Taxes in Portugal: The Ultimate Guide 

Mention ‘tax’ and ‘Portugal’ in the same breath, and for years, the conversation would inevitably turn toward the almost mythical benefits of the Non-Habitual Resident (NHR) regime. 

Stories of near-zero tax on foreign income became part of the relocation pitch for Lisbon and the Algarve, drawing in thousands of would-be residents. It’s believed over 74,000 people registered to enjoy the NHR benefits between 2009 and 2022. 

But the tide has turned.

As of early 2024, the general NHR regime was closed to most new applicants, although some transitional provisions and exceptions endured temporarily.

But the generous tax benefits of the past are now reserved for a much narrower group, available via Portugal’s new Fiscal Incentive for Scientific and Innovation (IFICI) program – commonly referred to as NHR 2.0.

The change doesn’t mean Portugal has lost all of its appeal, but it does mark a clear shift in the tax narrative. Moving to Portugal purely for tax perks is no longer as straightforward as it once was.

These days, most newcomers face Portugal’s standard, progressive income tax rates, which can climb as high as 48%. There are also specific rules for investment income, potentially complex corporate tax structures and various property and stamp duties to navigate.

The Nomad Capitalist team has put together this in-depth guide to break down the latest rates, rules and practical implications – from personal and corporate income tax to VAT, stamp duty and beyond – so you can make smart, informed decisions. 

In short, while Portugal may no longer be the tax haven it once was, with the right planning and advice, it can still offer meaningful tax advantages compared to many Western countries.

How Do Taxes in Portugal Work?

Portugal employs tax laws that are broadly comparable to those of other European nations. The system primarily operates on a residence basis. 

Thus, people who live in Portugal are usually responsible for paying Portuguese taxes on their global income. People who don’t live in Portugal are usually only taxed on the money they make within the country. 

The system comprises various levies, including personal income tax, corporate income tax, Value Added Tax (VAT) and property taxes (IMI and AIMI).

Portugal’s tax system has changed a lot since it joined the EEC in 1986, which is why it now compares to modern EU standards. 

Recently, it has become more popular due to the NHR system. However, the nature and extent of the new changes are still taking place, and as we all know in this industry, the rules can change at any time.

Pros and Cons of Portugal’s Tax System

Portugal’s tax system, like any other, has its share of advantages and drawbacks. 

Pros of Portugal’s Tax System

First off, Portugal levies no general wealth tax, which sets it apart from some European neighbours. 

Its inheritance and gift tax rules are also favourable, primarily limited to a modest stamp duty rate and often exempt entirely for close family members. 

For investors, crypto assets held for longer than a year can be exempt from personal income tax.

Businesses may also benefit from rules permitting them to avoid paying taxes on dividends and capital gains from subsidiaries. Special but targeted incentives are still available, especially in Madeira and the Azores.

Cons of Portugal’s Tax System

Portugal’s regular personal income tax rates are fairly high, progressing steeply to a top marginal rate approaching 50% when solidarity surcharges are included. 

Making sense of the system often involves significant bureaucratic hurdles and administrative complexities, requiring professional guidance. 

Social security contributions can also be substantial, particularly for the self-employed and company directors. 

While lacking a general wealth tax, property ownership attracts annual taxes and potentially a surcharge on higher-value holdings. 

Probably the biggest drawback at the moment is the NHR overhaul, which has eliminated a large benefit of setting up a business or residency in Portugal.

What are Portugal’s Income Tax Rates?

Portugal’s income tax framework comprises many types of levies, which we’ve broken down into various subcategories.

Below is an explanation of how each one works and the current 2025 rate. 

Resident Income Tax in Portugal

For 2025, personal income rates begin at 13% for the lowest income band and ascend through various brackets to a top marginal rate of 48% applied to income over €83,696. 

For residents, it’s important to understand that it applies to your entire global earnings, not merely Portuguese-sourced income. 

Non-residents pay taxes on employment income and pension income at a flat rate of 25% in 2025.

These brackets may change over time depending on updates to the Portuguese State Budget. 

Additional Solidarity Rate in Portugal

For those whose taxable income ventures into the upper regions, Portugal applies an additional ‘solidarity’ rate. 

This surtax kicks in at 2.5% for taxable income exceeding €80,000 and increases to 5% for income surpassing €250,000 per annum.

Social Security Contributions in Portugal

Portugal’s social security contributions depend largely on your role or career. 

Standard employees typically contribute 11% of their gross salary, with the employer shouldering a larger burden at 23.75%. 

Board members generally face a 9.3% contribution, with a 20.3% contribution coming from the employer. 

