An Overview of Taxes in Portugal for Expats 

Portugal has long been a magnet for expats, drawn by its golden beaches, year-round sunshine, and a pace of life that feels like a sigh of relief after a hard day’s work. Add to that a thriving food scene, world-class healthcare, and a relatively low cost of living, and it’s no surprise that Portugal consistently ranks among the top destinations for global citizens looking to relocate. 

Understanding taxes in Portugal is key to unlocking the full potential of life in this gem on the Iberian Peninsula. For residents, it ensures compliance and peace of mind. For expats, it can bring significant tax benefits. And for businesses, it provides a roadmap to thriving in one of Europe’s most dynamic economies. 

This article provides a general overview of taxes in Portugal to give you enough information to get started. From taxes in Portugal for expats and the finer details of tax residency to the Portugal tax rates to know, you’ll be equipped to navigate your taxes in the country. But before we begin, let’s look at the bigger picture of the Portuguese tax system.  

Portugal’s Tax System Overview

Love it or hate it, taxes in Portugal are what keep the beautiful country ticking, funding everything from healthcare and schools to those picture-perfect streets all over social media.  

The Portuguese tax system is administered by the Autoridade Tributária e Aduaneira (Tax and Customs Authority). They collect taxes and ensure tax residents are compliant. The Portuguese tax year matches the calendar year, running from 1 January to 31 December. 

Portugal’s taxes are divided into two main categories: 

• Direct Taxes: These include income tax (for individuals and companies) and property taxes.  
• Indirect Taxes: The most notable is VAT (Value Added Tax), which applies to goods and services. 

The system for income tax Portugal offers is designed to balance fairness and efficiency, offering opportunities for both individuals and businesses to thrive.  

For residents, the progressive income tax rates ensure that contributions are scaled to income levels. For expats, programs like the Tax Incentive for Scientific Research and Innovation make Portugal an even more appealing destination. And for businesses, competitive corporate income tax rates create a good environment for growth.  

Understanding these rules can help you optimize your tax liability, avoid penalties, and even take advantage of generous expat incentives. 

Tax Residency in Portugal

Before determining the “what, when, where, and how” of Portugal taxes, let’s first discuss the “who”. You’ll need to be aware of whether you are a tax resident in Portugal or not to determine which taxes you may be liable for, and which tax rates apply to you.  

• Residents: Taxed on worldwide income, including earnings from abroad. May benefit from tax deductions, allowances, and special programs like the Tax Incentive for Scientific Research and Innovation. 
• Non-Residents: Taxed only on Portuguese-source income, usually at a flat rate of 25 percent for employment income and 28 percent for investment income. 

Tax residency is not the same as getting a Portugal Golden Visa and being a resident of the country. To become a tax resident in Portugal, you must meet one of the following conditions: 

1. Stay in Portugal for more than 183 days 

Spend at least 183 days (consecutive or not) in Portugal within any 12-month period that starts or ends in the relevant tax year. 

2. Maintain a permanent home in Portugal 

If you have a home in Portugal in which you intend to live there permanently, you can be considered a tax resident—even if you stay less than 183 days. 

Personal Income Tax in Portugal

Portugal’s Personal Income Tax (IRS) follows a progressive tax system, meaning the more you earn, the higher the Portugal tax rate you pay. For Portuguese tax residents, this applies to worldwide income, including salaries, pension income, rental income, and other earnings. Non-residents, on the other hand, are only taxed on Portugal-sourced taxable income, typically at flat rates depending on the income type (usually 25 percent for employment income and 28 percent for investment income). 

