PORTUGAL TAX GUIDE

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PORTUGAL TAX GUIDE

 

 

Are you considering moving to live in Portugal?

PORTUGAL is increasingly a popular destination to move to, chosen not only by retirees but also by young remote workers or digital nomads, by families looking for a welcoming destination or by entrepreneurs looking for different incentive schemes.

Portugal is a country to which we are linked professionally and by long experience and exposure to different territorial realities, from the capital Lisbon to the beautiful Porto and the jewels of the Algarve.

Portugal, the P in the famous PIGS acronym that includes Italy, Greece and Spain, also experienced a further expansion of its debt position during the pandemic, which resulted in a debt/GDP level of up to 135.2%.

Now the government, driven by the rising cost of debt, has a plan to significantly reduce it to around 100% of GDP, through 2 routes that both impact the lives of Portuguese residents.

A reduction in spending, which if it does not go through a reduction of the state perimeter, turns into a reduction of services, from transport to health.

An increase in taxation, of which the example of the recent decisions on the taxation of the crypto world, initially used to attract residents to Portugal, is the evidence of this path.

 

PORTUGAL TAX GUIDE

PORTUGAL TAX GUIDE

 

TABLE OF CONTENTS, PORTUGAL TAX GUIDE

 

  1. TABLE OF CONTENTS, PORTUGAL TAX GUIDE
  2. HOW TO CHOOSE A COUNTRY
  3. PORTUGAL TAX GUIDE
  4. TAX REGIME AND TAXATION IN PORTUGAL
  5. DOUBLE TAXATION AGREEMENTS SIGNED BY PORTUGAL
  6. NON-HABITUAL RESIDENTS OR NHR
  7. NON-HABITUAL RESIDENT TAX REGIME FOR PROFESSIONALS
  8. NON-HABITUAL RESIDENT TAX REGIME FOR PENSIONERS
  9. PROPERTY TAX
  10. INHERITANCE TAX
  11. VAT
  12. PORTUGAL CRYPTO TAXATION
  13. INTERNATIONAL TAXATION

  

 

HOW TO CHOOSE A COUNTRY

 

To evaluate a country to expatriate with a professional approach, anyone has to have regard to several elements but Portugal is certainly a country with a mild, hospitable and welcoming climate, a relaxed lifestyle, a variety of landscapes and natural beauty and a rich cultural, artistic and historical heritage.

For these and many other reasons, it is often on the list of the best countries in Europe to move to.

Favourite destinations are the capital Lisbon, but also Porto or the famous Algarve area with its 150 kilometres of coastline in the south of Portugal, where life flows more peacefully and in contact with beautiful natural areas.

 

When choosing a country, whether it be

  • of Expatriation,
  • of Investment,
  • of domiciling a business and a company,
  • of opening a market,
  • to carry out one’s professional activity,
  • to transfer one’s pension or
  • to be a digital nomad in smart working,

 

we have developed a model covering

6 macro-areas from the Geo-Political to the Macro-Economic situation, to then identify the well-known fiscal or regulatory issues

both in relation to individuals and to corporate or asset protection structures.

We offer a highly qualified professional advice, to compare the legal, tax, wealth, regulatory, financial, macro-economic, geo-political implications of these choices amongst different jurisdictions, considering the country of choice to be a fiscal resident, to locate assets, to domicile a company

 

The indicated advisory model and methodology are based on a specific foundation of academic studies, professional practices and experiential observations, which show how a country based on an extensive, pervasive and bureaucratic state, leads to a macroeconomic situation in which deficit and debt go into a direction of out-of-control growth that feeds on itself.

 

This condition is also present in many developed countries, in Europe in the PIGS (Portugal, Italy, Spain, Greece) joined during the pandemic by France, Cyprus and the UK, leading to an increased consumption of public resources, a country starved of taxes and debt that are then demanded from its tax residents, who are subject to taxation on all income and assets worldwide with an added obligation of a declaratory regime

 

PORTUGAL TAX GUIDE

 

Portugal is a country to which we are linked professionally and with a long experience and exposure to different territories, from the capital Lisbon to the beautiful Porto and the jewels of the Algarve.

 

On this page, we present a schematic guide to taxation in Portugal for different regimes and income categories.

 

 

TAX REGIME AND TAXATION IN PORTUGAL

 

From a fiscal point of view, one must first consider that Portugal, like Italy and Spain, is a country that applies worldwide taxation, i.e. the taxation of all income wherever it is produced and not only that produced in the country of residence, unlike countries with territorial taxation and a non-dom tax regime such as Malta.

