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Understanding taxes in Portugal is essential for any expat planning to live, invest, or retire here. Portugal offers an attractive tax system, but it also comes with specific rules that every foreign resident should know—from income tax and social security to rental income and capital gains.
This comprehensive guide breaks down the key tax obligations, the benefits available to newcomers, and what you need to do to stay fully compliant while making the most of Portugal’s opportunities.
The Tax System in Portugal
Portugal’s tax system clearly distinguishes between tax residents and non-residents, and each category comes with different obligations.
In Portugal, you are considered a tax resident if you spend more than 183 days in the country within a 12-month period, or if you maintain a permanent home here. Once you meet this threshold, you are taxed on your worldwide income, meaning all income earned both inside and outside Portugal must be reported.
If you stay in Portugal for less than 183 days and do not have a permanent residence, you are treated as a non-resident. In this case, your tax obligations apply only to income generated within Portugal, such as rental income, employment in Portugal, or local business activity.
Who Has to Pay Taxes in Portugal?
Anyone who earns income connected to Portugal is required to pay taxes in the country. This includes individuals who live in Portugal full-time as well as those who only have financial ties here.
If you are considered a tax resident, you must report all of your global income to the Portuguese tax authorities.
If you are a non-resident, you only pay tax on income generated within Portugal, such as rent from a local property, employment carried out in the country, or profits from business activities.
Types of Tax in Portugal
Portugal has a structured tax system that applies to both residents and non-residents, covering everything from income and social security to real estate and investment gains. Here is the list of Portuguese taxes:
- Personal Income Tax
- Taxes on Goods and Services (VAT)
- Wealth Property Tax (AIMI)
- Inheritance Tax
- Property Taxes
- Tax on Rental income
- Capital Gains Tax
- Company Taxes
1. Personal Income Tax (IRS) Rates in Portugal
In Portugal, Personal Income Tax (IRS) is assessed individually, but married couples and civil partners can choose to file a joint return. When filing together, the tax rates apply to the household’s combined taxable income, which can be beneficial depending on how each partner earns.
For 2025, IRS rates run from 13% to 48%, applied progressively as income increases. Taxpayers can also take advantage of several deductions—such as education costs, medical expenses, and other eligible deductions—which help lower taxable income and reduce the final amount owed.
Portugal’s tax system groups earnings into six main income categories: employment income, business or professional income, dividends, interest, rental income, and capital gains.
Self-Employment Income Tax
In Portugal, sole traders, freelancers, and anyone running an unincorporated business are taxed on their income as personal earnings. Instead of paying corporate tax, their profits fall under the personal income tax system.
2. Taxes on Goods and Services (VAT)
The Value Added Tax (VAT) regulations in Portugal align with the guidelines established by the European Union (EU):
Reduced Rate (6%): The government applies this rate to specific goods and services considered essential or falling within categories that warrant a lower level of taxation.
Intermediate Rate (13%): Goods and services that do not qualify for the reduced rate but are not subject to the standard rate fall into this category. The government typically applies this rate of 13% to items such as certain food and beverages, agricultural supplies, and other specified goods and services.
Standard Rate (23%): The general VAT rate in Continental Portugal is 23%, and it applies to most goods and services. This includes a broad range of products and services that do not fall under the reduced or intermediate categories.
3. Wealth Property Tax (AIMI)
AIMI stands for “Adicional ao Imposto Municipal de Imóveis” which translates to Additional Municipal Property Tax.
It is an annual property tax in Portugal that is levi on the combined fiscal value of all residential properties own by a taxpayer as of January 1st of each year worth above €600.000.
There are three levels of AIMI Tax in Portugal:
- 7% on properties valued between €600,000 and €1M
- 1,0% on properties valued between €1M and €2M
- 1,5% if the total properties value is over €2 million
4. Portugal’s Inheritance Taxes
5. Property Taxes in Portugal
Portugal applies several property taxes that homeowners and buyers should be aware of. These include ongoing taxes on property ownership as well as one-time taxes when purchasing real estate.
Property Ownership Tax (IMI)
The Municipal Property Tax (IMI) is an annual tax charged on real estate ownership in Portugal. It’s set by local municipalities and calculated based on the property’s taxable value, which is determined by the tax authority using factors like location, size, type, and overall market value.
IMI rates vary from one municipality to another but generally range between 0.3% and 0.45% for urban properties and 0.8% for rural properties. Each municipality can choose its own rate within these limits, so what you pay may differ depending on where the property is located.
Property Transfer Tax (IMT)
The Municipal Property Transfer Tax (IMT) is a one-time tax applied when you buy a property in Portugal. It’s paid by the buyer and calculated on the higher value between the purchase price and the property’s assessed market value.
IMT rates are progressive and depend on the type of property and its value. For residential properties, rates generally range from 1% to 8%, while commercial properties are taxed up to 6.5%.