As of 2025, Portugal has adjusted its income tax brackets to provide greater relief for low- and middle-income earners, with a lower entry tax rate of 13 percent. The progressive income tax system now follows these updated brackets: 

Taxable Income	Tax Rate (Percent)
Up to €8,059	13
€8,059 – €12,160	16
€12,160 – €17,233	22
€17,233 – €22,306	25
€22,306 – €28,400	32
€28,400 – €41,629	35.5
€41,629 – €44,987	43.5
€44,987 – €83,696	45
Over €83,696	48

As part of its key tax incentives, Portugal has extended the Youth PIT Relief tax regime to encourage young professionals to stay in Portugal. Under the regime, individuals aged 18 to 35 benefit from reduced tax rates on employment income for the first years of their careers. 

With these updates, Portugal continues to refine its tax policies, making the tax system fairer and more attractive—especially for young workers and expats looking to build a future in the country. 

Corporate Taxation

Portugal has been making moves to attract businesses and foreign investment, and one of the biggest changes in 2025 is a slight reduction in corporate tax rates.  

The standard Corporate Income Tax (IRC) rate is now 20 percent in 2025, down from 21 percent in 2024. However, an additional local municipality surcharge of up to 1.5 percent may apply, as well as additional charges of 1 to 9 percent on taxable profits of more than €1.5 million 

On a mission to encourage entrepreneurship, Portugal also offers reduced tax rates for Small and Medium-Sized Enterprises (SMEs) and startups: 

• SMEs: First €50,000 of taxable profit taxed at 16 percent (down from 17 percent in 2024) 
• Startups: Special Portugal tax rate of 12.5 percent on the first €50,000 of taxable income 

Special Tax Regimes and Benefits

Portugal has long been known for its attractive tax incentives for expats and foreign professionals. While the popular Non-Habitual Resident (NHR) regime will no longer accept new applications after March 2025, the Portuguese government has introduced new programs to continue attracting skilled workers and investors. 

The end of NHR: What it means for existing holders

If you already hold non-habitual resident (NHR) status, you’re in luck! Existing NHR beneficiaries can still enjoy its perks for its ten-year validity, which include a flat 20 percent income tax on qualifying Portuguese employment income and exemptions or reduced rates on certain foreign income. 

As it comes to an end, Portugal has introduced a new tax incentive program to attract skilled professionals in scientific research and innovation sectors. 

The new IFICI Program: Portugal’s replacement for NHR

The Tax Incentive for Scientific Research and Innovation (IFICI) Program is Portugal’s fresh take on expat tax benefits. Aimed at filling job shortages in key sectors (like teaching, science, and research), it offers: 

• A flat 20 percent tax rate on qualifying taxable income for up to 10 years 
• Lower taxation on foreign income for professionals working in designated industries 
• A focus on highly skilled workers, making it ideal for scientists, researchers, and educators looking to settle in Portugal 

While it’s not as broad as the NHR regime, IFICI still provides significant tax relief for those who qualify. You can read all the details on the new NHR Portugal tax regime in this article.  

Value-Added Tax (VAT)

If you’re living in, visiting, or moving to Portugal, you’ll encounter Value-Added Tax (VAT), known locally as IVA (Imposto Sobre o Valor Agregado). Introduced in 1986, Portugal’s VAT system follows EU standards, but its rates vary depending on what you’re buying and where you are. 

VAT is included in the price of most goods and services you buy. Businesses collect VAT from consumers and then pass it on to the Portuguese Tax and Customs Authority. If you’re a business owner with more than €15,000 turnover on taxable goods and services, you’ll need to register for VAT in Portugal. 

VAT Rates in Portugal

Portugal applies a three-tier VAT system, with different rates for essential goods, standard goods, and services: 

Good or Service Type	VAT Rate (Percent)  (Mainland)	VAT Rate (Percent) (Madeira)	VAT Rate (Percent) (Azores)
Reduced rate (essential goods)   Includes basic food items (meat, fruit, vegetables, cereals), books, newspapers, medicines, transport, and hotel stays	6	5	4
Intermediate rate (certain food and beverage services)   Applies to restaurant meals, catering, and some other food-related services	13	12	9
Standard rate (everything else)  Most consumer goods and services, electronics, entertainment, luxury items	23	22	18

How Portugal’s VAT Compares to the EU

Portugal’s standard VAT rate of 23 percent lies somewhere in the middle when compared to some EU countries, where rates typically range from 17 percent to 27 percent. While this impacts the cost of living and consumption, Portugal offsets it with lower tax rates on essentials and regional VAT reductions in Madeira and the Azores. 

