We will examine the specifics of the Portuguese tax system in this guide. This covers who is subject to taxes in Portugal, business and property taxes, Portuguese taxes for foreigners, and other tax benefits the country provides.
You must file a tax return and pay taxes on your income and assets if you live and/or work in Portugal. Although foreigner taxes in Portugal can change based on your situation, it’s still crucial to know how much you owe.
In addition to answering frequently asked concerns concerning taxes in Portugal for foreigners and the tax benefits you can qualify for based on your residency status, we’ll go over all of these crucial information in this guide.
It’s a good idea to thoroughly comprehend Portugal’s tax structure, regardless of whether you currently reside here or are thinking about moving there.
Portugal’s Tax System
Both national residents and foreign nationals who make money in Portugal are obligated to pay personal income tax under Portuguese law. This implies that everyone in the country who receives income from their jobs, capital, businesses, personal labor, property, or pensions is required to file an IRS tax return.
Property Taxes in Portugal
The immovable rate for urban properties in Portugal ranges from 0.3% to 0.5% when it comes to property taxes. In contrast, the annual immovable tax rate for rural property is 0.8%.
Property owners in the nation, whether locals or foreigners, must pay the appropriate taxes on their holdings. You will be subject to an income tax rate ranging from 14% to 48% if you are a resident renting out your property. The flat tax rate for non-residents renting out real estate is only 25%.
When you decide to sell your house in Portugal, property taxes are also due. Residents only have to pay 50% of the profits they make from the sale, which is known as the capital gains tax. Conversely, non-residents pay 100% of the earnings from the sale in taxes. However, the Portuguese government does not collect a capital gains tax from citizens who sell one piece of property to buy another.
Resident Income Tax Rates
You should fully comprehend resident income tax rates, particularly those for foreigners, if you now reside in Portugal or are considering doing so. Residents currently pay taxes in a progressive manner, with rates ranging from 14.5% to 48%.
Portugal levies income tax on a wide range of wages in a number of different categories. This comprises earnings from traditional jobs and self-employment as well as income from real estate ventures like renting out homes. Capital gains, pension income, and investment returns are also subject to taxes. The nation’s progressive tax system, which establishes the relevant rate depending on the total amount generated throughout the fiscal year, assesses each of these income kinds.
The country’s tax year lasts from January 1 to December 31. In Portugal, income-related foreign taxes must be paid by June 30 of the subsequent tax year. The deadline for paying taxes that are already due is August 31.
Corporate Taxation in Portugal
Corporate taxation is imposed on each business that generates revenue in Portugal; the rates vary by area. Companies located in the autonomous territory of Madeira are subject to a significantly lower corporate tax rate of 20% than the usual rate of 21% in mainland Portugal. With corporation taxes at 16.8%, the Azores have the best rate. For the first €25,000 of taxable income, small and medium-sized businesses (SMEs) that are mainly involved in commercial, industrial, or agricultural operations are subject to a lower rate of 17%. Any income over this amount is subject to taxation at the usual rates in the area in which it is earned.
Unless they are producing income that is eligible for a 35% tax rate, companies that are not permanently based in Portugal and/or do not have a registered office there are required to pay 25% in corporation taxes.
Regardless of the taxpayer’s total income, some forms of income in Portugal are subject to a flat tax rate of 35%. Winnings from raffles, lottery games, and other like contests are subject to this rate. Earnings deposited into accounts owned by one or more people on behalf of third parties are also included. The Portuguese government’s efforts to deter the use of offshore structures for tax avoidance are also reflected in the higher tax rate applied to income earned by businesses based in jurisdictions regarded as tax havens—areas or nations with particularly advantageous tax regimes.
International Taxes in Portugal
Taxes must still be paid to the Portuguese government by residents who reside in other countries. The progressive tax rate of 14.5% to 48% is still in effect in this instance. However, Portuguese citizens may also be required to pay government taxes, depending on the country in which they reside.
Under one of the double taxation treaties that include Portugal, you can be able to pay greater or lesser taxes, depending on where you’re from. The specifics of this will be covered in more detail later in the guide.
Portugal Citizenship by Investment route may be a wise choice for individuals seeking to maximize their tax planning while obtaining entry into the European Union. The Golden Visa scheme enables investors and their families to get residency and then seek for citizenship after five years without having to relocate, even though Portugal itself does not directly give citizenship in exchange for investment. This long-term path gives access to Portugal’s generally advantageous tax system, including the possibility of becoming eligible for the Non-Habitual Resident (NHR) tax status, which can grant substantial 10-year exemptions on foreign income, including dividends, royalties, and pensions. Investors can lawfully take advantage of these tax breaks as they work toward EU membership by establishing residency through the Golden Visa.
