Learning about taxes may feel like a chore, but it's crucial if you're moving to Portugal through its various Portugal visa types available.
In this guide, you'll find information on the Portuguese tax system, insights into federal and municipality taxes, taxes in Portugal for foreigners, as well as details on income, corporate, and inheritance tax rates, NIF Portugal, and much more.
Disclaimer: The legal information published on Flatio is for informational purposes only and does not constitute legal advice.
- Tax system
- NIF number
- Federal taxes
- Local taxes
- Who pays VAT?
- VAT rate
- VAT returns
- Tax refund
- Who should pay taxes?
- NHR
- Golden visa
- Income tax
- Filing tax return
- Self-employed income
- Property and wealth tax
- Rental income
- Inheritance tax
- Company tax
- Tax reliefs
- Tax avoidance and evasion
- Crypto tax
- Tax advice
- Useful apps
Portugal tax system
The tax system in Portugal involves both state and local taxes. These taxes are usually determined based on factors like income, spending, and property ownership.
For foreigners living in Portugal, it's necessary to become a registered taxpayer before earning income.
You can submit your registration online through the Portuguese Tax Authority’s online portal (Portal das Finanças).
If you find the registration process challenging, there are expat-friendly services available to assist you.
It's important to note that the Portuguese tax year aligns with the calendar year, running from January 1 to December 31.
Tax identification number Portugal: What is NIF in Portugal?
What is NIF number Portugal? The NIF (Número de Identificação Fiscal) is your taxpayer ID number in Portugal. It's needed for everyday tasks like opening a bank account, getting a phone plan, or enrolling in health insurance. It's also known as the Número de Contribuinte.
If you're a Portuguese citizen with a valid Citizen’s Card, you already have a NIF assigned to you.
If you don't fall into this category, you can learn how to apply for a NIF on the ePortugal website, which is a government portal.
Find perfect accommodation for rent in Madeira
TIP: Proof of address is one of the requirements for applying for a NIF in Portugal. If you’re looking for a visa-friendly lease agreement that can be used as official proof of address, you can easily rent apartments in Portugal through Flatio, which offers flexible stays in the various Portuguese destinations, including:
- Lisbon
- Porto
- Sintra
- Coimbra
- Faro (Algarve)
- Aveiro
- Braga
- Cascais
- Funchal (Madeira)
Portugal federal taxes
In Portugal, federal taxes cover various aspects:
- Income tax: This applies to both employed and self-employed individuals and is based on their earnings.
- Corporate tax: Businesses are subject to corporate tax, which is applied to their profits.
- VAT (Value Added Tax): This tax is levied on businesses for the value they add to goods and services during each stage of production and distribution.
- Capital gains tax: When selling property or other assets, individuals are subject to capital gains tax.
- Inheritance taxes: Estates are taxed on inherited assets.
Portugal local taxes
In Portugal, some taxes are applied at the local level, with one of the most significant being IMI (Imposto Municipal sobre Imóveis), similar to council tax in other countries.
IMI is determined by your municipality, considering your home's value and the perceived affluence of your area. This tax is specific to homeowners, and tenants are not required to pay it.
The funds collected through IMI contribute to maintaining the local area, covering services like waste collection and recycling.
For residents owning homes valued over €600,000, an additional level of IMI, known as AIMI, applies. This is often viewed as Portugal's equivalent to a wealth tax.
Who pays VAT in Portugal?
In Portugal, those with a turnover exceeding €14,500 on taxable goods and services are required to pay VAT. This threshold will increase to €15,000 in 2025.
Find perfect apartments for rent in Lisbon
Portugal VAT rate
VAT in Portugal, or Imposto Sobre o Valor Agregado (IVA), was introduced in 1986 and consists of 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 specific essential items such as certain foods (e.g., meat, fruit, vegetables, cereal), books, newspapers, medicines, transport, and hotel accommodation
Different Portugal VAT rates apply in the Madeira islands (22%/12%/5%) and the Azores (16%/9%/4%).
Monthly and quarterly VAT returns
Portugal has announced updates to the submission and payment deadlines for monthly and quarterly VAT returns. Here’s an overview of some of the important changes:
- Monthly VAT returns can now be filed by the 20th day of the second month following the relevant month, instead of the previous deadline of the 10th day. For example, the March 2024 return can be filed by May 20, 2024. The payment of VAT owed can also be made by the 25th day of the month in which the return is submitted, instead of the previous deadline of the 15th day.
- Similarly, quarterly VAT returns can now be filed by the 20th day of the second month following the quarter, instead of the previous deadline of the 15th day of the relevant month. The payment of VAT owed on these returns can be made by the 25th day of the month in which they are submitted, instead of the previous deadline of the 20th day.
