An introduction to Tax in Portugal

Portugal has a tax system that is based on the residency status of an individual. If a person from the UK becomes a tax resident in Portugal, they will be subject to Portuguese taxes on their worldwide income and assets.

Residents are taxed on their income from all sources, including salaries, pensions, investment income, and rental income. The tax rate varies between 14.5% and 48% depending on the amount of taxable income.

In Portugal, non-residents are only taxed on their Portuguese-sourced income, such as rental income from Portuguese properties. The tax rate for non-residents is 25% on their taxable income.

It's important to note that the tax laws in Portugal are subject to change, so it's always a good idea to consult with a tax professional for up-to-date information and for help in determining your residency status and tax obligations.

Disclaimer:
It's important to note that the tax laws and regulations in Portugal are complex and subject to change. It is advisable to consult a tax professional for up-to-date and specific advice on taxes in Portugal.

Do foreigners pay taxes in Portugal?

Yes, foreigners are subject to taxes in Portugal, but the tax laws and obligations will depend on their residency status.

If a foreigner is a tax resident in Portugal, they will be subject to Portuguese tax laws and will be required to pay taxes on their worldwide income, as well as any Portuguese-sourced income.

If a foreigner is not a tax resident in Portugal, they will only be subject to Portuguese taxes on their Portuguese-sourced income, such as rental income from Portuguese property, pensions, dividends, and capital gains on the sale of Portuguese assets.

It is important for foreigners to understand their tax obligations in Portugal, as failure to comply with Portuguese tax laws can result in significant fines and penalties.

If you are a foreigner in Portugal, it is recommended that you seek the advice of a tax professional to ensure that you are aware of your tax obligations and are in compliance with Portuguese tax laws.

Frequently asked questions and answers about taxes in Portugal:

• What is the personal income tax rate in Portugal? The personal income tax rate in Portugal ranges from 14.5% to 48% depending on the amount of income earned.
• Do I need to pay taxes on my foreign income in Portugal? Yes, foreign income is subject to tax in Portugal if you are a tax resident there. Tax residency is determined by the number of days you spend in the country, among other factors.
• What is the corporate tax rate in Portugal? The corporate tax rate in Portugal is 21%.
• Is there value added tax (VAT) in Portugal? Yes, value added tax (VAT) is levied in Portugal at a standard rate of 23%.
• Are there any tax incentives for foreign businesses in Portugal? Yes, there are several tax incentives for foreign businesses in Portugal, including the non-habitual residents regime, which offers a flat tax rate of 20% on certain types of foreign income for a period of 10 years, and the Golden Visa program, which provides residency to foreign investors in exchange for real estate investments in the country.
• What is the deadline for filing tax returns in Portugal? The deadline for filing personal income tax returns in Portugal is usually in April of the year following the tax year. The deadline for filing corporate tax returns is usually in November of the year following the tax year.
• Can I get a tax refund if I am a non-resident in Portugal? Yes, it is possible to get a tax refund if you are a non-resident in Portugal and have overpaid taxes. You will need to file a tax return to claim the refund.

It's important to note that the tax laws and regulations in Portugal are complex and subject to change. It is advisable to consult a tax professional for up-to-date and specific advice on taxes in Portugal.

What countries have a double tax treaty with Portugal?
Portugal has entered into double tax treaties with a number of countries to avoid double taxation of income earned by residents of one country in the other country.

The aim of these treaties is to provide tax certainty and avoid taxation on the same income in two different countries.

Countries that have a double tax treaty with Portugal as of August:2021

• Algeria
• Andorra
• Angola
• Austria    
• Bahrain    
• Barbados
• Belgium    
• Brazil    
• Bulgaria
• Canada    
• Cape Verde    
• Chile
• China    
• Croatia    
• Colombia
• Cyprus    
• Czech Republic    
• Cuba
• Denmark    
• East Timor    
• Estonia
• Ethiopia
• France    
• Germany
• Georgia    
• Greece    
• Guinea
• Hong Kong    
• Hungary    
• Iceland
• India    
• Indonesia    
• Ireland
• Israel    
• Japan    
• Kenya
• Italy    
• Ivory Coast    
• Korea (Rep.)
• Kuwait    
• Latvia    
• Lithuania
• Luxembourg    
• Macao    
• Malta
• Mexico
• Moldova    
• Montenegro
• Morocco    
• Mozambique    
• Netherlands
• Norway    
• Pakistan    
• Panama
• Peru    
• Poland    
• Qatar
• Romania    
• Russia    
• San Marino
• Sao Tome
• Saudi Arabia    
• Senegal
• Singapore    
• Slovenia    
• Slovakia
• South Africa    
• Spain    
• Sweden
• Switzerland    
• Tunisia    
• Turkey
• U.A.E.    
• U.K.    
• Uruguay
• U.S.A.    
• Ukraine    
• Venezuela
• Vietnam

It is important to note that the list of countries with a double tax treaty with Portugal may change over time, and that the terms of the treaties may also change.