However, for managers or administrators in statutory boards, the contribution rates are 23.75% for employers and 11% for members.

For the self-employed, the contribution rate sits at 21.4% of their relevant determined income, which is calculated based on reported earnings. 

These contributions fund pensions, healthcare access and other social benefits.

VAT in Portugal

​​​​Value Added Tax, or IVA as it’s known locally, is levied on most goods and services. 

The standard VAT rate in mainland Portugal currently stands at 23%. 

Reduced rates apply to certain essentials, but this headline figure is the one most people grapple with.

Wealth Tax Rates in Portugal

Portugal does not impose a general annual wealth tax burden. While property ownership attracts specific taxes, there isn’t a broad-based tax levied merely on your accumulated global net worth.

Inheritance Tax Rates in Portugal

The good news on this front is that Portugal abolished inheritance tax in 2004.

However, stamp duty at a flat rate of 10% applies to gratuitous transfers of Portuguese assets unless the beneficiary is a spouse, descendant or ascendant.

Property Tax Rates in Portugal

Owning property in Portugal involves an annual municipal property tax known as ‘Imposto Municipal sobre Imóveis’ (IMI). 

Rates vary by municipality but typically range from 0.3% to 0.5% of the property’s rateable value. Certain exemptions might apply.

Deductions for Personal Income Taxes in Portugal

​​​​Portugal’s personal income tax system does permit certain expenses to be deducted. 

Common deductible categories include: 

• Qualifying health expenses (a percentage of costs incurred, often needing official invoices linked to your NIF)
• Education fees for yourself or dependents
• Expenses related to property (such as certain percentages of rent paid or mortgage interest on a primary residence, though caps apply)
• Contributions to approved pension funds
• Donations made to registered charities.

Thankfully, the system automatically captures expenses linked via the e-fatura portal, but keeping your own records is always prudent. 

These deductions collectively chip away at your taxable base, potentially nudging you into a lower overall effective tax rate.

What are Portugal’s Corporate Tax Rates?

Portugal presents a reasonably attractive corporate tax framework. 

The headline rate is straightforward, but businesses must also account for potential regional incentives, SME benefits and those inevitable surcharges.

Corporate Income Tax Rate in Portugal

The standard corporate income tax rate, known locally as IRC (Imposto sobre o Rendimento das Pessoas Coletivas), sits at 21% on the Portuguese mainland. 

However, there’s a welcome reduction for Small and Medium-sized Enterprises (SMEs), which typically enjoy a lower rate of 17% on the first €50,000 of taxable income. 

Moreover, the autonomous regions of Madeira and the Azores offer distinctly lower rates as part of their economic policies.

Withholding Taxes in Portugal

Beyond direct corporate tax, Portugal applies withholding taxes (WHT) on various payments made to non-residents, notably dividends, interest and royalties. 

Standard domestic rates apply, but these can often be substantially reduced or eliminated entirely under the provisions of Double Taxation Agreements or relevant EU directives.

Surtaxes in Portugal

Beyond the headline IRC rate, companies face surtaxes. 

The Municipal Surtax (‘Derrama Municipal’) adds up to 1.5% locally, while the State Surtax (‘Derrama Estadual’) applies progressively to profits exceeding €1.5 million, which can reach up to 9% for profits exceeding €35 million.

Autonomous Taxation in Portugal 

Portugal employs ‘autonomous’ taxation (Tributações Autónomas), a rather distinct type of taxation. 

These taxes apply directly to specific company expenses – such as vehicle costs, entertainment or representation expenses. Rates range from 2.5% to 10%, depending on the type of vehicle and the price you paid. 

Corporate VAT in Portugal

​​For businesses, IVA involves collecting the standard 23% rate (on the mainland) from customers on taxable goods and services and remitting it to the tax authorities after deducting VAT paid on their own business inputs. 

Custom Duties​​ in Portugal

​​As Portugal is an EU member state, customs duties primarily apply to goods imported from outside the European Union. 

These are governed by the EU’s Common Customs Tariff, meaning the rates and regulations are harmonised across member states.

Excise Duties in Portugal

Specific goods such as ​​alcohol, tobacco products and fuel face excise duties. 

While harmonised at an EU level regarding structure, the actual rates applied can vary nationally. 

These taxes are often embedded in the final consumer price.

Corporate Property Taxes in Portugal

Companies owning Portuguese real estate face the annual Municipal Property Tax (IMI), just like individual taxation, with rates typically between 0.3% and 0.45% for urban properties. 

For rural properties, the rate is fixed at 0.8%.