- Certain taxpayers, including cooperatives, micro, small, and medium-sized companies, as well as "small mid cap" companies, may be eligible to pay VAT in up to three monthly installments without incurring interest or penalties. However, taxpayers must request this option in advance and receive authorization from the Portuguese tax authorities. If approved, the first installment is due on the standard deadline for VAT payment (the 25th day of the second month following the month to which the VAT return relates), and the remaining installments are due on the same date of the two subsequent months.
Tax refund
A self-employed person or company can claim a Portugal VAT refund if they meet the following criteria:
- They have a claim for 12 consecutive months that exceeds EUR 250.
- Their claim exceeds EUR 3,000.
- Their claim exceeds EUR 25 in case of scheme termination or change.
To qualify for a VAT refund, the self-employed person or company must:
- Report all invoices issued in previous periods.
- Provide details of a valid bank account.
- Not be in default regarding VAT returns or payment.
- Ensure that reported values match the declared values of paid and deductible tax.
- Exclude customers or suppliers with invalid Tax Identification Numbers (TIN) or those who have ceased trading in the tax period.
Additional information is available on the website of the Portuguese Tax Authority.
Who should pay taxes in Portugal?
Whether you need to pay taxes in Portugal as an expat depends on your residency status, determined by the time you spend living and working in the country.
If you stay in Portugal for 183 days or more in a calendar year, you'll be considered a resident and must pay income tax on your global income.
For those residing fewer than 183 days, income tax is applicable only to earnings within Portugal.
Income tax rates in Portugal for residents follow a progressive scale, meaning higher earnings incur higher taxes. Non-residents, on the other hand, face a flat tax rate of 25% on their income.
Portugal tax system for expats (Portugal NHR program)
The Portugal expat tax system includes a special provision known as Non-Habitual Residency, Non-Habitual Resident tax, or (NHR), allowing certain expats to enjoy significant tax exemptions for the initial 10 years of residence.
Portugal NHR is accessible to individuals in qualifying professions and offers two main advantages.
- You can be a resident in Portugal but won't be taxed on income earned outside the country, covering employment and capital gains, effectively granting you non-resident status.
- Your income from Portuguese sources is subject to a flat tax rate of 20%, instead of the regular progressive rates that can go up to 48%.
It's important to note that the NHR program is set to end in 2024. Additionally, in 2020, the Portuguese government adjusted the tax rate on foreign pension income from 0% to 10%.
Find perfect apartments for rent in Porto
Portugal Golden visa scheme
For years, Portugal has been granting Golden Visa to foreigners who purchase properties valued at more than €500,000. This provides investors with the opportunity to obtain residency in Portugal and enjoy unrestricted travel within the European Union.
However, in 2023, the Portuguese government announced plans to modify the Golden Visa program, and a significant change involves removing the option to get a Golden Visa through real estate investment.
Portugal income tax rates
In Portugal, residents need to pay income tax on the money they earn. For most employees, taxes are deducted from their salaries each month.
However, everyone still needs to fill out a tax return every year. If you're married, you and your spouse need to file your taxes together. The total income of the couple is divided in half to determine the tax rate.
Portuguese income taxes cover six main types of earnings:
- Money earned from employment
- Income from being self-employed
- Returns from investments
- Rental income from properties rented out in Portugal
- Profits from selling properties, assets, or shares
- Pensions received in Portugal, including private pension plans
Additionally, an additional solidarity tax, ranging from 2.5% to 5%, is applied to individuals who earn over €80,000 per year.
Note: Detailed information on tax rates in Portugal can be found on the official website of the Portuguese tax authority.
How to file your income tax return in Portugal
Here's how to file your income tax return in Portugal:
The tax year in Portugal goes from January 1 to December 31, and returns are submitted in the following spring.
- You can fill out your tax return either online or using a paper form.
- Late submissions can lead to penalties ranging from €200 to €2,500.
- You have from April 1st to June 30th to complete your tax return.
- If you owe taxes on income that wasn't deducted from your pay, you can pay in installments due in July, September, and December.
Note: You can find more information on how to pay taxes in Portugal on the official website of the Portuguese tax authority.
Self-employed income tax in Portugal
For those who work for themselves in Portugal, like sole traders, freelancers, or those running businesses without being incorporated, their earnings are considered personal income. They pay Portuguese income tax instead of corporate tax.
Tax on property and wealth tax Portugal
In Portugal, when you sell property or assets, you'll pay capital gains tax. Individuals pay at a rate of 28%, while companies and non-residents pay 25%.
However, residents only pay taxes on 50% of their gains. There are exemptions for residents selling their main home and purchasing another property in Portugal or elsewhere in the EU, and for those selling a property bought before 1989.