It is therefore recommended that you seek the advice of a tax professional to ensure that you are aware of the latest information regarding double tax treaties between Portugal and your home country.

Non-residents tax in portugal

In Portugal, non-residents are subject to tax on their Portuguese-sourced income. This includes income from rental properties, pensions, dividends, and capital gains on the sale of Portuguese assets.

The tax rate for non-residents in Portugal is generally 25%, although there are some exceptions. For example, if the non-resident is a resident of a country with which Portugal has a tax treaty, the tax rate may be lower.

It is important for non-residents to understand their tax obligations in Portugal, as failure to comply with Portuguese tax laws can result in significant fines and penalties.

Non-residents must file an annual tax return in Portugal, reporting their Portuguese-sourced income. They may also be required to make estimated tax payments throughout the year.

If you are a non-resident in Portugal, it is recommended that you seek the advice of a tax professional to ensure that you are aware of your tax obligations and are in compliance with Portuguese tax laws.

How do I become a tax resident in Portugal?

To become a tax resident in Portugal, you will need to meet certain criteria set by Portuguese tax law.

Here are the steps to becoming a tax resident in Portugal:

• Establish a tax domicile: To be considered a tax resident in Portugal, you must have your tax domicile in the country. This means that you must have a permanent home in Portugal, such as a rented or owned property, where you reside for at least 183 days of the year.
• Spend time in Portugal: In addition to having a permanent home in Portugal, you must also spend a significant amount of time in the country. This means that you must reside in Portugal for at least 183 days of the year, or 183 days during a two-year period.
• Register with the Portuguese authorities: Once you have established your tax domicile and are spending a significant amount of time in Portugal, you must register with the Portuguese authorities. This involves obtaining a tax identification number and registering with the tax office.
• Notify your home country: If you are a citizen of another country, you may also need to notify your home country of your change in tax residency. This will depend on the tax laws of your home country and any tax treaties that may be in place between Portugal and your home country.

It is important to note that the criteria for tax residency in Portugal may change over time, so it is important to seek the advice of a tax professional to ensure that you are aware of the latest requirements.

Additionally, becoming a tax resident in Portugal may have tax implications for your worldwide income, so it is important to understand the tax implications of your decision before becoming a tax resident in Portugal.

Is there double taxation between Portugal and the UK?’

Yes, there is the possibility of double taxation between Portugal and the United Kingdom, as both countries have their own tax laws and systems.

However, a double tax treaty exists between the two countries to avoid double taxation of the same income.

The double tax treaty between Portugal and the United Kingdom sets out the rules for the taxation of income earned by residents of one country in the other country.

Under the treaty, certain types of income, such as dividends, interest, and royalties, are taxed in the country of residence of the recipient, while other types of income, such as employment income, may be taxed in the country where the income is earned.

By reducing the risk of double taxation, the double tax treaty between Portugal and the United Kingdom provides tax certainty for residents of both countries and encourages cross-border trade and investment.

It is important to note that the terms of the double tax treaty between Portugal and the United Kingdom may change over time, so it is recommended that you seek the advice of a tax professional to ensure that you are aware of the latest information regarding the treaty and the implications for your specific circumstances.

Are Portuguese citizens taxed worldwide income?

Yes, Portuguese citizens are generally taxed on their worldwide income if they are tax residents of Portugal. The Portuguese tax system applies to individuals who are considered tax residents in Portugal.

A tax resident is defined as someone who spends more than 183 days per year in Portugal or has their main place of economic activity in Portugal.

As a tax resident in Portugal, a Portuguese citizen will be subject to Portuguese tax laws and will be required to declare and pay taxes on their worldwide income, including income from foreign sources.

This income may include salary and wages, rental income, capital gains, dividends, and interest.

It is important for Portuguese citizens to understand their tax obligations in Portugal, as failure to comply with Portuguese tax laws can result in significant fines and penalties. If you are a Portuguese citizen and have questions about your tax obligations, it is recommended that you seek the advice of a tax professional.

How do taxes in Portugal compared to other European countries 

The tax system in Portugal is comparable to other European countries in terms of the types of taxes that are imposed, but the specific tax rates and rules may differ.

