The tax system in Portugal: a guide for expats (2023)

Learning about taxes might seem like a chore, but if you’re moving to Portugal, it’s important to get your head around the Portuguese tax system, which consists of a mixture of federal and municipal taxes.

This guide to taxes in Portugal includes advice on the following:

  • The tax system in Portugal
  • Federal taxes in Portugal
  • Local taxes in Portugal
  • Taxes on goods and services in Portugal
  • Who has to pay tax in Portugal?
  • The Portuguese tax system for foreigners
    • Golden visa scheme
  • Income tax rates in Portugal
    • How to file your income tax return in Portugal
    • Self-employed income tax in Portugal
  • Tax on property and wealth in Portugal
    • Property tax (IMI)
    • Property wealth tax
    • Tax on rental income
  • Inheritance tax in Portugal
  • Company taxes in Portugal
  • Tax advice in Portugal
  • Useful resources


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The tax system in Portugal

The Portuguese tax system consists of state and local taxes, which are generally calculated based on income, expenditure, and property ownership.

Foreigners living in Portugal must register as taxpayers before they can start earning money. You can register by completing a form and submitting it to your local tax office, which you can find on the Portuguese Tax Authority’s online portal (Portal das Finanças).

The Portuguese tax year runs alongside the calendar year (1 January to 31 December).

Federal taxes in Portugal

Federal taxes include income tax on earnings for employed and self-employed workers, corporate tax and VAT for businesses, capital gains tax on sales of property and other assets and inheritance taxes on estates.


(Video) Paying TAXES in Portugal | What We Did & What You Should Avoid

Local taxes in Portugal

There are some taxes levied at a local level, however. The most significant is IMI (Imposto Municipal sobre Imóveis) – Portugal’s equivalent of council tax.

The tax system in Portugal: a guide for expats (2)

IMI is charged by your municipality based on the value of your home and the perceived wealth of the area in which you live. IMI is only applicable to homeowners, so tenants are exempt.

Income from IMI pays for ongoing upkeep and maintenance of the local area, including services such as bin collections and recycling.

Residents with homes valued at more than €600,000 need to pay IMI at an additional level. This is known as AIMI, what many consider to be Portugal’s equivalent of a wealth tax.

Taxes on goods and services in Portugal

Businesses in Portugal with a turnover of more than €10,000 on taxable goods and services must pay VAT.

VAT in Portugal (Imposto Sobre o Valor Agregado, or IVA for short) was established in 1986, and comes with three chargeable bands:

  • General rate:23% on taxable goods and services
  • Intermediate rate:13% on food and drink goods and services
  • Reduced rate:6% on certain essential necessities including certain foods (e.g., meat, fruit, vegetables, cereal), books, newspapers, medicines, transport, and hotel accommodation

Separate IVA rates apply in the islands of Madeira (22%/12%/5%) and the Azores (18%/9%/4%).


Who has to pay tax in Portugal?

Your tax liability as an expat depends on your residency status, which is defined by how much time you spend living and working in Portugal each year.

If you reside in Portugal for 183 days or more in a calendar year, you’ll be considered a resident and will need to pay income tax on your worldwide income. If you live in Portugal for fewer than 183 days, you’ll only need to pay on income earned within Portugal.

Income tax rates for residents in Portugal are progressive, meaning you pay more tax the more you earn. Non-residents are taxed at a flat rate of 25% of income.


(Video) A FRESH Look At Portugal Taxes For Expats | The Expert Advice You Need

The Portuguese tax system for foreigners

Some expats living in Portugal can take advantage of the Non-Habitual Residency (NHR) tax codes, which provide substantial exemptions for the first 10 years of residence.

NHR status is available for workers in qualifying professions and has two main benefits.

The tax system in Portugal: a guide for expats (3)

Firstly, you can live as a Portuguese resident but not pay tax on your earnings elsewhere in the world (including employment and capital gains), effectively giving you non-resident status.

Secondly, you’ll pay income tax on Portuguese earnings at a flat rate of 20%, rather than the standard progressive rates of up to 48%.

In 2020, the Portuguese government increased the tax rate on foreign pension income from 0% to 10%.

