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

FAQs

What taxes do expats pay in Portugal? ›

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

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.

Taxes For Retirees in Portugal

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

US Expat Taxes in Portugal

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

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.

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.

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.

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.

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.

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%;

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%.

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.

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.

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.

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.

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 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.

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.

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.

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.

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.

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.

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).

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.

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 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.