In general, Portugal has a progressive income tax system, with higher tax rates for higher levels of income. The standard VAT rate in Portugal is 23%, which is similar to the VAT rates in many other European countries.

Portugal also has a property tax, a wealth tax, and various social security contributions that are similar to those in other European countries.

Compared to other countries, Portugal has a relatively low corporate tax rate of 21%. This, combined with other tax incentives, has made Portugal an attractive destination for foreign investors and companies.

However, it is important to note that tax systems can vary greatly between countries and that the tax laws and rules in Portugal may be subject to change.

If you are considering moving to or investing in Portugal, it is recommended that you seek the advice of a tax professional to understand the specific tax implications for your situation.

Is Portugal a tax haven?

No, Portugal is not considered a tax haven. Tax havens are typically defined as countries or territories with low or no tax rates, lax tax regulations, and a lack of transparency.

While Portugal does have a relatively low corporate tax rate of 21%, it is not a tax haven in the traditional sense. Portugal has a well-developed tax system and is a signatory to various international agreements and treaties aimed at promoting tax transparency and preventing tax evasion.

Portugal has also been working to improve its tax system in recent years, and it has adopted various measures to prevent tax avoidance and improve tax collection.

These measures include increased tax inspections and audits, stricter penalties for tax evasion, and the implementation of a tax reporting system for Portuguese residents with foreign income.

In conclusion, while Portugal may offer certain tax benefits, it is not considered a tax haven, and individuals and businesses operating in Portugal are expected to comply with Portuguese tax laws and regulations.

Can you live in Portugal tax free?

No, it is not possible to live in Portugal tax-free. All residents of Portugal are subject to Portuguese tax laws, regardless of their nationality or the source of their income.

Residents of Portugal are required to pay taxes on their worldwide income, including salary and wages, rental income, capital gains, dividends, and interest.

The Portuguese tax system is based on a progressive income tax system, with higher tax rates for higher levels of income. The standard VAT rate in Portugal is 23%, which is applied to the sale of goods and services in the country.

In addition to income tax and VAT, Portuguese residents may also be subject to other taxes, such as property tax, wealth tax, and social security contributions.

It is important for residents of Portugal to understand their tax obligations and to comply with Portuguese tax laws, as failure to do so can result in significant fines and penalties.

If you have questions about your tax obligations in Portugal, it is recommended that you seek the advice of a tax professional.

Do I have to pay tax when I sell a property in Portugal?

Yes, you may be required to pay tax when you sell a property in Portugal. The tax implications of selling a property in Portugal will depend on several factors, such as your residency status, the type of property being sold, and the amount of profit made from the sale.

For Portuguese residents, capital gains tax will be payable on the sale of a property in Portugal.

The capital gains tax rate is typically 28% for residents, although there are exemptions and reductions available for certain situations, such as the sale of a main residence.

For non-residents, a withholding tax of 28% is usually deducted from the sale proceeds and paid to the Portuguese tax authorities. This withholding tax is treated as a final settlement of tax obligations for non-residents, and further tax may not be payable.

It is important to note that the tax laws and regulations regarding the sale of property in Portugal may be subject to change, and it is recommended that you seek the advice of a tax professional to understand the specific tax implications for your situation.

Do I pay capital gains tax in Portugal on gain from another country? 

Yes, Portuguese residents are generally required to pay capital gains tax in Portugal on gains from the sale of assets located in another country. Portuguese tax laws require residents to declare their worldwide income, including capital gains from the sale of foreign assets, as part of their annual tax return.

The rate of capital gains tax payable in Portugal on gains from the sale of foreign assets will depend on several factors, including the type of asset being sold, the country in which the asset is located, and the tax laws and regulations of the foreign country.

It is important to note that some countries have double tax treaties in place with Portugal, which may provide relief from double taxation in certain circumstances.

For example, if you are a resident of Portugal and have paid capital gains tax on the sale of a foreign asset in the country where the asset is located, you may be able to claim a foreign tax credit in Portugal, which can reduce the amount of capital gains tax payable in Portugal.

If you are a Portuguese resident with foreign capital gains, it is recommended that you seek the advice of a tax professional to understand the specific tax implications for your situation.

Do I have to pay tax on pension from another country in Portugal

Yes, Portuguese residents are generally required to pay tax in Portugal on pension income received from another country. Portuguese tax laws require residents to declare their worldwide income, including pensions received from foreign sources, as part of their annual tax return.

The rate of tax payable on foreign pensions in Portugal will depend on several factors, including the tax laws and regulations of the country from which the pension is received, and the tax treaty, if any, between Portugal and the foreign country.

