Taxes in Portugal for Foreigners (2024): Your Guide to Savings and Compliance

Understanding the intricacies of taxes in Portugal for foreigners is a critical part of your relocation process.

With five years of first-hand experience living in Portugal and support from our local partners, we’ve helped hundreds of newcomers navigate their relocation process.

This guide combines our personal experience with professional tax expertise from our partners to cover everything from your basic obligations to insider tax planning tips.

Key Features of Portugal’s Tax System

Portugal uses a progressive tax system that encompasses several key types of taxation. Here’s what foreigners need to know about the fundamental structure.

Tax Category	Rate	Notes
Personal Income Tax (PIT)	14.5% to 48%	Progressive rates depending on income levels.
Dividend Tax	28%	Flat rate for individuals; lower rates may apply for residents under specific conditions.
Capital Gains Tax	28%	For non-residents; residents pay tax at 50% of the gain added to their PIT bracket.
Corporation Tax	21%	Standard rate; reduced to 16% in the Azores.
Madeira Corporate Tax	5%	Applicable to companies licensed under the International Business Centre of Madeira (IBC) until December 31, 2028.
Value-Added Tax (VAT)	23%	Standard rate; reduced to 18% in Madeira and 16% in the Azores.
Inheritance and Gift Tax	10%	Applies to assets transferred outside the immediate family.
Property Tax (IMI)	0.3% to 0.45%	Varies depending on the municipality and property valuation.
Social Security Contributions	11% (employee), 23.75% (employer)	Mandatory contributions for employed individuals.

Personal income tax (IRS – Imposto sobre o rendimento das pessoas singulares)

The backbone of Portuguese taxation applies to various forms of income, from employment earnings to rental income.

Tax rates are progressive and range from 14.5% to 48% (as of 2024), with different brackets based on your total annual income. The Portuguese tax year aligns with the calendar year, running from January 1 to December 31.

Corporate tax (IRC – Imposto sobre o rendimento das pessoas coletivas)

For foreigners running businesses in Portugal, the standard corporate tax rate stands at 21%. Small and medium-sized enterprises may benefit from reduced rates, starting at 17% for the first €50,000 of taxable profit in 2024.

Value-added tax (IVA – Imposto sobre o valor acrescentado)

Portugal applies three VAT rates:

• Standard rate: 23% for most goods and services
• Intermediate rate: 13% for specific food items and certain services
• Reduced rate: 6% for essential items like basic foodstuffs and pharmaceuticals

Note: Madeira and the Azores enjoy slightly lower rates due to their autonomous status.

Additional important taxes

• Municipal Surcharge (Derrama Municipal): An additional tax on corporate income, varying by municipality
• Stamp Duty (Imposto do Selo): Applies to financial transactions, property purchases, and legal documents
• Social Security Contributions: Mandatory payments for both employed and self-employed individuals

Regional variations

Most Portuguese tax laws apply nationwide, but autonomous regions like Madeira and the Azores often offer special rates and incentives. These variations can affect your tax planning strategy significantly, especially for business owners and investors.

Portugal’s Tax Authority (Autoridade Tributária e Aduaneira) administers these taxes through a centralized system, with local tax offices (Finanças) handling regional matters. All taxpayers (both individuals and locally-incorporated companies) must register for a Portuguese tax number (NIF) before engaging in any taxable activities.

Important Tax Changes in Portugal for 2024

Here is an overview of 2024 changes in Portugal’s tax environment. 

New benefits for young workers

Portugal offers special tax relief for workers under 35. Young professionals can receive partial tax exemptions on employment income during their first years of work. This program aims to attract and retain young talent in Portugal.

Property tax updates

The government adjusted property tax thresholds in 2024. High-value property owners face updated Additional Property Tax (AIMI) rates. Properties worth over €600,000 now follow a revised progressive rate structure.

Standard tax bracket adjustments

Portugal updated its standard tax brackets to account for inflation. This change affects income not covered by special regimes. The adjustments help prevent bracket creep and maintain purchasing power.

Social security changes

Self-employed workers face revised social security contribution rules. The new system better aligns payments with actual income levels. Remote workers receive clearer guidelines about their social security obligations.

Tax filing updates

The Portuguese Tax Authority modernized its digital systems in 2024. Taxpayers now use an improved Portal das Finanças interface. The system offers more English-language support and clearer guidance for international residents.