Portugal, like many tax regimes in force in Europe and around the world, e.g. Italy, Switzerland, Spain, the USA, etc., applies the worldwide taxation regime to residents who are Portuguese citizens or foreigners who spend more than 183 days per year in Portugal, considering the person to be resident there for tax purposes.

 

You may also be considered resident if you have stayed for a period of less than 183 days if you have a rented or owned dwelling proving your intention to reside permanently in the country.

 

In Portugal, there are 6 categories of personal income subject to taxation:

 

– A: Income from employment

– B: Self-employment income

– E: Investment income

– F: Rental income

– G: Capital incomes

– H: Pensions.

 

 

Standard taxation for individuals ranges from 14.50% up to 48%.

There is also an additional solidarity surcharge, applied as follows:

2.5 per cent on annual taxable income between EUR 80,000 and EUR 250,000

5 per cent on annual taxable income over EUR 250,000.

 

Many municipalities impose a derrata or additional tax on personal income.

The autonomous regions of Madeira and the Azores and Madeira have favourable tax regimes.

 

 

Capital gains are taxed at 28% (PIT)

Portuguese residents are subject to PIT on capital gains related to Portuguese assets and anywhere in the world (worldwide).

Capital gains related to real estate acquired after 1 January 1989 are taxed at progressive rates on 50% of their value.

 

 

Corporate income taxes start from 17% up to 23%, plus an additional state tax levied on some assets from 3% to 7%.

 

The taxation regime in Portugal for natural persons, updated to 2022:

 

Taxable IncomeRateDeductible
Up to 7,11614.5%0.00
Over 7,116 to 10,73623.0%604.86
Over 10,736 to 15,21626.5%980.63
Over 15,216 to 19,69628.5%1,284.99
Over 19,696 to 25,07635.0%2,565.21
Over 25,076 to 36,75737.0%3,066.79
Over 36,757 to 48,03343.5%5,455.84
Over 48,033 to 75,00945.0%6,176.56
Over 75,00948.0%8,426.51

 

 

 

DOUBLE TAXATION AGREEMENTS SIGNED BY PORTUGAL

 

It is certainly important to know and consult the up-to-date list of double taxation agreements signed by Portugal necessary to know the tax regime to be considered for each category of income and assets in order to avoid double taxation for taxpayers in many cases.

 

 

NON-HABITUAL RESIDENTS OR NHR

 

Since 2009, Portugal has introduced a special and favourable tax regime to attract qualified professionals, entrepreneurs and pensioners, namely that of non-habitual residence.

It can be applied for by those who have not been resident in Portugal in the 5 years prior to the application and have resided for at least 183 days in the Portuguese territory or if they have resided for a period of less than 183 days they must have a rented or owned dwelling proving that they intend to reside permanently in the country.

You can prove that you have not been resident in Portugal in the previous 5 years by means of a historical certificate of residence to be requested from the Italian municipality of residence, if you were resident in Italy, or in other countries of previous residence.

The application for special status must be submitted to the Portuguese Tax Authority, online or in paper form, by 31 March of the following year, presenting the necessary supporting documentation:

 

– Portuguese tax code or NIF

– residence certificate

– rental or property purchase contract

– document or work contract certifying the listed high-value activity carried out or being a pensioner

– current account.

 

Income received in Portugal

The favourable status and regime for income from employment or self-employment with high added value, mentioned in a specific list, or for pension income has a duration of 10 years and you must remain resident in the country. After the 10 years have elapsed, you revert to the ordinary regime.

There are also facilitative regimes for members of maritime or

aircrew of entities having their residence, seat or management in Portugal.

Other types of income received in Portugal from real estate, interest, dividends, capital gains and royalties are taxed at the ordinary rate of 28%.

 

Income received outside Portugal

Under the non-habitual non-resident regime, passive income such as interest, dividends, royalties and capital gains from foreign sources as well as salaries, pensions, professional income and real estate rentals are also not taxed in Portugal, provided they are not considered to be received in Portugal.

However, care must be taken because such income is subject to taxation in the source state, as provided for by the Double Taxation Conventions or in accordance with OECD models.

If this is not the case, such income is taxable in Portugal at the ordinary progressive rate taking into account other income.

If the source of the foreign income is in a privileged tax country, such income is taxed at the ordinary rate in Portugal.

The NHR programme for NON-HABITUAL RESIDENTS has been CANCELLED by the Portuguese government as of the fiscal year 2024 (it remains in place with all the benefits for persons who have already obtained the status or who have successfully registered as NHRs during 2023 before its expiry and in compliance with the envisaged transitional regime).

