Tax in Portugal: The Complete Guide for Expats

Portugal’s tax regime affecting expats has gone through recent changes. Read on for more information on what to expect from taxes as an expat in Portugal.

Disclaimer: This guide is for informational purposes only and does not constitute legal or tax advice. Anyone acting on this without tailored professional counsel does so at their own risk.

Why Portugal?

Portugal has become a top destination for international professionals, retirees, and digital nomads. With a high quality of life, affordable healthcare, excellent international schools, and relatively low living costs, it offers a unique blend of tradition and modern convenience.

But one of Portugal’s most compelling draws has been its favourable tax regime, from the now-phased-out NHR scheme to its new TISRI initiative. This guide breaks down everything expats need to know about tax residency, income types, benefits, and risks.

Tax Residency in Portugal

According to the Portuguese tax law in force since January 2015, an individual is deemed to be resident in Portugal for tax purposes if one meets either of the following conditions:

• Spends more than 183 days, consecutive or not, in Portugal in any 12-month period starting or ending in the fiscal year concerned.

• Regardless of spending less than 183 days in Portugal, maintains a residence (i.e. a habitual residence) in Portugal during any day of the period referred above, with the intention to use it and keep it as one’s primary residence.

As a rule, the taxpayer will become resident in Portugal as of the first day of stay in the Portuguese territory and non-tax resident as of the last day of stay in Portugal, with a few exceptions.

Residency is often triggered at the administrative level by linking a Portuguese address to your NIF (tax number). In cross-border situations, tax treaties determine residency via tie-breaker rules.

Key Tax Principles

🔹 Territoriality

• Tax residents pay tax on worldwide income.

• Non-residents are only taxed on Portuguese-source income.

🔹 Double Taxation Treaties (DTTs)

Portugal has DTTs with over 70 countries. In most cases, the treaty overrides local legislation to prevent double taxation.

🔹 Annual Filing Obligations

Most expats must file an annual tax return between April 1 – June 30 for the previous tax year, even with no taxable income.

🔹 Accrual Basis

Income is taxed when earned, not when received.

🔹 Burden of Classification

Taxpayers are responsible for correctly classifying their income. Mistakes can result in penalties.

The Grey Zone in Portuguese Tax

Unlike other jurisdictions, Portugal lacks definitive guidance on many international tax matters. This legal ambiguity means:

• Case law and arbitration rulings play a major role.

• Even experienced professionals may disagree on interpretation.

• In many cases, reasonable discretion is required by the taxpayer.

NHR – Portugal’s Non-Habitual Resident Regime (Now Closed to New Applicants)

The Non-Habitual Resident (NHR) regime officially closed to new applicants in 2024 but remains fully active for those who registered before the deadline.

For qualifying individuals, it provides one of Europe’s most attractive tax frameworks for a 10-year period:

Key benefits:

• 10% flat tax on most foreign pension income.

• 0% tax on qualifying foreign-sourced dividends, interest, and royalties (subject to double tax treaty conditions).

• 20% flat rate on income earned in Portugal from listed “high-value” professions, such as finance, IT, engineering, and medicine.

• No wealth tax and no inheritance or gift tax on transfers to direct family members.

In short, NHR offered an exceptional window for UK expatriates and globally mobile professionals to establish Portuguese residency with significant tax efficiency, a legacy regime still protecting those who qualified before 2024.

TISRI – Portugal’s New Tax Incentive Regime (Replacing NHR)

Portugal has introduced the TISRI – Tax Incentives for Scientific Research and Innovation – as a replacement for the former NHR (Non-Habitual Resident) regime.

Unlike NHR, which offered broad benefits to most new residents, TISRI is far more targeted and designed to attract professionals contributing to Portugal’s innovation and research sectors.

Key points so far:

• Eligibility: Primarily for PhD holders, researchers, university lecturers, technology professionals, and employees of certified innovative companies or start-ups.

• Scope: Provides reduced tax rates or exemptions on income from qualifying scientific, technological, and innovative activities.

• Capital income: Early drafts suggest foreign dividends, interest, and capital gains may remain exempt if the source country has a right to tax them under a double taxation treaty.

• Pension income: No longer benefits from preferential treatment — now taxed at standard progressive Portuguese rates.

• Status: The regime is still being implemented, with limited access while the government finalises the full qualifying criteria and approval process.

Main Benefits

• A flat tax rate of 20% on net income from employment or self-employment arising from eligible Portuguese-sourced activities. 