Golden visa scheme

Portugal awards golden visas to foreigners who purchase property worth more than €500,000. This enables investors to obtain residency in Portugal and travel freely within the European Union.

Since 2012, Portugal has issued more than 10,300 golden visas, with just under half of these going to Chinese citizens.

In 2020, the Portuguese parliament voted to ban golden visas for property purchases across Portugal’s coastline, including Lisbon and Porto. As of January 2022, real estate investments only count towards a golden visa in inland parts of Portugal, the Azores, and Madeira.

Income tax rates in Portugal

Portuguese residents must pay personal income tax on their earnings. Most workers pay taxes automatically through their payslips, but everyone must still complete an annual tax return.

Married couples in Portugal must submit a joint return. To calculate the relevant tax rate, the couple’s collective income is divided in two.

Portugal’s rates for individuals for 2022 are as follows:

Portuguese income tax bandsPortuguese tax rate
up to €7,11614.5%

Portuguese income taxes apply to earnings in the following six categories:

  • A:Employment income
  • B:Self-employment income
  • E:Investment income
  • F:Rental income from properties let in Portugal
  • G:Capital gains from selling properties, assets, or shares
  • H:Pensions in Portugal, including private pension plans

Find out more in our guide to Portuguese income tax

(Video) Taxes in Portugal (Tax System in Portugal)

How to file your income tax return in Portugal

The Portuguese tax year runs from 1 January to 31 December, with returns submitted the following spring. Returns can be completed online or via a paper form. Penalties for late returns can be anywhere from €200 to €2,500.

The current window for completing your tax return for 2021 is from 1 April to 30 June 2022.

If you owe tax on income that hasn’t been deducted through Portugal’s pay-as-you-earn system, you can make payments in installments, which are generally due in July, September, and December.

Self-employed income tax in Portugal

Sole traders, freelancers, and people who run unincorporated businesses in Portugal will have their income assessed as personal earnings, and payPortuguese income taxrather than corporate tax.

Read our guide to tax for self-employed workers in Portugal

Tax on property and wealth in Portugal

Capital gains tax in Portugal is charged on the sale of property or other assets at a rate of28% for individuals and 25% for companies and non-residents. Residents pay taxes on only 50% of their gains.

Exemptions apply for residents selling their primary home and buying another property in Portugal or elsewhere in the EU, and those selling a property they bought before 1989.

Property tax (IMI)

As a property owner in Portugal, you must pay IMI, the Portuguese version of council tax.

Each individual municipality sets its own rate, which the municipal assembly decides.

IMI varies from around 0.3% to 0.45% of the value of a home in urban areas. In rural areas, a rate of 0.8% applies. You can find out the IMI rates for 2022 in each area on SAPO’s website (in Portuguese).

Homeowners in urban areas with properties worth less than €125,000 can benefit from a three-year exemption on IMI, as long as they live in the property themselves.

You can get a further deduction of around €20 for each dependant, and exemptions also exist for people with low incomes or those with energy-efficient homes.

(Video) PORTUGAL Income Tax Rate For Foreigners - Tax Guide

Property wealth tax

First introduced back in 2017, the Adicional Imposto Municipal Sobre Imóveis (AIMI) affects owners with a share in Portuguese property worth over €600,000. If you and your partner jointly own the property, you only pay AIMI if the value is over €1.2 million.

Regardless of residency status, the rates applied are 0.4% on the total amount for properties held by companies, 0.7% for individuals, and 1% for those owning property valued over €1 million. Data from the Portuguese government shows that nearly 89,000 homeowners paid AIMI in 2020.

Tax on rental income

If you decide after you have purchased your property that you wish to let it out, then you will be taxed on any profits you make from rental income. Net rental income is taxed at a flat rate of 15%.

Inheritance tax in Portugal

The Portuguese government abolished inheritance tax several years ago, but a stamp duty known asImposto do Selomay apply at a rate of 10%.

If you have to pay tax on inheritance in Portugal, you must do so within three months from the date of death. This is a strict deadline; you may have to pay a fine if you’re late.