Municipal tax variations

Several municipalities adjusted their local tax rates. These changes affect:

• Property tax rates
• Municipal surcharges
• Urban rehabilitation incentives
• Business establishment fees

These updates reflect Portugal’s ongoing efforts to modernize its tax system while maintaining international competitiveness.

Residency and Tax Obligations

Your tax obligations in Portugal will depend heavily on your residency status. Understanding whether you qualify as a tax resident is your first key step in navigating the Portuguese tax system.

According to Portuguese tax law, an individual is considered a tax resident if they meet any of the following conditions:

1. Physical presence: Spending more than 183 days, consecutive or not, in Portugal during any 12-month period starting or ending in the fiscal year concerned.
2. Permanent home: Maintaining a residence in Portugal on 31 December of the relevant year, which is intended to be used as a habitual abode.
3. Employment abroad as a Portuguese public servant: Engaging in public functions or civil service for the Portuguese State abroad (unlikely to be relevant for you as a foreign resident).

Before engaging in any financial activities in Portugal, you’ll need to get yourself a NIF (Número de Identificação Fiscal).

This unique tax identification number is essential – for everything from opening a bank account to signing a rental contract or receiving salary payments. Getting your NIF should be your first administrative task upon arriving in Portugal (or even before).

The distinction between resident and non-resident status significantly affects your tax obligations. As a resident, you must declare your worldwide income to Portuguese authorities and file annual tax returns between April 1 and June 30. 

You’ll have access to progressive tax rates and various deductions, but you’re also required to report foreign bank accounts and investments. Portugal’s extensive network of double taxation agreements (DTAs) around the world helps prevent paying taxes twice on the same income.

Non-residents in Portugal are taxed only on income earned within the country. This income is typically taxed at a flat rate of 25%, making the rules simpler but less advantageous compared to those for residents.

Non-residents can’t access most tax deductions available to residents. What’s more, non-residents from outside the EU/EEA typically need to appoint a fiscal representative to manage their tax obligations and interact with Portuguese authorities.

If your residency status changes during the tax year, you’ll enter a partial year residency situation. This requires careful attention to timing and you may need to file two separate tax returns. The tax year splits according to when your residency status changed, and different rules apply to each period.

A common oversight among new arrivals is failing to properly declare their change of residency status or missing important reporting deadlines. Understanding these obligations from the start helps avoid complications with the tax authorities and ensures compliance with Portuguese law.

The Non-Habitual Resident (NHR) Tax Regime: 2024 Changes

Portugal’s tax landscape for foreigners is going through major changes in 2024. The traditional Non-Habitual Resident (NHR) program is being replaced by the new Tax Incentive for Scientific Research and Innovation program, informally known as “NHR 2.0.”

Feature	Non-Habitual Resident (NHR)	IFICI Program
Eligibility	Open to individuals with high-value activities or retirees moving to Portugal.	Focused on professionals in specific fields (e.g., research, education, startups) and geographic criteria (e.g., Madeira, Azores).
Duration	10 years of benefits from the date of approval.	10 years of benefits under similar terms to NHR.
Foreign Income	Tax exemptions on pensions, dividends, and certain income from abroad if taxed in the source country.	Broader exemptions with no requirement for source-country taxation, provided income is from legitimate jurisdictions.
Capital Gains	Limited exemptions on foreign capital gains.	Full exemptions on foreign capital gains, excluding blacklisted jurisdictions.
Pension Income	Flat 10% tax on foreign pensions.	Taxed at standard progressive rates (14.5% to 48%).
Professional Income	20% flat tax on qualifying Portuguese income.	20% flat tax on Portuguese-sourced income from qualifying activities.
Startup Involvement	Not applicable.	Special incentives for board members and employees of certified startups.

Timing your transition in light of NHR

If you’re considering a move to Portugal, then timing is key. If you can prove having had “intent to reside” in Portugal before December 31, 2023, then you may still qualify for the traditional NHR benefits (before the end of 2024).

Valid proof includes:

• Issuance of residency visa (e.g. D7/D8) from a Portuguese embassy
• AIMA appointment documentation
• Proof of rental agreement (minimum 12 months)
• Property purchase deed

The new IFICI program (‘NHR 2.0’)

Unlike its predecessor, the IFICI program takes a more focused approach to attracting talent. The program targets two main groups:

1. Professional qualifications:

• Research workers with Ph.D. qualifications
• Professors in higher education
• Senior roles in financial industry
• Employees or board members of certified Portuguese startup companies

2. Geographic criteria:

• Those working in Madeira/Azores (with specific criteria to be determined by local governments)
• Potentially including remote workers based in these regions

How to create a certified startup in Portugal 

A company can become a certified as a startup through two main routes:

1. Investment-based certification: Startups qualify automatically when they receive investment from a certified Portuguese venture capital firm, angel investor, or angel investment group.
2. Direct certification: Companies apply directly through the Startup Portugal program, which operates an active certification procedure. Another certification body will provide an additional pathway for qualification.

