Tax in Portugal for Expats

The Portuguese tax system is one of the more generous in Europe and quickly becoming a popular destination for expats from the UK and other countries.

For high-net worth individuals, the Portuguese tax system is particularly favourable and combined with other factors, including being one of the leading countries for R&D into new technologies, it’s appeal is growing.

This article was originally written in 2018 and is in the process of being updated for 2023/24. If you would like to speak to a trusted Portuguese tax specialist to get clarification on any Portuguese tax matters, please request a free introduction to one of our trusted partners >

Tax in Portugal: The basics

The Portuguese tax year follows the calendar year and ends on the December 31^st.

If you are moving to Portugal you are required to register as a tax payer before you embark on any paid activity in Portugal. You need to register to become a tax payer which requires you to obtain an NIF (Numero de Identicacao Fiscal) which can be requested from a local tax office.

Portuguese tax residents, including expats, are required to submit an annual income tax return early in the following year. The deadline for submitting your Portuguese income tax annual return is between 1st April and 30th June of the calendar year following the end of the previous tax year.

For example, income received between 1st January 2018 and 31st December 2018 will need to have submitted their tax return by 30th June 2019.

Am I a Portuguese tax resident?

At a basic level, the rules for becoming a Portuguese tax resident are relatively straight forward.

The simplest approach is that if you are in Portugal for 183 or more days in a single calendar year, you will typically be classed as a Portuguese tax resident. However a number of other factors may also see you deemed as a tax resident including:

• You have a permanent residence in Portugal on December 31^st in that tax year
• If the head of your household is a tax resident in Portugal
• If you are part of the crew on a ship, yacht or aircraft which is owned by a Portuguese entity
• If you work for the Portuguese state, regardless of the country you work in

Portuguese Income Tax

If you are classed as a tax resident, your worldwide income is subject to Portuguese income tax. This income could include salary, rental income and capital gains.

Portugal has various tax treaties with other countries, including a tax treaty with the UK, which ensures that you should not have to pay tax more than once on any income in multiple jurisdictions.

If you are a non-resident in Portugal, only income earned in Portugal will be liable for tax, typically at 20%. However, lower tax rates exist for income received from property.

Portuguese tax for non-habitual tax residents

In an effort to attract leading talent and also high net worth individuals, the Portuguese tax system has a favourable tax system for non-habitual tax residents.

The non-habitual residence (NHR) tax regime was introduced in 2009 and can provide tax benefits for an individual in their first ten years of residence in Portugal.

For non-habitual residents, the flat rate of 20% is applied to income received, regardless of the level of income. The current highest income tax band in Portugal charges 48% tax on income, which is a massive difference.

Aside from the flat rate 20% income tax, there is a reduced or deferred tax rate on dividends or other income from investments – and in some cases the income may be exempt from tax.

There is also no inheritance tax, gift tax or wealth tax in Portugal for non-habitual residents.

For people with pensions there is beneficial tax treatment for income received from pensions and other life insurance products.

To qualify for the non-habitual resident status you must not have been a tax resident in Portugal for any of the previous five tax years. You also need to meet the criteria for being a tax resident in the year of application – the simplest way of achieving this is to be present in Portugal for more than 183 days. Finally, you need to apply via the Portuguese tax authorities (and, of course, you need to be approved).

If you'd like to know more about this, read our detailed guide to Portugal's Non-Habitual Residence tax regime >

Portuguese tax penalties

Failing to correctly submit your Portuguese tax return and payment on time can be costly. Penalties for late filing start at €200, but can rise to €2,500. Late payment penalties can range from 10% of the amount owed, to double the total amount – but is capped to €55,000. Any penalties may also attract interest.

However, fines and penalties depend entirely on your personal circumstances.

Portuguese inheritance tax

Inheritance tax in Portugal is incredibly favourable. Not only does it only apply to Portuguese assets, it’s also only 10% while passing your estate to a spouse or your children will mean your estate is exempt from inheritance tax.

It is important to remember that if you keep your UK domicile you will still be liable for UK inheritance tax on your worldwide estate.

Next step: Speak to a Portuguese tax specialist

You should always speak to a trusted tax specialist before making any decisions so if you have questions or concerns over your Portuguese tax situation, you can use our free Portuguese tax introduction service to speak to a trusted tax expert who specialises in both Portuguese and international tax affairs.

When requesting your introduction, please provide as much information as possible to enable us to select the most suitable partner from our network.

All of our partners are fully qualified and experienced in assisting foreigners living in or moving to Portugal, Portuguese expats living abroad as well as people who have connections to Portugal whether they still live there or not.

Once selected, our partner will invite you to book an initial discovery call which last around fifteen minutes. The discovery call is designed to enable our partner to clarify your situation while also giving you the opportunity to have some general questions answered.

Following the discovery call, our partner will provide you with a proposal and fee quotation for their services and you will be able to decide whether you wish to proceed or not. Typical services include:

• Recommendations on how you could reduce your tax burden
• Tax return services and liaison with Portuguese tax authorities
• Guidance for relocating to Portugal and how to structure your tax matters before arriving
• Services to help minimise your tax exposure, such as special tax regimes and visas

Any proposal will include a detailed overview of any potential fees and costs, but you will be under no obligation to proceed with any proposals or advice.

Request a free introduction to a Portuguese tax specialist >