To help reduce the burden paid by expats, Portugal has double taxation treaties with more than 60 countries, including Germany, Hong Kong, and the United Kingdom.

This means you can offset the tax paid in Portugal against any you might owe in your home country.

Discover how to plan your estate in Portugal

Company taxes in Portugal

Businesses pay corporate tax in Portugal at a flat rate of 21% of any taxable profits. Local municipality surcharges of up to 1.5% apply, as do additional charges on profits of more than €1.5 million.

Small- and medium-sized companies can pay a reduced corporate tax rate of 17% on their first €15,000 of taxable profit.

Small businesses and sole traders with an annual turnover of less than €200,000 can choose to pay business taxes through a simplified regime, through which they pay tax on their turnover rather than their profit.

The deadline for completing Portuguese corporate tax returns is between 16 April and 16 May each year.

Learn more in our guide to corporate tax in Portugal

(Video) Non-Habitual Tax Residents and Understanding Your Tax Obligations in Portugal

Tax advice in Portugal

Filing a tax return can be complicated, especially if you’re self-employed or own your own business. With this in mind, it makes sense to seek advice from an accountant or tax expert.

You can also get advice on tax and social security issues from an English-speaking chartered accountant through the international directory through theInstitute of Chartered Accountants in England and Wales (ICEAW).

Useful resources


What taxes do expats pay in Portugal? ›

Non-residents are taxed at a flat rate of 25% on their taxable remuneration in 2023.

Will my US Social Security be taxed in Portugal? ›

They won't pay social security taxes in Portugal. Under U.S. law, U.S. Social Security covers self- employed workers if they are U.S. citizens or U.S. resident aliens, even if they live and work outside the United States.

Do US retirees pay taxes in Portugal? ›

Taxes For Retirees in Portugal

Portugal typically taxes all income. This includes pension income and income from international sources.

What is the tax system of Portugal? ›

Residents in Portugal for tax purposes are taxed on their worldwide income at progressive rates varying from 14.5% to 48% for 2023.
2023 resident income tax rate.
Taxable incomeTax rate
€0 - €7,47914.5%
€7,479 - €11,28421%
€11,284 - €15,99226.5%
€15,992 - €20,70028.5%
5 more rows

Do US expats pay taxes in Portugal? ›

US Expat Taxes in Portugal

If you're living abroad in Portugal, you'll need to file both US taxes and Portugal taxes.

How much are Social Security taxes in Portugal? ›

If you work as an employee, your contribution to Social Security is equivalent to 11% of your gross salary (total income without deductions). This amount is automatically deducted by the employer. Find out more about social security deductions if you are employed.

Can a retired US citizen move to Portugal? ›

How can I retire to Portugal from the USA? You need to apply for residency in order to retire in Portugal as an American. The process is straightforward, but it may take a while. You need to provide (1) your passport, (2) proof of income, (3) proof of health insurance, (4) criminal background check, in order to apply.

What are the cons of retiring in Portugal? ›

Some cons of retiring in Portugal include:
  • Bureaucracy can be slow.
  • Understanding double taxation can be tricky.
  • Winters can be cold.
  • Learning Portuguese is difficult.
  • Cultural shock.
  • Slow pace of life.
  • Lots of tourists.
6 days ago

What city in Portugal has the most expats? ›

Home to approximately 87 different nationalities, Lisbon is the most popular place for expats to live in Portugal. The diversity of the city makes it a very dynamic and exciting place to live.

What are the pros and cons of retiring in Portugal? ›

Living in Portugal offers many advantages: a warm climate, the Atlantic ocean, mountains nearby, a low crime rate and a relatively low cost of living. Medicine and education are well developed here, and residents are offered tax exemptions. The disadvantages include the need to learn Portuguese and carry cash on you.

Do you pay tax on US pension if you live abroad? ›

Distributions from your 401(k) and pensions are still taxed as income, albeit they're treated as unearned income—meaning you won't be able to claim them under the Foreign Earned Income Exclusion.