Note: A certified venture capital firm has obtained official authorization from the Portuguese Securities Market Commission (Comissão do Mercado de Valores Mobiliários, CMVM) to operate within the country’s financial markets. The CMVM is the regulatory body responsible for overseeing and supervising securities and financial instruments markets in Portugal.

Certified startups can access IFICI tax benefits for their employees and board members. Participants qualify for these benefits by receiving a minimum salary from the startup, while retaining other income sources outside the company.

This system creates unique opportunities for entrepreneurs and experienced professionals. For example, professionals with relevant expertise can qualify for IFICI benefits by investing as angel investors in certified startups and joining their boards. This allows them to support the startup ecosystem through financial contributions and mentorship.

The Portuguese government designed this system to promote innovation and attract seasoned professionals. By encouraging the growth of new companies and offering significant tax benefits, the government aims to strengthen Portugal’s startup ecosystem and incentivize active participation from qualified individuals.

Tax benefits with IFICI:

• 20% flat tax rate on qualifying Portuguese-sourced income (versus standard rates up to 48%)
• Exemption on foreign-sourced employment and self-employment income
• Full exemption on foreign investment income and capital gains (if not from blacklisted jurisdictions)
• No longer a requirement for income to be taxed in the source country to qualify for exemption

Key changes from traditional NHR:

• Pension income will now face standard progressive tax rates
• Broader exemptions for capital gains and investment income
• More stringent professional qualification requirements
• New opportunities through certified startup involvement

Note: Portuguese citizens continue to be eligible for the program as before, provided they’ve been tax resident outside Portugal for the previous five consecutive years before returning.

The new program has the same 10-year duration as the original NHR. Existing NHR holders will retain their current benefits until their term expires.

Regional Tax Benefits

Portuguese tax rates and benefits differ by region. In particular, Madeira and the Azores enjoy special autonomous status, which also creates several unique tax advantages.

Understanding the lower tax rates and incentives in Madeira

Madeira’s International Business Centre stands out for its low tax rates. Companies registered here pay just 5% corporate tax, while mainland Portugal charges 21%. This rate remains valid until 2027.

VAT rates in Madeira cost less than the mainland:

• Standard rate: 22% (mainland 23%)
• Intermediate rate: 12% (mainland 13%)
• Reduced rate: 4% (mainland 6%)

The International Business Centre offers clear benefits for companies, including the following:

• Low corporate tax rate
• Access to EU markets
• Support from skilled local workforce (with excellent English language ability)
• Connection to Portugal’s international tax treaty network
• Reduced withholding taxes

Tax savings in the Azores: Reduced VAT and income tax explained

The tax structure in the Azores offers several notable advantages compared to mainland Portugal, particularly when it comes to personal income tax and VAT rates.

Personal income tax

Residents of the Azores benefit from reduced rates on personal income tax. The regional government applies a reduction to the national rates, resulting in lower tax brackets for residents. For instance, the lowest tax bracket in the Azores is taxed at 9.1%, compared to 13% on the mainland. This reduction varies across different income levels.

Value-added tax (VAT):

The standard VAT rate in the Azores is 16%, which is lower than the mainland rate of 23%. This reduction in VAT contributes to lower daily living costs for residents.

These tax benefits make the Azores an attractive location for individuals seeking a lower tax burden within Portugal.

Local tax differences

Each town sets its own property tax rates. Urban properties typically pay between 0.3% and 0.45%. Some areas offer discounts for main homes or renovated buildings.

Filing Taxes in Portugal: Essential Info

Filing taxes in Portugal may seem complex, but understanding the key processes and timelines will help you stay compliant and avoid penalties. Here’s what you need to know, whether you’re a resident or non-resident.

How to Register for a Portuguese Tax Number (NIF)

The NIF (Número de Identificação Fiscal) is essential for nearly all financial activities in Portugal, including opening a bank account, signing a rental agreement, and, of course, filing your taxes.

Steps to get your NIF:

1. Visit a local tax office (Finanças): Bring identification (passport or residency permit) and proof of address.
2. Appoint a fiscal representative (if required): Non-EU/EEA nationals may need a Portuguese fiscal representative to manage their tax matters (although this changed in 2022, see note below)
3. Online services for expats: Many service providers can help you obtain your NIF remotely before arriving in Portugal.