Property tax in Portugal (IMI)
As a property owner in Portugal, you're required to pay IMI, similar to council tax in other places.
- The rate for property taxes in Portugal is decided by each municipality, determined by the municipal assembly.
- In urban areas, IMI typically ranges from about 0.3% to 0.45% of the home's value. In rural areas, it's around 0.8%.
- Homeowners in urban areas with properties valued under €125,000 can get a three-year exemption from IMI if they live in the property.
- Additionally, there's a deduction of around €20 for each dependent, and exemptions for low-income earners or those with energy-efficient homes.
Property wealth tax
Introduced in 2017, the Adicional Imposto Municipal Sobre Imóveis (AIMI), or Property Wealth Tax, impacts property owners in Portugal with property worth over €600,000. If you jointly own the property with a partner, AIMI applies only if the property value exceeds €1.2 million.
For both residents and non-residents, the rates are as follows:
- 0.4% for properties held by companies
- 0.7% for individuals
- 1% for those owning property valued over €1 million
Find perfect apartments for rent in Faro
Tax on rental income
If you choose to rent out your property after buying it, you'll be taxed on the money you earn from rent. The profit you make, known as net rental income, is taxed at a fixed rate of 15%.
Inheritance tax in Portugal
In Portugal, inheritance tax was abolished several years ago. However, a stamp duty known as Imposto do Selo may apply at a rate of 10% on certain inheritances. 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 and the United Kingdom.
This implies that you can deduct the tax paid in Portugal from any tax you might owe in your country of residence.
Company taxes in Portugal
Businesses in Portugal are subject to corporate tax at a fixed rate of 21% on any taxable profits. Additionally, local municipality surcharges of up to 1.5% may apply, along with extra charges on profits exceeding €1.5 million.
For small- and medium-sized companies, there's a reduced Portugal corporate tax rate of 17% on their first €50,000 of taxable profit.
Small businesses and sole traders with an annual turnover of less than €200,000 have the option to pay business taxes through a simplified regime. Under this scheme, they pay tax based on their turnover rather than their profit.
The deadline for filing Portuguese corporate tax returns is the last day of the fifth month following the end of the tax year. For instance, if the company’s tax year spans from January to December, the deadline would be the end of May of the following year.
Tax reliefs in Portugal
Individual taxpayers in Portugal can take advantage of various allowances to reduce their taxable income. These include a general allowance of €4,104 and deductions for dependants.
Tax avoidance and evasion in Portugal
The Portuguese government is taking stronger measures against tax evasion. As of 2023, companies must report a full inventory when filing taxes, not just raw materials and products for sale.
If you fail to submit your tax return, you'll be penalized. Late or incomplete returns by individuals can result in fines ranging from €200 to €2,500. Late payments incur interest ranging from 10% to double the outstanding tax, up to a maximum of €55,000.
Corporate tax fines are more severe. Late filing incurs daily interest charges of 4% of the tax due, with penalties capped at €45,000 for negligence or €165,000 for deliberate delay. Late payments are charged between 30% and 100% of the tax due, capped at €45,000.
Portugal tax on crypto
In recent years, Portugal has emerged as one of Europe’s leading countries in economic innovation. The country's stance on cryptocurrency reflects this trend.
With the rise of blockchain technology and cryptocurrencies gaining widespread attention, Bitcoin traders are looking for favorable environments, and Portugal stands out.
Recognizing this trend, the Portuguese government has begun to establish regulations around cryptocurrency. Blockchain technology is being integrated into various projects across Portugal, with banks also implementing measures to regulate crypto assets.
You may be wondering: Is crypto tax free in Portugal?
Starting from January 1, 2023, Portugal has implemented new tax rules for cryptocurrencies. According to these rules, profits from digital assets held for less than one year will be taxed at a rate of 28%.
However, cryptocurrencies held for over a year will be exempt from taxation. Furthermore, capital gains from cryptocurrency issuance and mining operations will be considered taxable income by authorities.
Find perfect apartments for rent in Funchal
Tax advice in Portugal
Filing taxes can be complex, especially for self-employed individuals or business owners. To navigate this process effectively, it's wise to consult with an accountant or tax expert.
You can also use tools known as “Portual tax calculator” or “Portugal income tax calculator”.
For assistance with tax and social security matters, especially when it comes to Portugal tax for expats, you can seek guidance from an English-speaking chartered accountant.
Useful Portugal finance apps
The Portuguese finance authority (Portal das Finanças) has introduced various official applications to simplify tax submission and payment, which can be found on their website.
[Sources: ePortugal, Expatica, tax@hand: Deloitte, Global Citizens Solutions]
