assuming it is taxed in the source country and subject to a double tax treaty.

However, rental income from Portuguese properties is still taxable. Depending on the terms of the lease, the applicable rate ranges from 5% to 28%. These preferential rates are valid for the 10-year NHR benefit period.

What Are Portugal’s Tax Incentives for Expats?

Portugal offers several tax incentives designed to attract foreign residents, entrepreneurs, and retirees. These measures can help reduce overall tax liability and support long-term financial planning for expats. The main tax benefits for expats in Portugal include:

• Double Taxation Agreements (DTAs): Portugal has an extensive network of DTAs that prevent the same income from being taxed twice—once in Portugal and again in your country of origin. This is particularly valuable for expats with foreign-source income.
• Foreign Tax Credits: Expats may also claim foreign tax credits to offset taxes paid abroad, up to the amount of Portuguese tax due on the same income. However, unused credits cannot be carried forward or refunded.
• Tax Incentive Scheme for Scientific Research and Innovation (IFICI): Introduced in 2024 as a replacement for the now-closed NHR regime, IFICI provides tax relief for professionals in high-value sectors such as science, research, and innovation. Eligible individuals benefit from a flat 20% tax rate on qualifying employment income and may receive exemptions on foreign-source income, subject to treaty conditions.

New Expats: Navigating the End of NHR and the Emergence of NHR 2.0

While the original Non-Habitual Resident (NHR) scheme closed to new applicants on 1 January 2024, those already enrolled can continue to benefit for the remainder of their 10-year period.

Informally referred to as “NHR 2.0,” this post-closure window remains non-renewable. Once the 10-year period ends, individuals are automatically subject to Portugal’s standard progressive tax rates – up to 48%, among the highest in Europe.

This has prompted many UK expats to seek long-term alternatives – especially those concerned by rising tax uncertainty in nearby jurisdictions, such as Spain’s proposed punitive property taxes on non-EEA nationals.

A Long-Term Alternative: The Apex Portugal Structure

For expats seeking a more sustainable solution after their NHR benefits expire, the Apex Portugal investment structure offers an alternative.

The Apex Portugal investment structure is a tax-efficient, single-premium life insurance policy created specifically for expatriates residing in Portugal. Designed to dovetail with the 10-year NHR period, the Apex solution enables qualifying individuals to:

• Achieve an effective long-term tax rate of 11.2% on income and gains after eight years.
• Structure their wealth more tax efficiently beyond the NHR period.
• Maintain compliant, internationally mobile financial arrangements under Portuguese law.

To determine whether this structure is suitable for your needs, speak to a wealth adviser at Titan Wealth International.

Our expat tax specialists are experienced in Portuguese tax residency rules and international investment strategies, and can assess whether the Apex Portugal policy aligns with your long-term financial objectives and tax position.