Taxes you are going to pay in Portugal
Taxes you are going to pay in Portugal
If you buy property in Portugal, just moved there or have properties overseas
Portugal is a lovely country. But like all countries it has some less savoury aspects that you need to take into account - one of which is taxation.
And if you're moving to Portugal from another country you have to take into account not just Portugal's tax system, but your own, because they will relate in various ways. The same is true if you have Portuguese taxable income but you're tax resident elsewhere.
It's all regrettably complicated, even more so because certain special tax regimes are available as well as the 'regular' tax system. But we've tried to simplify it as much as we can.
First of all, you'll need to know whether you're a Portuguese tax resident or not. If you live in Portugal for more than 183 days in a tax year (which in Portugal is the calendar year), you're a resident. Portugal also counts you a resident if you have a permanent residence in Portugal on the last day of the tax year, December 31.
So, here we'll explain what taxes you will pay, if you buy property in Portugal or have property in another country, also if you just move to Portugal for work and what residence status you have. But let's start with good news!
The Portuguese tax break no one talks about
While most people focus on income tax when they're thinking about moving to another country, if you have a family it may also be worth thinking about inheritance tax. In Portugal, if you leave your estate to a spouse or children, there's no inheritance tax to pay; otherwise, it's just 10% (actually a stamp duty on transfer, rather than an inheritance tax per se). That compares with rates of 40% in the UK and up to 60% (for non-relatives such as unmarried couples) in France - though it's above the Brazilian rate of 8%.
So Portugal is not quite paradise, because there is no tax in paradise. But the various government programmes for those moving to the country make it definitely one of the better contenders for your choice of residence as far as tax is concerned. Then you'll get the lifestyle, beautiful cities, beaches, landscape, Super Bock beer and irresistible pasteis de nata with your coffee for free!
What is the best city to buy property?
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Buy your new home in Portugal as a local with help of our guide. It's a great adventure you can take with us and reveal new sides of Portugal. You cannot know everything, but it's always a good idea to research before diving in.
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1. You own a property overseas and buy property in Portugal, but don't become a Portuguese tax resident
If you're not a tax resident, then only income that you earn in Portugal is liable for tax. While that could include a summer job or a consultancy contract, for most people it's more likely to include income derived from renting out their Portuguese property, whether it's a permanently rented investment property or a holiday home rented short-term while you're not there.
Rental income is liable for tax at a flat rate of 28%; if you use a lettings agent, they must deduct your tax from the gross rent, so you'll be paid net of tax. However, you can deduct your maintenance expenses, including management fees and insurance, as well as the IMI municipal tax. You'll only be taxed on your rental income after those costs have been taken into account.
Remember, though, you may also be liable to pay tax on that income in your country of residence. Exactly how the arrangement works depends on the details of the double taxation agreement between your country and Portugal. (Brazil, EU countries, the UK, USA, Russia, China, and many Latin American countries have such treaties.)
For instance, if UK tax on your rental income is higher than the 28% you've paid in Portugal, you'll have to pay the difference to the UK authorities. In France, on the other hand, you won't have to pay tax on the income, but it will be taken into account in calculating your 'revenu de référence fiscal' which determines what rate of tax you'll pay on the rest of your income.
2. You own a property overseas and buy in Portugal to live there (non-Portuguese)
If you become a Portuguese resident, your worldwide income is subject to tax in Portugal. So, for instance, if you have a pension paid from the UK, or you have rented out your former home in Germany, you will pay tax on that income in Portugal. Of course, double taxation treaties apply, so if you have paid tax in the other country that will be set against the tax you need to pay in Portugal.
We've included a table of Portuguese tax rates below. However, you may be able to cut the rate of tax you pay very considerably by making use of a particular tax regime that is available for foreign nationals moving to Portugal.
The Non Habitual Residents (NHR) regime was introduced in 2009, and though recent revisions have made it slightly less attractive than it used to be, it still offers a generous tax break. A flat tax rate of 20% will be applied to all your income for the first ten years you live in Portugal - that compares with a highest rate band of 48% on the regular tax schedule. It's also lower than taxes in most other countries, including Brazil (27.5% highest rate).
You may also benefit from a reduced or deferred rate on dividends and investment income and royalties, and from beneficial tax treatment for pensions. Pension income is subject to a 10% flat tax, with a tax credit for any taxes already paid on it in the country of origin.
Applying for NHR is a tricky process, particularly if you also need a visa for your move to Portugal, so it's best to consult a specialist before you start. To qualify, you must not have been tax resident in Portugal for any of the last five tax years, and you need to meet criteria for being a Portuguese resident in the year of application (e.g. by residing for over 183 days).
While NHR status is great for retirees, it's also useful for those moving to Portugal to work in a number of high value added professions, who benefit from a 20% flat tax on their Portuguese income.
This applies to: • architects and engineers, • doctors and dentists, • school teachers and university lecturers, • senior managers, • actors, musicians and artists.
3. If you're Portuguese and decided to repatriate to Portugal
More than 20% of Portuguese citizens live outside the country, many working in other EU member states where the employment market is more buoyant. There are now some serious skills gaps in Portugal. That's a big reason for a recent government initiative to make returning to Portugal more attractive, the Programa Regressar ('Project Return').
A special tax relief will be given to Portuguese expatriates who return in 2020. 50% of their employment and self-employment income will be exempt from tax for 5 years if they meet the requirements. The program includes not just a tax break, but vocational training assistance in work placement, together with access to loans for anyone who wants to set up a business. Even if you've never lived in Portugal, the programme applies to descendants of Portuguese emigrants. A Portuguese grandma or grandpa is enough to qualify - as long as they never renounced or lost their Portuguese citizenship.
4. If you decided to move to Portugal for work without buying
If you don't come into the NHR regime, you'll enter the regular Portuguese tax system. IRS (income tax) is deducted at source from revenues within Portugal, so if you're working for a company, they'll take it out of your pay cheque.
Remember, though, that you're liable for Portuguese tax on your worldwide income, so if you've let out your property while you're in Portugal, or have investment income elsewhere, you'll need to put that down on your tax return and pay any extra tax that's due.
Portugal gives you a threshold of EUR 4,014 below which you're not taxed. Above that, a complex series of bands apply, with tax rates increasing from 14.5% on the lowest tranche of income up to 48% for income above EUR 80,882.
(Note that even if you don't purchase a property you can apply for NHR status; you just need to demonstrate that you have a residence available, whether that's your Portuguese partner's flat, or a property under a rental agreement.)
Portuguese tax rates:
|Up to EUR 7,112||14.5%|