Your NIF serves as your tax identification number, and you’ll need it for all interactions with the Portuguese Tax Authority (Autoridade Tributária e Aduaneira).

Note: The Portugal Tax Authority amended the fiscal representative requirement in July 2022, stating an alternative as follows (Circular Letter no. 90057 of 20 July):

“If the taxable person, resident in a third country, subscribes to any of the dematerialized notification channels (electronic notifications and citations system on the Tax Authority’s website or to the electronic mailbox), they are dismissed from the obligation to appoint a tax representative.”

Key deadlines for filing taxes

Portugal’s tax year runs from January 1 to December 31, and filing deadlines vary depending on your residency status and type of income.

For Residents:

• Annual income tax return (IRS):
  • Filing period: Between April 1 and June 30 of the following year.
  • Submission method: File online through the Portal das Finanças (Portuguese Tax Portal).
• Income to declare: Residents must declare worldwide income, including earnings from employment, rental income, and investment returns.

For Non-residents:

• Filing period: Non-residents must also file between April 1 and June 30 if they have Portuguese-source income.
• Flat tax rate: Non-residents are taxed at 25% on Portuguese-source income and must report only that income.

Special situations:

• Partial-year residency: If you change residency status mid-year, you may need to file two separate returns for the resident and non-resident periods.
• Corporate and self-employment deadlines: Businesses and sole traders have specific deadlines for VAT and corporate tax filings.

Tips for staying on track:

• Set reminders: Missing deadlines can lead to penalties or interest on unpaid taxes.
• Use online resources: Use the Portal das Finanças for filing, payment tracking, and access to official tax documents.
• Hire professional help: A tax advisor can ensure you meet your deadlines and maximize deductions. A local accountant can submit your tax return for you, saving you the hassle of dealing with it (especially if you’re not confident in Portuguese).

Tax Planning Tips for Foreigners in Portugal

Moving to Portugal requires careful tax planning. While each person’s situation differs, understanding basic tax strategies helps you make informed decisions.

Timing your move

The date you become tax resident in Portugal affects your tax obligations. Arriving early or late in the tax year impacts when and how you file your first return. We highly recommend discussing optimal timing with a tax advisor before planning your move.

Income structure

Different types of income face different tax treatment in Portugal. International income sources, investment returns, and business profits each need specific consideration. Your tax advisor can help structure your income efficiently within Portuguese law.

Banking considerations

Portuguese tax residents must declare foreign bank accounts. Setting up local banking early helps manage tax obligations and provides necessary documentation for authorities. Consider currency conversion costs when planning international transfers.

Documentation

Keep clear records of the following:

• Foreign income sources
• International investments
• Overseas property income
• Business activities

Professional support

Portuguese tax rules change frequently, so working with a qualified tax advisor helps ensure compliance and optimal tax efficiency. Make sure you choose a professional who understands both Portuguese requirements and international tax implications.

For personalized advice about your specific situation, consider booking a consultation with our experienced tax advisory partner. They specialize in helping digital nomads, entrepreneurs and expats navigate Portuguese taxation effectively.

Resources and Tools for Navigating Portuguese Taxes

The Portuguese Tax Portal (Portal das Finanças) serves as your main hub for tax management. Understanding how to use these official resources helps you handle tax obligations effectively.

Accessing Portal das Finanças

First-time users must register for access credentials. The portal offers basic English-language support, though key documents remain in Portuguese. Access your personal area using your NIF (tax number) and password.

The portal lets you:

• Submit tax declarations
• Access tax payment records
• Update personal information
• Download official certificates
• Check tax status

Official government resources

The Portuguese Tax Authority provides several helpful tools within the online portal, including:

• E-fatura system for tracking expenses
• Tax payment simulator
• VAT (IVA) verification service
• Property value calculator

Additional support tools

For international residents, several resources help you navigate Portuguese taxation:

• Social Security Direct (Segurança Social Direta) for contribution management
• Doutor Finanças (for simulating all kinds of tax scenarios – in Portuguese)
• Double taxation treaty database (Tax Treaties Explorer)

Remember: these tools provide valuable support, but complex tax situations require professional guidance. Our cross border tax advisory partner can help you understand and use these resources effectively.

📅 Book a 15 min discovery call now – so you can start your journey toward tax clarity and financial peace of mind in Portugal.