• Exemption from Portuguese taxation for most foreign-sourced income (including capital income, rental income, dividends, interest and capital gains) — provided the individual qualifies and the income is not from a black-listed/tax-haven jurisdiction. 

• Valid for up to 10 consecutive years from the year of registration.

Important Exclusions & Conditions

• The benefit does not apply to pension income (Category H) under favourable terms — foreign pensions are taxed at the standard progressive rates. 

• Income from entities domiciled in a “blacklisted” or “tax-haven” jurisdiction (without a Portuguese permanent establishment) may be taxed at 35% rather than being exempt. 

To qualify you must:

• Become tax resident in Portugal (and not have been tax resident in Portugal in any of the previous 5 years). 

• Perform an eligible activity (e.g., work as a professional in scientific research, qualified professions in certain sectors, board member of a certified start-up, or work for a company doing R&D/innovative activities).

Income Tax Without NHR or TISRI (2025)

Residents in Portugal for tax purposes are taxed on their worldwide income at progressive rates varying from 12.50% to 48% for 2025.

Non-residents are liable to income tax only on Portuguese-source income, which includes not only that portion of remuneration that can be allocated to the activity carried out in Portugal but also remuneration that is paid/borne by a Portuguese company or permanent establishment (PE).

Non-residents are taxed at a flat rate of 25% on their taxable remuneration (e.g. employment, self-employment, and pension income) in 2025.

Personal Income Tax Brackets:

For the purpose of applying the tax rate, the taxable income is divided by two if the taxpayers are married and not judicially separated, as well as in the case of de facto marriages, whatever the circumstances, should they opt for joint taxation.

Special rates apply to capital gains and investment income.

Additional solidarity rate

In 2025, an additional solidarity rate, which varies between 2.5% and 5%, applies to taxpayers with a taxable income exceeding EUR 80,000 and EUR 250,000, respectively.

Subsistence level

Portuguese tax legislation includes a specific rule that ensures individuals who primarily receive employment income, business and professional income, and/or pension income are guaranteed a minimum level of net income (subsistence level).

Social Security Contributions Overview

Employees:

• Total rate: 34.75% of gross salary (11% employee + 23.75% employer).

• Covers family, pension, and unemployment benefits.

• Employers must also hold occupational accident insurance, with premiums varying by risk level.

Board Members:

• Standard rates: 9.3% employee + 20.3% employer.

• If classed as managers or administrators, rates align with regular employment (11% + 23.75%).

• Contributions are based on actual pay, with a minimum monthly base of €522.50.

• Entitlement to unemployment benefits may apply.

Self-Employed:

• Contribution rate: 21.4%.

• Under the simplified regime, contributions are based on ⅓ of average income over the past three months.

• For calculation: 70% of service income and 20% of production/sales income are considered.

Consumption taxes

Value-added tax (VAT)

There are three VAT rates: the standard rate of 23% (22% in the Autonomous Region of Madeira; 16% in the Autonomous Region of the Azores), the intermediate rate of 13% (12% in Madeira; 9% in the Azores), and the reduced rate of 6% (4% in Madeira and in the Azores). 

Net wealth/worth taxes

There are no net wealth/worth taxes in Portugal.

Inheritance and gift taxes

Inheritance Tax in Portugal was abolished in 2003. Free acquisition of goods by individuals (inheritance and gifts) is taxed under the stamp tax at 10%. This tax is only applicable outside direct descendants, such as siblings, nieces, nephews etc.

Donation of property is subject to an additional rate of 0.8%.

Tax on Other Income Streams

Self-Employment

• Taxed per brackets or under Simplified Regime (only 75% of revenue taxed)

• First year: 50% discount on taxable base + no social security

• Year 2: 25% discount

• Social security starts at ~21%, capped for simplified filers

Capital Gains

• Standard rate: Capital gains are generally taxed at a flat 28%.

• Small company shares: Only 50% of gains from selling shares in micro or small unlisted companies are taxable.

• Short-term holdings: From 1 January 2023, if assets are held for less than 12 months and the taxpayer’s total income exceeds €83,696, the gains must be added to overall income and taxed at progressive rates (instead of the flat 28%).

• High-risk jurisdictions: The same rule applies to gains from countries on Portugal’s blacklist, taxed at 35%.

