If you're moving to Portugal, here's how taxes work

Nobody likes tax surprises in a new country. Here's exactly how Portugal's tax system affects expats, with real numbers and rates.

Tax System Overview

Income Tax in Portugal

Portugal operates a progressive income tax system, meaning higher earners pay a higher percentage on their income above certain thresholds. The top marginal rate is 48%.

What Does This Mean in Practice?

On a gross annual salary of €90,000, you would pay an effective tax rate of approximately 21.4%, resulting in a net monthly income of approximately €5,240. This accounts for income tax and mandatory social contributions.

For context, the average monthly salary in Portugal is approximately €1,436.

VAT (Value Added Tax)

The standard VAT rate in Portugal is 23.0%. VAT is included in consumer prices and applies to most goods and services. Reduced rates typically apply to:

• Basic food items and groceries
• Medical supplies and pharmaceuticals
• Books and educational materials
• Public transport (in some cases)

Special Tax Regimes for Expats

Yes — nhr. IFICI (ex-NHR 2.0): Flat 20% tax on qualifying income for 10 years. Replaces old NHR regime from Jan 2024

If eligible, these regimes can provide substantial savings during your initial years in Portugal. Always verify current requirements with a qualified tax professional, as rules change frequently.

Tax Filing Requirements

As a tax resident of Portugal, you are generally required to:

1. Register with tax authorities upon establishing residence
2. Obtain a tax identification number
3. File an annual tax return (deadlines vary)
4. Declare worldwide income if you are a tax resident
5. Report foreign bank accounts if applicable

Double Taxation

Portugal has double taxation agreements (DTAs) with numerous countries. These treaties determine which country has the right to tax specific types of income and help prevent you from being taxed twice on the same income. Before moving, check whether a DTA exists between Portugal and your home country.

Tax Tips for Expats

• Hire a local tax adviser familiar with expat situations during your first year
• Keep records of all income, deductions, and tax payments from day one
• Understand residency rules: most countries consider you a tax resident after 183 days
• Check for exit tax: some countries impose tax on unrealised gains when you leave
• Social security contributions are often separate from income tax and can add 10-20% to your total burden

Additional Practical Information

The following information is compiled from expat community sources and recent reports to complement the official data above.

Key Institutions and Services

Based on current expat reports, the following organisations and services are relevant for newcomers to Portugal:

• Portuguese Tax Authority

Additional Data Points

Recent reports and expat sources provide these additional figures for Portugal:

• If you stay in Portugal for more than 183 days in a calendar year, you will be identified as a tax resident . In this case, you will need to pay income tax on your earnings — whether they come from local sources or from abroad.
• Currently, IRS ( tax on income or Imposto sobre o Rendimento das Pessoas Singulares ) percentages can range from 0% (if you earn the minimum wage) to 47.17% (if you make over 20.221 €/month), with plenty of other brackets in between. Furthermore, you'll be paying a flat rate 11% of your paycheck towards your future public retirement fund ( Segurança Social ), while the remaining taxes (IRS) will depend on how much you make. These tax rates apply to everyone working for a Portuguese company .
• AIMI (Adicional Imposto Municipal Sobre Imóveis) is an additional property tax that was introduced in 2017. AIMI applies to homeowners whose property is valued (VPT) at 600,000€ or above. These are the current tax brackets for the AIMI:
• Regarding rental income , taxes are paid by homeowners who have decided to rent out their property. In this case, you will be taxed on the profits from renting out your house or apartment. The rental income rate is set at 25%, but landlords can get a tax discount if they rent out their property for 5 (15%), 10 (15%), or 20 years (5%).
• Companies in Portugal pay taxes (IRC) at a flat rate rate of 20%. Municipality payments also apply (up to 1.5%, depending on location). There is also an additional charge called Derrama Estadual if a business makes over a certain amount in taxable profits:
• As the government in Portugal offers strong support to small and mid-sized companies , they can pay a reduced tax rate (16%) on their first taxable profits of 50.000€. Plus, small businesses (with an annual turnover of under 200,000€) can use a simplified tax scheme and choose to pay taxes on their turnover instead of profit.

Additional data sourced from expat community reports. All information should be verified with official sources.