Other Taxes in Portugal

Beyond the obligation to pay income tax, corporate tax, and VAT, Portugal has a range of other federal and local taxes that expats, investors, and property owners should be aware of. Whether you’re buying property, selling assets, or inheriting wealth, here’s what you need to know. 

Capital Gains Tax in Portugal

If you sell Portugal real estate, or other assets in Portugal, you’ll need to pay Capital Gains Tax (CGT). How much you owe depends on whether you’re a resident or non-resident: 

• Portuguese Residents: Pay tax on 50 percent of the capital gains at progressive income tax rates 
• Non-Residents: Taxed on 100 percent of the capital gains at a flat tax rate of 28 percent for individuals and 25 percent for companies 

Exemptions to CGT will apply if you sell your primary home and reinvest the proceeds into another home in Portugal or the EU, and also if the property was purchased before January 1989. 

Wealth Tax in Portugal

Portugal does not have a general wealth tax, but high-value real estate owners may be subject to the AIMI (Additional to IMI) tax if the property is valued over €600,001 (more on this in the property taxes section below. 

Property Taxes in Portugal

If you own or plan to buy property in Portugal, you’ll need to budget for a few different property-related taxes. These include: 

• Property Transfer Tax (IMT): Ranges from 0 percent to 8 percent, based on the price, the location, the intended use, and the type of property. A flat tax rate of 10 percent applies if the buyer is linked to a blacklisted jurisdiction. 
• Stamp Duty (Imposto de Selo): Charged at 0.8 percent of the property’s value when transferring ownership. 
• Municipal Property Tax (IMI): Paid annually at 0.3 percent to 0.8 percent, depending on the property’s location and value. 
• AIMI: Additional property tax on high-value real estate worth over €600,001. The rate varies from 0.7 to 1.5 percent depending on the value of the property. 

Rental Income Tax

In Portugal, the rate for taxable rental income depends on the type of rental agreement. As of 2023 and with the introduction of the Mais Habitação law, long-term housing rentals benefit from a 25 percent tax rate, while other rentals such as short-term rentals are taxed at 28 percent.    

Under the Mais Habitação package, these rates can be reduced, based on the duration of the rental contract, if the monthly income does not exceed the general income price limits by 50 percent. In which case the rates will be as follows:  

Duration of the rental contract	Tax rate (percent)
2 to 5 years	25
5 to 10 years	15
10 to 20 years	10
More than 20 years	5

Inheritance Tax in Portugal

Portugal does not have an official inheritance tax, but a 10 percent Stamp Duty (Imposto do Selo) applies to most inherited assets. However, direct family members (spouses, children, parents) are exempt from this tax. 

Double Taxation Agreements

If you’re an expat or an international business operating in Portugal, the last thing you want is to be taxed twice on the same income—once in Portugal and again in your home country. Luckily, Portugal has double taxation agreements (DTAs) or double taxation treaties with over 60 countries, including the US, UK, Germany, and Hong Kong, to help reduce your tax burden. 

DTAs also clarify which country has the right to tax specific types of income based on residency and income source. Additionally, some DTAs reduce or eliminate withholding taxes on dividends, interest, and royalties, making cross-border investments more attractive.  

If you’re interested in the double taxation treaties that apply to you, the best thing to do would be to consult a tax professional or refer to the Worldwide Tax database for a full list of Portugal’s active tax treaties. 