• Long-term relief (from 2024): Capital gains on listed securities or fund units held long-term qualify for partial exemptions:

• Property: 50% of gain taxed at marginal rates

Note on property: Since 2023, similarly to the regime applicable to tax residents, in the case of non-residents, only 50% of capital gains arising from the sale of real estate is taxed. This income is taxed at the marginal rates varying between 12.50% and 48% (plus the solidarity rate, if applicable) for 2025. In the case of non-tax residents, in order to determine the tax rate applicable to those capital gains, it is considered the worldwide income received (even if not taxed in Portugal). 

Dividends, Interest, Royalties

• Standard rate: Dividends and interest are generally taxed at a flat 28%.

• Optional regime: Taxpayers may instead choose to include this income in their progressive tax bands (12.5%–48% plus solidarity surcharge).

• Foreign tax credit: A credit is available for foreign tax paid, limited to the lower of the foreign tax or the Portuguese tax due, and capped by the Double Taxation Treaty (DTT) rate where applicable.

• EU dividends relief: If dividends come from an EU-resident company that meets EU directive conditions, only 50% of the amount is taxable when opting for progressive rates.

• Interest income: Portuguese bank interest – taxed at 28%. Foreign interest – also 28%, unless from a blacklisted jurisdiction, which is taxed at 35%.

Cryptocurrency

• <12 months: 28% tax

• >12 months: Exempt if from a DTT country

• Crypto-to-crypto trades are not taxable events

Rental Income

• Standard rate: Rental income is generally taxed at a flat 28%.

• Residential leases: From October 2023, rental income from residential properties is taxed at a reduced rate of 25%(subject to certain conditions).

• Optional aggregation: Taxpayers can choose to include rental income in their overall taxable income, which may be beneficial in some cases.

• Business treatment: If renting properties is a regular activity, the taxpayer may elect to treat it as self-employment income (Category B), though the same rules for rental income (Category F) still apply.

• Reliefs: Certain reductions or exemptions can apply if specific requirements are met.

Pension Income

• Standard taxation: Regular pension income (from UK private or occupational pensions) is generally taxed at progressive marginal rates, ranging from 13.25% to 48%, plus the solidarity surcharge where applicable.

• Government service pensions: UK government pensions (e.g. civil service, NHS, police, armed forces) are typically taxable only in the UKunder the UK–Portugal Double Taxation Agreement, though they may still need to be declared in Portugal for rate-determination purposes.

• Category H income: Pensions are classified under Category H of the Portuguese Personal Income Tax Code, covering all foreign and domestic pension payments, annuities, and similar retirement income streams.

• 85/15 rule: Certain pensions that include both employee and employer contributions (typically private or occupational schemes) can qualify for the “85/15” rule, under which only 15% of the pension income is taxable in Portugal. This can reduce the effective tax rate to around 3–4%, depending on the individual’s situation and structure of the pension.

• Planning opportunity: Careful analysis of how a pension was funded is essential — confirming whether it qualifies for Category H treatment and whether the 85/15 exemption can be applied. Specialist advice can ensure that withdrawals or transfers are optimised before or after becoming tax-resident in Portugal.

For a copy of our “Income Tax in Portugal – 2025 Overview for UK Expats” guide, send us a private message.

Tax Liabilities for NHR Holders (Still Active)

• Foreign employment income taxed only if physically worked abroad

• Portuguese employment in “high-value” professions: taxed at 20%

• Self-employment abroad: exempt if certain treaty conditions met

• Dividends/Interest/Royalties: exempt if source country has DTT (even if no tax is applied)

• Capital gains: real estate gains from treaty countries are exempt; share sales are not

Tax Planning Opportunities

Portugal offers many legal avenues for structuring income to reduce tax:

• Using foreign companies to receive dividends

• Working as a contractor/self-employed instead of salaried

• Timing income extraction across tax years

• Classifying income carefully where multiple treatments are possible

Caveat: Misclassifying income or triggering Portuguese residency rules for foreign companies (e.g., effective management in Portugal) can backfire.

Final Word...

Portugal remains a highly attractive tax jurisdiction, but it's far from simple. The abolition of NHR and rollout of TISRI mark a turning point, and understanding the fine print has never been more critical.

For expats, digital nomads, and cross-border professionals, robust tax planning with qualified local and international experts is essential.

Interested in bespoke tax planning as a UK expat in Portugal? 📩 Drop me a message, happy to help you make sense of it all.

☎️ 🇵🇹 +351 913 324 177 💻 steve@atlasbridgewealth.com📍Book an appointment https://www.atlasbridgewealth.com/book-online 📱 Communication Box https://linktr.ee/steveIFA