Some countries have double tax treaties in place with Portugal, which may provide relief from double taxation in certain circumstances.

For example, if you are a resident of Portugal and have paid tax on a foreign pension in the country where the pension is paid, you may be able to claim a foreign tax credit in Portugal, which can reduce the amount of tax payable in Portugal.

If you are a Portuguese resident receiving foreign pensions, it is recommended that you seek the advice of a tax professional to understand the specific tax implications for your situation.

Does Portugal have tax on inheritances? 

Yes, Portugal has inheritance tax. The Portuguese inheritance tax applies to transfers of property and other assets that take place upon the death of an individual.

The rate of inheritance tax in Portugal varies depending on the value of the assets being transferred and the relationship between the deceased and the beneficiaries.

There are different tax rates for transfers between spouses, children, and other close relatives, and higher tax rates for transfers to more distant relatives or unrelated individuals.

Exemptions and reductions from inheritance tax may be available in certain circumstances, such as for transfers of a main residence or for transfers to charity.

It is important to note that the inheritance tax laws and regulations in Portugal may be subject to change, and it is recommended that you seek the advice of a tax professional to understand the specific tax implications for your situation.

What is Portugal's Non-Habitual Tax Residency?

Portugal's Non-Habitual Tax Residency (NHR) regime is a tax incentive program designed to attract highly-skilled foreign professionals and entrepreneurs to Portugal.

The program provides certain tax benefits for individuals who become tax residents of Portugal but who do not have a habitual residence in the country.

Under the NHR regime, eligible individuals may be taxed in Portugal at a flat rate of 20% on their foreign-sourced income, rather than being subject to Portuguese tax laws and regulations.

This includes income from employment, pensions, business profits, and certain other sources of foreign income.

In order to qualify for the NHR regime, individuals must meet certain requirements, such as not having been a tax resident in Portugal in the previous five years and having a professional activity that is considered eligible under the program.

The NHR regime is intended to be a temporary measure, with individuals typically being required to remain tax resident in Portugal for a minimum of five years.

After this period, individuals may become subject to Portuguese tax laws and regulations on their worldwide income, although certain tax benefits may still apply.

It is important to note that the rules and regulations of the NHR regime are subject to change, and it is recommended that you seek the advice of a tax professional to understand the specific tax implications for your situation.

How can I save tax in Portugal?

• Take advantage of tax incentives: Portugal offers several tax incentives, such as the Non-Habitual Tax Residency (NHR) regime and the Golden Visa program, which can help reduce your tax burden.
• Make use of tax deductions: There are various tax deductions available in Portugal, such as deductions for mortgage interest, pension contributions, and charitable donations.
• Minimize capital gains tax: If you sell real estate in Portugal, you may be subject to capital gains tax. To minimize this tax, it may be helpful to hold the property for a longer period of time and to take advantage of any available exemptions or deductions.
• Plan your estate wisely: Estate planning can help reduce the amount of inheritance tax your heirs will have to pay when you pass away. This may include setting up a trust, giving gifts during your lifetime, or making a will.
• Seek professional advice: Working with a financial advisor or tax professional can help you understand the tax laws and regulations in Portugal and identify strategies to minimize your tax liability.

It is important to note that tax laws and regulations in Portugal are subject to change, and that the best way to minimize your tax liability is to seek the advice of a professional who is familiar with the specific tax implications for your situation.

What is a fiscal representative in Portugal?

A fiscal representative in Portugal is a person or company appointed by a foreign entity to act as its legal representative for tax purposes in Portugal.

The fiscal representative is responsible for ensuring that the foreign entity complies with Portuguese tax laws and regulations, and for fulfilling its tax obligations in Portugal, including registering the entity for tax purposes, filing tax returns, and making tax payments.

The fiscal rep in Portugal acts as a liaison between the foreign entity and Portuguese tax authorities and is responsible for ensuring that all required tax information is provided to the authorities in a timely manner.

Do private individuals need a fiscal representative in Portugal?

Private individuals do not typically need a fiscal representative in Portugal. The requirement for a fiscal representative applies to foreign companies that carry out economic activities in the country but do not have a permanent establishment there.

Private individuals who visit Portugal for tourism or other personal purposes, or who own property in the country but do not carry out economic activities there, do not need a fiscal representative.

However, if a private individual is carrying out economic activities in Portugal, such as renting out property or providing services to customers in the country, they may be subject to Portuguese tax laws and regulations and may need to appoint a fiscal representative.

It is advisable to consult a tax professional to determine whether a fiscal representative is required in a specific situation.