When considering immigration to a country, there are many factors to consider; education, healthcare, living standard, living costs, and much more. However, there is one more vital issue you need to look into before choosing a new home, which is taxes in Portugal. 

Portugal, thanks to its prominent golden visa program, has long been a favorable destination for the world’s elite. While its educational and healthcare infrastructures have been well documented, a comprehensive explanation of the taxation framework within the EU nation is rarely found, and that is exactly what we aim to cover in this piece. 

We will discuss the most significant taxes in Portugal you’ll need to consider as a Portuguese residency cardholder, as well as the Non-Habitual Resident (NHR) tax incentive scheme that makes Portugal a remarkable place to live in without needing to worry about taxes draining your treasury. 

Taxes in Portugal

Portugal follows the financial regulatory standard set out by the EU, but maintains its sovereignty when it comes to setting out its internal tax regimen. Taxes in Portugal are regulated by the Portuguese Taxes and Customs Authority . Below are the major taxes you should consider before immigrating to Portugal.

Property taxes in Portugal

Considering that the Portuguese golden visa is one of the most popular routes chosen by prospective immigrants, and that, historically, more than 90% of applicants have chosen the real estate option to obtain the golden visa, it is paramount to understand what taxes come along with owning a property in Portugal.

The government imposes a federal tax on immovable property, known as the IMI tax, at a rate ranging between 0.45-0.8% of the original value, depending on the property’s value, location, and use. Those who own properties in low-density urban areas worth less than 125,000 Euros may qualify for an IMI tax exemption if they live in it themselves. 

There is an additional municipal property tax, or the Adicional Imposto Municipal Sobre Imóveis (AIMI) levied upon those who own properties worth more than 600,000 Euros. The AIMI is taxable at a rate ranging between 0.4-1%. 

Resident and non-resident property owners alike are liable for property taxes and must pay them annually. It is also worth noting that those looking to rent out their property for a profit will have to pay rental income tax at a flat rate of 28%. 

Income Taxes in Portugal

Income taxes are normally divided into two sections; personal and corporate income taxes, so let’s take a closer look at each. 

Personal income taxes in Portugal

Personal income tax is levied upon salaries, wages, dividends, and other personal income an individual earns per year. Portugal does worldwide tax income, but only if the person receiving it is a tax resident in Portugal (lives at least 183 days in Portugal) and brings that money into the EU nation. It does not, however, tax non-residents in the manner the US does, for example. 

Personal income tax is paid on a progressive scale ranging from 14.5 to 48%, depending on the amount earned per year. The table below shows the breakdown of personal income tax brackets.

Corporate income taxes in Portugal

When it comes to taxing businesses on their annual income, things are much more straightforward, as corporate income is taxed at a flat rate of 21% (or 14.7% in the Autonomous Regions of Madeira and Azores).

Small and medium enterprises can benefit from a reduced corporate income tax rate of 17%, or 11.9%,in Madeira and Azores.

Corporations are also liable for income tax surcharges of 1.5%, and it may go up if they surpass a certain income threshold, as shown below:

• 3% on taxable profit exceeding 1.5 million euros and up to 7.5 million euros
• 5% on taxable profit exceeding 7.5 million euros and up to 35 million euros
• 9% on taxable profit exceeding 35 million euros.

Wealth Taxes in Portugal

There are no wealth taxes in Portugal other than the aforementioned tax on properties worth more than 600,000 euros, making it a perfect location to hold your capital. 

The robust financial services and banking sector makes it a great location to store, move, and access capital easily without worrying about taxes every time you make a financial move. 

Portugal tax laws

Portugal’s tax laws are in a state of continuous flux, with small changes coming in every now and then, but nothing major looms on the horizon. The nation does implement other types of taxes that may affect one’s wealth if not planned for, such as capital gains tax, which is paid at a flat rate of 28% for residents and 25% for non-residents, as well as withholding taxes, as shown in the table below.

Portugal also has double taxation treaties with a staggering 80 nations (click for full list) around the world, meaning investors who obtain a golden visa can set up shop in Portugal and operate on the tax regime they deem most suitable to any specific situation. 

The EU nation does value bringing global investors to its shores, which is why it has many tax incentives in place, none as popular as the NHR. 

NHR

The NHR tax scheme can provide investors with a hugely beneficial foundation on which to base their wealth management framework. Successful NHR applicants can get tax incentives for up to ten years. 

NHR’s income is taxed at a flat rate of 20% regardless of the amount they earn. This rate applies to both employed or self-employed people who operate in high-value-added activities such as the ones shown below. 

• Architects, engineers, and similar technicians.
• Fine artists, actors, and musicians.
• Auditors.
• Doctors and dentists.
• Professors.
• Psychologists.
• Liberal professions, technicians, and similar.
• Investors, directors, and managers.

Qualifying for the NHR scheme is straightforward, and the requirements align perfectly with the requirements of maintaining the Portuguese golden visa, especially if one obtained it through investing in real estate. The criteria to qualify for NHR is:

• Become tax resident under Portuguese domestic legislation; and 
• Not having been taxed as a Portuguese resident in the five years before taking up residence in Portugal.

The NHR system is sometimes combined with the D7 visa as there is a strong synergy between the programs. If you’d like to learn more on the D7 program read our article on the subject: Golden VS D7 Visa; Which Portuguese Immigration Route is Right For You?

If you would like to know more about the taxation framework in Portugal, the NHR scheme, or the Portuguese golden visa, contact us today to book a free and comprehensive consultation with one of our experts.