How much tax do you pay on rental income in Portugal? ›

Rental income

As a general rule, rental income earned by tax residents and non-tax residents is liable to a special tax rate of 28%, but the option for the inclusion of such income in the total aggregated income is possible in some situations. Special provisions may apply provided certain conditions are met.

What are the tax benefits of living in Portugal? ›

Tax benefits for “digital nomads”

After relocating to Portugal, a freelancer can obtain an NHR (non-habitual resident) status. There are several advantages: no taxes on foreign income; 20% tax on income earned in Portugal compared to standard Portuguese income tax rates of up to 48%;

What taxes do you pay on property in Portugal? ›

Property tax rates range from 0.3% to 0.45%. While properties in rural areas are taxed at 0.8%, properties in more urban areas are taxed within the mentioned range. If a property has been re-valued since 2004, it will fall between 0.2% and 0.5%.

How long can I live in Portugal as an American? ›

A US citizen can enter Portugal without a visa and stay there for 90 days. You will need to secure a visa and obtain a residence permit for a long-term stay. Different visa options are better suited to different people.

Can I move to Portugal to avoid taxes? ›

If you're moving to (or are already in) Portugal and earning an income, you may have to pay taxes. If you reside in Portugal for 183 days or more a year, you must pay income tax on your worldwide income.

Are American expats welcome in Portugal? ›

The Portuguese government welcomes expats from the US and the move is generally straightforward. Before getting into details on a visa, there are a few things you need to know about Portuguese law when it comes to foreigners entering the country.

Does Portugal tax expat retirement income? ›

Foreign pension income in Portugal is taxed at only 10% and most double taxation agreements (DTAs) grant exclusive taxation rights on pension income to the country of residence.

Can foreigners open a bank account in Portugal? ›

Foreigners may open a bank account in Portugal, either as a resident or a non-resident. Non-resident accounts require more documentation and can have more restrictions than a resident account, but this is an option if you don't have an address in Portugal yet.

Who is entitled to Social Security in Portugal? ›

Who is eligible for social security in Portugal? The Portuguese social security system is available to both Portuguese and foreign citizens who make contributions. To work and make social security contributions, you'll need to have a Social Security Identification Number (NISS).

Can you be a dual citizen of the US and Portugal? ›

Both the US and Portugal allow their citizens to have dual citizenship.

What is the number 1 place to retire in the world? ›

The Top 25 Best Countries to Retire in
6 more rows
Nov 21, 2022

Why do Americans retire in Portugal? ›

Americans Retiring in Portugal

Portugal is frequently featured in articles on the best places in the world to retire – and with good reason. Excellent health care infrastructure, a sublime climate, and the fact that you can spend much of the year outside are key attractions for retirees.

How much is a gallon of gas in Portugal? ›

For comparison, the average price of gasoline in the world for this period is 1.73 Euro. Use the drop menu to see the prices in gallons.
Portugal Gasoline prices, 27-Feb-2023.
Portugal Gasoline pricesLitreGallon
1 more row

Why are Californians moving to Portugal? ›

Citing the state's high cost-of-living, wildfires, water shortages and at times its politics, many Californians have moved elsewhere in the U.S. Others have decided to relocate internationally. Americans now are among the fastest-growing groups of Westerners moving to Portugal.

Why is electricity so expensive in Portugal? ›

Price of electricity in Portugal is expensive

Unfortunately, Portugal has some of the highest prices for electricity in Europe thanks to taxes. According to Eurostat, we pay €0.2246 per kWh here which is 22% higher than in the UK.

Where do American retirees live in Portugal? ›

Lisbon is one of the cities where expats are happiest with their life abroad, according to the Internations Expat City Ranking 2022, where the Portuguese capital comes in fourth.

What does T1 mean in Portugal? ›

The terminology used is T0, T1, T2, T3, and so on—the numbers correspond to the number of bedrooms. For example, a T1 is an apartment with one bedroom, a kitchen, a bathroom, and a living room. A T0 is a studio apartment.

What's the coldest month in Portugal? ›

January is the coldest month with an average temperature of 52ºF (11ºC). It's rare for it to get colder than 41ºF (5ºC). In summer, the warmest month is July with average temperatures of 74ºF (24ºC). However, it can get much hotter with temperatures over 86ºF (30ºC) and lows of 62ºF (17ºC).