Furthermore, companies holding urban properties valued over €600,000 are subject to an additional property tax known as AIMI (‘Adicional ao IMI’), currently levied at a rate of 0.4% on the total value held.

AIMI applies to the taxable equity value of urban property exceeding €600,000 per entity, not necessarily market value. Exceptions and deductions may apply depending on the taxpayer’s status and use of the property.

Beyond that, real estate owned by residents and entities in blacklisted areas pays a massive 7.5%.

Property Transfer Taxes in Portugal

​​When acquiring property in Portugal, the buyer typically pays a property transfer tax or IMT. 

This tax is progressive for residential properties, with rates climbing up to 7.5% (plus an additional 1% ‘mansion’ rate portion above €1 million). 

For other urban properties and rustic land, fixed rates generally apply, such as 6.5% and 5%, respectively. The rate is calculated on the purchase price or the rateable value, whichever is higher.

These are general guidelines. Actual applicable rates may depend on whether the property is a primary or secondary residence, its location or the buyer’s residency status.

Stamp Tax in Portugal

Stamp tax is levied on various legal and financial acts, contracts and documents. For property acquisitions, it’s typically a flat 0.8% of the value. 

Different rates apply to other transactions, such as mortgages (variable) or inheritances (10% for non-direct relatives).

Deductions on Corporate Income Tax in Portugal

Much like personal income, there are some deductions that companies can use to lower their tax rates. 

The SIFIDE II (System of Tax Incentives for Business R&D) scheme permits companies to claim a tax credit against CIT for qualifying research and development expenses. 

We’re talking costs like researcher salaries, operational expenses linked to R&D projects, acquisition of technical knowledge or patents, and even R&D audits. 

The base credit rate is 32.5%, potentially rising significantly – up to 82.5% under specific conditions – for incremental R&D expenditure compared to previous years. 

This upper rate is contingent on prior approval, specific eligibility criteria and incremental R&D expenditure. Interpretation and acceptance are at the discretion of Portuguese tax authorities.

Similarly, the RFAI (Investment Support Tax Regime) provides credits against CIT, calculated as a percentage (typically 10-30%, varying by region and investment size) of investments in tangible fixed assets (machinery, equipment) and certain intangible assets (like technology transfer or licences). 

Deductions are often available for creating new jobs, especially when hiring young people or those who have been unemployed for a long time. 

What About Expat Taxes in Portugal?

The first thing expats need to understand is tax residency in Portugal. 

Tax residents are liable for Portuguese tax on their worldwide income, whereas non-residents are typically only taxed on income sourced within Portugal. 

Misjudge this, and you could face unexpected liabilities. 

Gaining tax residency generally hinges on two primary tests:

• You’re likely considered a tax resident if you spend more than 183 days (consecutively or not) in Portugal during any 12 months overlapping the tax year.
• Or if you maintain a principal home there on December 31st, which implies an intention to use it as your habitual residence.

Portugal’s tax residency rules typically consider physical presence and habitual residence, but interpretation can vary and may involve multiple factors. Your official residency status should be confirmed with Finanças or a licensed advisor.

Of course, many expats retain ties (and potential tax obligations) elsewhere, which means you need the safeguard of double tax treaty agreements. 

Thankfully, Portugal has an extensive network of these treaties designed to prevent you from being taxed twice on the same income and to allocate taxing rights between Portugal and your home country. 

Finally, but just as importantly, is social security. If you’re working in Portugal, whether employed or self-employed, you’re generally required to register and contribute to the Portuguese system. 

Certain exceptions exist, notably for temporarily ‘posted’ workers from other EU/EEA countries holding a valid A1 certificate, but other than that, you’ll need to pay to play.

Taxes in Portugal: FAQs

Is the Portuguese Tax System Right for You?

Deciding if Portugal’s tax landscape aligns with your financial needs requires careful consideration, particularly now that the much-lauded NHR regime has largely closed its doors to newcomers. 

While grandfathered-NHR-status offers continued benefits for some, and new incentives exist for specific professions like researchers and tech innovators, Portugal is no longer the tax-friendly place it once seemed. 

The lifestyle appeal remains for retirees seeking sunshine or digital nomads needing a European base, but the purely fiscal advantages demand closer scrutiny.

Perhaps you’re an entrepreneur whose operational needs are better met by Malta’s corporate structures. Or perhaps you’re an investor drawn to the territorial tax systems found in places like Singapore or Malaysia. 

Choosing the best jurisdiction demands a strategy that weighs tax efficiency against lifestyle, business infrastructure and global mobility. 

To handle this complexity and design your holistic offshore plan, explore the solutions offered by our team at Nomad Capitalist.