Several factors influence the final IMT calculation, including whether the property is urban or rural, located on the mainland or on the islands (Madeira or the Azores), and whether it will be used as a primary residence or a secondary home.
6. Taxes on Portugal Rental Income
If you rent out the property, you’ll need to pay income tax on the rental income generates. There is a flat tax rate of 28%.
Various expenses related to the rental activity can deduct from the gross rental income to determine the taxable income.
Common deductible expenses include property management fees, repairs and maintenance costs, insurance premiums, local property taxes (IMI), financing costs such as loan interest, and other relevant expenses like advertising and professional fees.
7. Capital Gains Tax
In Portugal, Capital Gains Tax is charged on profits from selling assets like property, stocks, or bonds. Individuals—resident or non-resident—are taxed at 28%, while companies pay 25%.
However, some situations allow for exemptions or reduced taxation. Assets held for more than two years may qualify for a 50% reduction, and the sale of a main residence can be fully exempt if the proceeds are reinvested in another primary home in Portugal or elsewhere in the EU. In addition, properties purchased before 1989 may be completely exempt from capital gains tax.
8. Company Taxes
In Portugal, if you own a company, it’s subject to corporate tax (“Imposto sobre o Rendimento das Pessoas Coletivas” – IRC) at a standard rate of 20% on taxable profits. Small and medium-sized enterprises may also qualify for a reduced rate on part of their taxable income if they meet the required criteria.
For smaller operations, sole traders and businesses with annual revenue under €200,000 can opt for the simplified regime, where tax is calculated on turnover rather than profit, making compliance more straightforward.
Register in the Portuguese Tax System
Getting started with the Portuguese tax system begins with registering as a taxpayer and obtaining your NIF (Número de Identificação Fiscal). This is your tax identification number and the first requirement for almost every financial or legal process in Portugal.
If you’re a non-EU citizen, you will also need to appoint a tax representative. You can request your NIF online through the official portal or obtain it in person at a local Finanças office.
Once you have your NIF, the next step is to complete your online registration with the tax authority. This allows you to receive your access codes, which you’ll need to submit your annual tax return and manage your tax activity digitally.
If you plan to work or carry out professional activities in Portugal, you can also request your NISS (social security number), which gives you access to social benefits and ensures your contributions are properly recorded.
Portugal’s fiscal year follows the regular calendar year, running from 1 January to 31 December, and the annual tax return must be submitted between April and June of the following year. Registering early and keeping your information updated makes the entire process much smoother, especially for expats settling into life in Portugal.
How to File Your Income Tax Return in Portugal
Portugal’s tax year runs from 1 January to 31 December, with income tax returns submitted the following year between 1 April and 30 June.
You can file your annual return online through the Finanças Portal, using your personal login details. It’s also possible to file in person at your local Serviço de Finanças, though most people now choose the online option. Even those who aren’t very comfortable with technology usually find it manageable with a bit of help.
If you prefer assistance, many accountants and tax professionals can handle the filing for you, with basic services starting from around €50 for a simple return.
Late filing penalties in Portugal can range from €200 to €2,500.
Double Taxation Agreements (DTA) Signed by Portugal
For expats moving to Portugal, it’s helpful to know that the country has double tax agreements with many other nations. These treaties are designed to prevent the same income from being taxed twice, allowing both individuals and businesses to claim tax relief according to the rules of each agreement.
Portugal has signed DTAs with countries such as the USA, UK, Canada, Australia, and New Zealand, among many others. These agreements provide clearer tax obligations and often make cross-border living or investing much simpler.
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Frequently Asked Questions
What is the tax year in Portugal?
The tax year in Portugal follows the calendar year, running from January 1st to December 31st.
Who is considered a tax resident in Portugal?
Individuals who spend more than 183 days in Portugal within a 12-month period or have a residence in Portugal with the intention of maintaining it as their habitual residence are generally considered tax residents in Portugal.
How is personal income tax calculated in Portugal?
Personal income tax in Portugal is calculates using a progressive tax rate system. The rates range from 14.5% to 48%, depending on the income bracket.
Are there any tax deductions available for individuals in Portugal?
Yes, Portugal offers various tax deductions and allowances, such as deductions for health expenses, education expenses, and pension contributions. These deductions can help reduce the taxable income and the overall tax liability.
What is the value-added tax (VAT) rate in Portugal?
Portugal has different VAT rates. The standard rate is 23%, while reduced rates of 6% and 13% apply to specific goods and services, such as essential food items, certain medical supplies, and cultural events.
How is corporate income tax calculated in Portugal?
Corporate income tax in Portugal is currently set at a flat rate of 21%.
Is there an inheritance tax in Portugal?
No, Portugal abolishe inheritance tax in 2004. However, stamp duty may apply to certain transfers of property or assets.
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