Where in Portugal do most Americans live? ›

American expats live all over Portugal. While Lisbon has the most American expats, other popular landing spots include the Algarve, Porto and the Silver Coast. There are even vibrant expat communities on the Portuguese islands in the Azores and Madeira.

What is the biggest expat community in Portugal? ›

Lisbon has the most expats in Portugal. The Lisbon metropolitan area has almost three million residents as of 2022, of which over 555,000 people are expatriated.

Where is the warmest place in Portugal in winter? ›

The Algarve, with the exception of Madeira Island (Portuguese archipelago) is the warmest region in Portugal in the winter. The average temperature is around 18ºC.

What happens to my pension if I move to Portugal? ›

What happens to my State Pension if I move abroad? As long as you've paid enough National Insurance, you can claim your State Pension while living abroad. The main difference is that if the State Pension increases, you may not benefit from the extra amount if you're living in certain countries.

How much is the average rent in Portugal? ›

Low-Cost, Old-World Living in Portugal
ExpenseU.S. $
Rent (furnished two-bedroom apartment)$1,300
Utilities (electric, water, gas, trash)$150
4 more rows

What happens to my Social Security if I move to Europe? ›

If you are a resident of a country that has a U.S. social security agreement, (other than Austria, Belgium, Denmark, Germany, Sweden, or Switzerland), we will continue your U.S. Social Security payments.

Do you lose Social Security benefits if you move to another country? ›

If you are a U.S. citizen, you may receive your Social Security payments outside the U.S. as long as you are eligible for them.

What happens to my US pension if I move abroad? ›

Can I Collect Social Security if I Live Outside the U.S.? If you are a U.S. citizen and qualify for Social Security retirement, family, survivor or disability benefits, you can receive your payments while living in most other countries.

What are the pros and cons of retiring to Portugal? ›

Living in Portugal offers many advantages: a warm climate, the Atlantic ocean, mountains nearby, a low crime rate and a relatively low cost of living. Medicine and education are well developed here, and residents are offered tax exemptions. The disadvantages include the need to learn Portuguese and carry cash on you.

What is the tax rate for retirees in Portugal? ›

Pensions and private pension plans are taxed at 10% in Portugal and not taxed in Spain. There is no wealth tax or inheritance and gift tax on assets outside Portugal.

Can American retirees move to Portugal? ›

Portugal's D7 visa is popular among retirees and persons living on passive income. This two-step process involves meeting all the visa requirements, which include obtaining a NIF number, providing proof of financial sustainability, and having health insurance.

Where do most Americans live in Portugal? ›

Most Americans in Portugal live in Lisbon, Porto, or the Algarve.

Where do most Americans retire in Portugal? ›

Americans tend to enjoy living in large cities, such as Lisbon and Porto, while the Algarve Coast is also proving to be a popular place for those that are looking for endless sunny days in the south of the country. Here are four popular choices for Americans living in Portugal.

How often do you pay property tax in Portugal? ›

Property is taxed annually by the municipality in which it is located. Each municipality assigns a patrimonial value and assesses a rate that generally ranges from 0.5% to 1.0%. Rural properties frequently have a higher percentage of assessment but a lower value than urban properties.

How long can you stay in Portugal if you own a property? ›

It allows non-EU nationals the ability to get a five year residence permit by buying a property worth 500,000€ and then the chance to apply for permanent residence after those five years provided the owner has met certain criteria during their stay.

Does Portugal tax foreign pensions? ›

Foreign pension income in Portugal is taxed at only 10% and most double taxation agreements (DTAs) grant exclusive taxation rights on pension income to the country of residence.

Which country is most tax friendly for retirees? ›

Top 9 Tax-Free Retirement Countries for Americans Abroad
  1. Panama. Panama tops most lists of the best countries to retire in, and there are good reasons for that. ...
  2. Costa Rica. ...
  3. Portugal. ...
  4. Ecuador. ...
  5. Greece. ...
  6. Belize. ...
  7. Nicaragua. ...
  8. The Philippines.


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