Every year more and more people are relocating to Portugal, for numerous different reasons. Portugal has become one of Europe’s most attractive destinations for expats, retirees, and remote workers. With its pleasant climate, warm and vibrant culture, and relatively affordable cost of living, it’s easy to see why so many are relocating to this gem. But there’s one crucial detail many overlook when making the move: taxes in Portugal.

Why does this matter? Because Portugal’s tax system offers expats several unique advantages you won’t easily find elsewhere, making it not just a beautiful place to live, but also a smart financial choice.

Understanding Portugal’s tax system is essential whether you're an expat settling in long-term, a digital nomad staying temporarily, or a resident. The country has a progressive income tax structure, specific rules for tax residency, and a history of offering favorable tax regimes to newcomers. Yet, it’s common for expats to get it wrong, risking penalties or missing out on available benefits.

This guide will answer key questions that many people have:

• What are the taxes in Portugal?

• How much tax do you pay in Portugal?

• Does Portugal tax foreign income?

• When are taxes due in Portugal?

• Is Portugal still tax-free for expats?

Let’s dive into what you need to know.

What Are the Taxes in Portugal?

Portugal’s tax system includes several types of taxes affecting both residents and non-residents. The key categories include:

• Income Tax (IRS): Personal income tax applies to salaries, business income, rental income, capital gains, pensions, and more.

• Corporate Tax (IRC): Businesses are taxed on profits at a flat rate, usually 20%.

• Value Added Tax (VAT/IVA): Standard VAT in Portugal is 23%, with reduced rates of 13% and 6% on essential goods and services.

• Property Taxes: These include the Municipal Property Tax (IMI) and Property Transfer Tax (IMT).

• Inheritance and Gift Tax: Portugal does not have a formal inheritance tax, but stamp duty of 10% applies in certain cases for non-direct relatives.

So, when asking "What are the taxes in Portugal?" the answer really depends on each individual's situation. The good news? With the right structure and planning, many are able to reduce their effective tax burden.

How Much Tax Do You Pay in Portugal?

The Portugal tax rate for individuals is progressive. That means the more you earn, the higher the percentage of tax you pay.

According to PWC, here are the Portugal income tax brackets for 2025:

• Up to €8,059: 13%

• €8,059 to €12,160: 16.5%

• €12,160 to €17,233: 22%

• €17,233 to €22,306: 25%

• €22,306 to €28,400: 32%

• €28,400 to €41,629: 35.5%

• €41,629 to €44,987: 43.5%

• €44,987 to €83,696: 45%

• Above €83,696: 48%

In addition, a solidarity surcharge of 2.5% or 5% applies to very high incomes.

Example: If you earn €30,000/year, your effective tax rate might be around 20%, after allowances and deductions.

Portugal offers deductions and tax credits (depending on your income) for:

✅ Health expenses

✅ Education costs

✅ General family expenses

✅ Mortgage interest (for older loans)

✅ Contributions to retirement savings or social security

Understanding these options is key to optimizing your tax bill.

Is Portugal Highly Taxed?

In comparison to other Western European countries, Portugal taxes for expats and residents are relatively similar.

For example:

• France’s top income tax rate is 45%, plus social charges.

• Germany’s top rate is also 45%.

• Portugal’s top rate of 48% applies to higher income levels, and the deductions can significantly reduce taxable income.

Indirect taxes like VAT are high at 23%, but again, this is very common across Europe.

For businesses, Portugal’s 20% corporate tax is comparable with EU peers.

While the Portugal tax rate can feel high, especially for those not used to European tax systems, it is not considered extreme. The tax burden is manageable with proper planning.

Is Portugal Still Tax-Free for Expats?

Portugal's famous Non-Habitual Resident (NHR) regime was a major draw for expats, offering tax exemptions or flat 20% rates on foreign and high-value income for 10 years.

If you registered for NHR before the deadline, you can still benefit until your 10-year period ends.

What if you just arrived?

Now, you have the NHR 2.0. A little more effort to qualify, but the reward is even higher. Learn more on our dedicated article.

If you are under 35 years old, you may also qualify for a 100% exemption on personal income tax in the first year, significant reductions in the following years and very powerful incentives for you to buy your first home in the country. Learn more.

There are also several ways to reduce your tax burden with the strategic tax planning solutions that we offer. The system is very complex and nuanced, so we are almost always able to reduce your effective tax rate to attractive levels.

So, is Portugal tax-free for expats today? Not entirely. But some very strong incentives remain, and most expats still find the tax system favorable when compared with their home countries.

Do Foreigners Pay Taxes in Portugal?

This is one of the most common questions: Does Portugal tax foreign income? The answer depends on your tax residency status.

How does Portugal determine tax residency?

You are considered a tax resident in Portugal if:

• You spend more than 183 days in the country within a 12-month period, or you have a permanent residence in Portugal.

• At some point during the tax year, you visited Portugal and you possessed a place of abode under circumstances which imply your intention to keep and occupy that abode as your permanent residency.

Residents vs. Non-Residents:

• Tax residents are taxed on worldwide income.

• Non-residents are taxed only on Portugal-sourced income.

If you're a resident and receive income from abroad (pensions, dividends, rental income), it may be subject to tax in Portugal. However, double taxation treaties (DTTs) exist with many countries to prevent being taxed twice. 

Portugal has DTTs with the U.S., UK, Canada, and most EU countries. These treaties often allow taxes paid abroad to be credited against Portuguese tax, or reduce the tax rate.

When Are Taxes Due in Portugal?

Knowing when to file is as important as knowing how much to pay. So, when are taxes due in Portugal?

Key deadlines for individuals:

Filing Period: April 1 to June 30 (for income from the previous calendar year)

Payment Deadline: Tax must be paid by August 31, if not done earlier

For businesses:

• VAT and corporate tax returns have different deadlines, typically quarterly or annually

• Social security payments and other obligations apply monthly

Late filings can result in penalties, interest, and even blocked refunds.

How to file taxes in Portugal:

Most people file using the online portal: Portal das Finanças 

• Assistance is available from tax professionals, accountants, or relocation services

If you're self-employed, you may need to issue electronic invoices and make advance tax payments throughout the year.

How to Avoid Making Costly Mistakes?

Many expats arrive assuming Portugal taxes for foreigners are simple or negligible. Unfortunately, misunderstanding the rules can lead to double taxation, missed deductions, or surprise bills.

Tips for avoiding any trouble with your taxes:

• Confirm your residency status early.

• Check how foreign income is treated, especially if you receive a pension or dividends.

• Understand local obligations if you're self-employed.

• Keep track of filing deadlines and use the correct forms.

Getting expert tax advice can help you:

✅ Optimise your tax structure

✅ Reduce your effective tax rate

✅ Stay compliant with local laws

Conclusion: Don’t Let Portugal’s Tax System Catch You Off Guard

So, what are the taxes in Portugal really like? They’re manageable, but only if you understand them. The Portugal tax rate system is progressive, the country taxes foreign income depending on your residency, and the deadlines matter. While Portugal taxes for expats have changed over the years, the country remains an attractive destination with proper planning.

If you’re relocating, investing, or retiring in Portugal, it's important to approach taxes in the right way. That means understanding your obligations, leveraging available tax benefits, and getting tailored advice to your own situation.

Need help with your taxes in Portugal?

We specialise in relocation, tax strategy, and business setup for global professionals landing in Portugal.

Join a growing, connected international community that is thriving in some of the fastest growing corners of the world. Portugal - now; Spain - soon; the rest of the world - to come. 

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