Common Myths About Taxes in Portugal

Many newcomers arrive with misconceptions about Portuguese taxation. Let’s address the most common misunderstandings.

Myth 1: Tax residency rules

“I won’t become tax resident if I stay less than 183 days in Portugal.”

This oversimplifies the rules. Portugal also considers other factors, like maintaining a permanent home here or having family connections. You might be considered tax resident even with fewer days in the country.

Myth 2: Foreign income reporting

“I only need to declare Portuguese income.”

False. Portuguese tax residents must declare worldwide income, even when exempt from Portuguese tax. Failing to report foreign income can result in penalties, regardless of where you pay tax.

Myth 3: Double taxation concerns

“Moving to Portugal means paying tax twice.”

Not necessarily. Portugal maintains tax treaties with many countries to prevent double taxation. The system protects you from paying tax twice on the same income when properly structured.

Myth 4: Bank account requirements

“I can keep using my foreign bank accounts exclusively.”

You can maintain your existing foreign accounts, but Portuguese tax residents need a local bank account for many financial transactions. You must also declare foreign accounts to Portuguese authorities.

Myth 5: Remote work implications

“Working remotely for a foreign company means I don’t pay Portuguese tax.”

This misunderstands how Portugal taxes employment income. Your tax obligations depend on your residency status, not your employer’s location.

Understanding these realities helps you plan effectively. For detailed guidance about your specific situation, consider speaking with an experienced cross border tax advisor.

Frequently Asked Questions About Taxes in Portugal

Do I need to declare my foreign income in Portugal?

Yes, if you are a tax resident in Portugal, you must declare all your worldwide income, even if it’s exempt under a tax regime like IFICI. This includes income from employment, pensions, investments, and rental properties abroad.

What makes me a tax resident in Portugal?

You are considered a tax resident in Portugal if you:

• Spend more than 183 days in Portugal during a 12-month period.
• Maintain a permanent home in Portugal that you use as your habitual residence.
• Work abroad as a Portuguese public servant (unlikely for foreigners).

What is the difference between the old NHR program and the new IFICI program?

The IFICI program replaces the NHR program and offers broader tax exemptions for foreign income but stricter professional eligibility requirements. For example, pension income is now taxed at progressive rates instead of a flat 10%.

Do non-residents pay taxes in Portugal?

Yes, non-residents are taxed on income earned within Portugal, typically at a flat rate of 25%. Non-residents can’t access most of the deductions and benefits available to residents.

Are capital gains from foreign investments taxed in Portugal?

Under the IFICI program, capital gains from foreign investments are exempt from Portuguese taxation, as long as the income is from legitimate, non-blacklisted jurisdictions.

What are the tax benefits of living in Madeira or the Azores?

Residents of Madeira and the Azores enjoy reduced tax rates, including:

• Lower VAT rates (16% in the Azores and 22% in Madeira, compared to 23% on the mainland).
• Reduced personal income tax rates, such as a 20% reduction in the Azores.

What happens if I become a tax resident mid-year?

If your residency status changes mid-year, you may need to file two separate tax returns:

• One for the period as a non-resident (taxed only on Portuguese-source income).
• Another for the period as a resident (taxing worldwide income).

Do I need a fiscal representative in Portugal?

Non-residents from outside the EU/EEA must appoint a fiscal representative to manage their tax obligations and interact with Portuguese authorities.

How are foreign pensions taxed under the new IFICI program?

Pension income is no longer taxed at a flat rate and is instead subject to Portugal’s progressive tax rates, ranging from 14.5% to 48%.

What resources can help me navigate Portuguese taxes?

You can use the Portal das Finanças to file taxes, track payments, and manage tax declarations. For complex situations, we recommend that you consult a tax advisor familiar with Portuguese and international tax laws.

How We Can Help

Navigating Portugal’s tax system as a foreigner plays a vital role in success during your time living in Portugal. 

Staying properly informed about residency rules, making use of tax benefits, and keeping up with the latest changes can transform a complex process into an opportunity for growth. 

By tackling these challenges head-on, you’ll sidestep pitfalls, uncover valuable savings, and set the stage for a worry-free life in one of Europe’s most captivating destinations.

Navigating the Portuguese tax system can be complex, but you don’t have to do it alone. Our trusted partner, Untaxed, specializes in helping digital nomads, entrepreneurs and investors simplify their tax obligations in Portugal and take full advantage of available benefits.

📅 Book a 15 min discovery call with Untaxed – so you can start your journey toward tax clarity and financial peace of mind in Portugal.