As of 2024, a new special programme is established which is very limited in terms of taxation raised to 20% and for the beneficiaries involved who must be employees of Start-Ups and R&D Sectors

 

 

 

 

NON-HABITUAL RESIDENT TAX REGIME FOR PROFESSIONALS

 

The favourable tax regime, which has a duration of 10 years, can only be claimed by professionals who are included in the special list issued by the government in a table that was updated by Order No. 230/2019 of 23/07/2019, which indicates which activities have a high added value for the Portuguese labour market, such as general administrators, directors of administrative services, hotel and restaurant managers, university lecturers, specialists in physics, mathematics, engineering, doctors, dentists, journalists, authors, artists and certain specialised workers or farmers.

A 20% withholding tax is levied on income from listed high value-added activities received in Portugal.

 

 

NON-HABITUAL RESIDENT TAX REGIME FOR PENSIONERS

 

Pensioners can transfer their residence to Portugal and then apply for the special tax regime as a non-habitual resident.

For pensioners, the special regime in Portugal previously provided for zero taxation of private pension income for 10 years, but a 2020 law now provides for taxation of the pension at 10%.

The relief is applicable for Italian pensions that can be transferred gross abroad, not for pensioners receiving pensions as former employees of public entities.

 

 

PROPERTY TAX

 

There is a municipal tax on real estate IMI or Imposto Municipal sobre Imóveis that can change in the different municipalities, depending on the value of the property ranging from 0.3 to 0.45 % on urban properties and 0.8 % on rural properties.

The transfer of property is subject to tax varying from 0 to 10% depending on the value of the property, whether it is urban or rural property, and whether it is a first, second or other dwelling.

 

 

INHERITANCE TAX

 

In Portugal, taxation for inheritances or gifts to spouses, parents and children or grandchildren takes the form of a 10% stamp duty on transfers.

 

VAT

 

The standard VAT rate is set at 23% with two reduced rates at 6% on food, pharmaceuticals and electricity and 13% on wine.

 

 

PORTUGAL CRYPTO TAXATION

 

Portugal does not consider cryptocurrencies as an asset, but rather as a form of payment, so the country does not tax them in the same way as the former. In essence, crypto currencies are treated like any other currency.

 

Portugal promotes the jurisdiction as a country where crypto currencies are not taxed, through formal positions of the Portuguese Tax Authority (PTA)

Therefore, individuals who buy and sell cryptocurrencies are not subject to paying capital gains tax or VAT.

 

For the Portuguese tax agency, therefore, the sale of cryptocurrencies is not taxable under current tax law, unless it constitutes a professional or business activity of the taxpayer, in which case it will be taxed under category B.

 

In essence, crypto trading is NOT taxable if it is NOT done on a regular basis and is NOT a primary or secondary source of income.

 

For the Portuguese tax authority (Tributação das cripto-moedas ou moedas virtuais),

 

The income generated by trading can fall into three different categories:

 

  • capital gains or capital gains from the sale of shares, real estate or other assets G
  • capital income, dividends, interest … E
  • commercial or professional income B

 

The first category G refers to the sale of securities, financial derivatives, certificates whose holders may receive value from an underlying asset, and some other instruments and cryptocurrencies are not included in the list. The same applies to category E.

Where applicable, Category B takes precedence over the other two.

 

In MAY 2022, the Portuguese state officially announced that the government will not only tax cryptocurrency earnings, but cryptocurrencies will be included in other types of taxation, such as VAT (known as IVA) and stamp duty (known as Imposto de Selo).

 

 

 

INTERNATIONAL TAXATION

 

A customized, multi-country Tax consultancy service for the internationalization and protection of individuals, investors and companies, in relation to their income and assets situation.

 

European and International clients ask for a multi-countries service, where the taxation advisory about different countries, including the country of origin and the country of destination, fits their individual profile, income, wealth.

Clients are looking for compliance, efficiency, independence, global know-how, speed, therefore we offer:

Are you cash rich and time poor?

A personalised professional Taxation and Legal Advisory service, for the choices of Expatriation, transfer of Residence abroad and protection of Individuals and Businesses with the comparison between your jurisdiction, Malta and 30 other countries

 

with analysis of specific individual needs and identification of opportunities and solutions offered by a re-domiciliation of Individuals, Families, Investors, Companies, or assets to Malta and other 30 different countries, an International Advisory service with solutions and opportunities in and from Malta with respect to your jurisdiction of origin and other countries in Europe or outside Europe:

 

We offer a highly qualified professional advice, to compare the tax implications amongst different jurisdictions of these sources of Income and investments, considering the Intermediaries involved in the transactions, the location of the Asset, the residence and citizenship of the Owner

 

For all your legal, tax, corporate governance and residence advice needs for individuals and companies, contact us here