Tax Planning in Portugal

Tax planning in Portugal For residents in Portugal, worldwide employment earnings, pension, rental and most other income over the year is added together to calculate your income tax bill. For non-Portuguese residents, only Portuguese source income is taxable here.

In planning your move to Portugal, it is important to be aware of the different tax treatment there compared with the UK and have an advisor you can turn to who understands the differences, and the interaction (via Double Tax Treaties), between the two regimes.

In Portugal, you are tax resident if you spend more than 183 days in Portugal in a 12-month period or if you make Portugal your ‘habitual residence’ which is simply making it your ‘home’.

Portugal’s sliding scale of income tax ranges from 12.5% on the first €8,059 of income, rising through seven tax bands to 48% on income exceeding €83,696. These income tax rates were updated in the 2025 State Budget. Rates differ slightly in Madeira and the Azores.

Portuguese tax on investment income

The tax rates are different for interest and investment income, such as shares, securities and bonds, which attract a flat rate of 28%. However, if you are a Portuguese resident, you have the option to pay tax at the scale rates instead if that works out cheaper for you.

Capital gains tax

If you are a Portuguese resident and sell property or assets – anywhere in the world – only 50% of the gain is taxable with relief for inflation after two years of ownership. Crucially, however, you won’t be taxed if you sell a main home and reinvest the proceeds to buy a new main home in Portugal or elsewhere in the EU/EEA or a country where there is an exchange of information clause with Portugal regarding tax matters. However, to qualify, you must do this within 36 months after the sale (or 24 months before) and also live in the property within six months of the three-year deadline.

Retirees or residents aged over 65 can avoid Portuguese capital gains tax when reinvesting into an eligible insurance contract or pension fund – great news for downsizers, though you must do this within six months of sale to qualify. Meanwhile, non-residents face a flat 28% charge on 100% of any gain from Portuguese assets.

Non-Habitual Residence (NHR) regime

The NHR regime in its former guise has now ended. NHR 2.0 is the common name for Portugal's new version of the scheme which replaced the Non-Habitual Resident (NHR) scheme in 2024.

Unlike the old version, which attracted many wealthy retirees from northern Europe – it is designed to attract highly qualified professionals in specific high-value sectors, such as technology, research and academia, to contribute to the national economy.

The benefits are: a flat tax rate of 20% on eligible Portuguese-sourced employment and self-employment income for 10 consecutive years (much lower than the progressive rates mentioned above that reach up to 48%), plus income exemptions on most foreign-sourced income, including dividends, interest, rental income and capital gains.

Wealth tax

Portugal’s Adicional Imposto Municipal Sobre Imóveis (AIMI) continues to apply a wealth tax of sorts to high-value Portuguese property, regardless of where the owner is resident. You are only liable if your stake in Portuguese properties is over €600,000, and then only on the value above that. So, if, for example, you and your partner jointly own a Portuguese home, the property will only attract AIMI if it is valued over €1.2 million. Rates are 0.7% for individuals, 0.4% for companies, and 1% for properties over €1 million (€2m for couples).

Tax planning for Portugal

While on the surface the Portuguese tax system may appear quite benign, it is a significantly different system to the UK. For those not eligible for the NHR there can be other tax efficient structures in Portugal – seek advice.

In addition, it is widely quoted that Portugal does not have an inheritance or succession tax, but it does have what is colloquially called ‘stamp duty’ which is charged at 10% on Portuguese assets – mostly real estate – passed on as an inheritance or lifetime gift, regardless of where the donor or beneficiary is resident. Whilst spouses, children and parents are exempt from this tax, partners who are neither married nor in a civil partnership, step-parents and step-children will all be potentially liable.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

FAQs: Tax Planning in Portugal

Do I have to pay tax when buying property in Portugal?

Yes, property buyers in Portugal must pay taxes including IMT (property transfer tax), stamp duty, and annual municipal property tax (IMI). Owning property for sale in Portugal also has ongoing tax implications depending on rental or investment status.

What is the Non-Habitual Resident (NHR) scheme in Portugal?

The NHR scheme that offered tax incentives on overseas pension income has now ended. There’s now NHR 2.0, a tax incentive for qualified professionals and entrepreneurs working in key economic sectors like science, technology, education, and innovation.

Are there capital gains taxes when selling property in Portugal?

Yes, capital gains tax applies to the sale of property in Portugal. The rate depends on residency status and length of ownership. Planning ahead can help reduce tax liabilities if you invest in property for sale in Portugal.

Can I rent out my property in Portugal tax-free?

Rental income from property in Portugal is taxable. Residents and non-residents must declare rental income, but deductions for expenses and depreciation may reduce the overall tax burden.

How can I legally reduce taxes when moving to Portugal?

Legal tax planning strategies include careful timing of property purchases and working with a cross-border tax advisor. Investing in property for sale in Portugal can be structured to maximize tax efficiency.

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