Tax Compliance for US Expats

Portugal taxes for US expats can be used to your advantage. If you’re an American living in Portugal, you have to file taxes in both countries.  As a US citizen, you are taxed in the US on worldwide income, no matter where you live. That means you must file a US annual tax return every year, even if you don’t owe anything. 

Remember, there are treaties and exclusions in place to avoid double taxation, including: 

• Foreign Earned Income Exclusion (FEIE): Exclude up to $130,000 of foreign-earned income from US taxes in 2025 (exact amount adjusts yearly). 
• Foreign Tax Credit (FTC): Offset US tax liability with taxes paid to Portugal 
• Tax Treaties: The US-Portugal tax treaty and Totalization Agreement help prevent double taxation on income and social security contributions (more on this below). 

US-Portugal Tax Treaty

When US citizens navigate taxes in Portugal for foreigners, the US-Portugal tax treaty provides important protections against double taxation. This agreement ensures that income is not automatically taxed in both countries, with taxation rights determined based on residency rules.  

The treaty includes provisions for tax reductions on certain types of investment income earned, such as foreign pension income and royalties. US expats can also take advantage of IRS foreign tax credits and exclusions, such as the Foreign Earned Income Exclusion, to minimize their overall tax burden. 

US-Portugal Social Security Agreement

In addition to tax treaties, Portugal has a Social Security Agreement with the United States to prevent double social security contributions and ensure expats receive the benefits they are entitled to.  

Under this agreement, US expats who contribute to Portuguese social security can qualify for benefits such as retirement and disability benefits. The agreement ensures that individuals working between both countries do not have to pay social security taxes in both systems, significantly reducing financial strain for expats and international workers. 

For those who have worked in both Portugal and the US, social security contributions can be combined to help meet the eligibility requirements for benefits in either country. This means that time worked in Portugal can count toward US Social Security eligibility and vice versa, ensuring that expats do not lose out on future benefits. 

Filing Taxes in Portugal

Filing taxes in Portugal doesn’t have to be stressful, but knowing the deadlines, required documents, and potential pitfalls can save you a lot of time and unnecessary stress. Here’s a quick breakdown of what you need to do when tax season rolls around. 

Tax Year and deadlines to file your tax return in Portugal

Portugal’s tax year runs from January 1 to December 31, just like in many other countries. If you earned income in Portugal, you’ll need to file your Personal Income Tax (IRS) return online between April and June of the following year. The standard deadline is June 30, but this can be extended under certain conditions.  

You’ll need to file your annual tax return online on the Tax Office (AT) website using one of these login methods: 

1. Digital mobile key 
2. Citizen card 
3. Tax identification number (NIF) and password 

Required documents to file your tax return in Portugal

To file your IRS annual tax return, you’ll need the following documents: 

1. Tax identification number (NIF) 
2. Access credentials for the Portal das Finanças 
3. Income documents (for example, salary slips, rental income statements, pension statements) 
4. Expense receipts (for deductions on healthcare, education, or dependents) 
5. Details of other household members (if filing jointly) 

Common tax filing mistakes to avoid

Expats often make these mistakes when filing their tax returns. Keep these in mind so that you can avoid these mistakes: 

1. Missing the deadline: Late filings can lead to penalties and interest charges 
2. Filing the wrong residency status: Remember, residents pay tax on worldwide income, while non-residents only pay on Portuguese income 
3. Forgetting tax deductions: Expenses like healthcare, education, and rent can lower your tax bill, don’t forget to deduct them from your taxable income 

Conclusion

Portugal taxes for expats and nationals are designed to balance economic growth and social welfare while remaining competitive for foreign investors.  

Filing taxes as an expat can be tricky, but staying on top of deadlines and leveraging tax benefits can help you save money and avoid penalties.  

With so many moving parts, it’s always wise to seek professional tax advice. A qualified accountant or tax consultant can help you optimize your tax strategy, avoid costly mistakes, and ensure you remain tax-savvy while being fully compliant—so you can focus on making the most of your time in Portugal.