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While living in Portugal can seem like a dream — the gorgeous beaches, the pleasant climate, the rich culture — it’s important to consider practical matters, too. Given how much it can impact your finances, one of the chief items worth looking into is taxes in Portugal for expats.
In addition to being subject to US taxes, most Americans in Portugal must navigate Portuguese taxes as well. And in the last couple of years, there have been some major changes to Portuguese tax law. As a result, it’s well worth your time to brush up on the rules.
The good news? As a tax provider that caters specifically to Americans abroad, we’ve helped plenty of US expats in Portugal navigate their tax obligations — and we’re here to help you, too. Read on below to learn what a Portugal resident is for tax purposes, how the Non-Habitual Resident (NHR) tax regime has changed, and more.
Snapshot of taxes in Portugal
- Primary tax form: Modelo 3
- Tax deadline: June 30th
- Reporting website: Portal das Finanças
- Administrative language(s): Portuguese
- Tax treaty with the US: Yes
- Totalization agreement with the US: Yes
Do expats pay taxes in Portugal?
Expats who qualify as Portuguese tax residents or earn Portuguese-source income must file and pay taxes in Portugal. Tax residents are subject to Portuguese taxes on their worldwide income, while non-tax residents are only subject to taxation on Portuguese-source income.
Who qualifies as a tax resident in Portugal?
The Portuguese government defines tax residents as those who:
- Spend over 183 days in the country within a 12-month period (regardless of whether those days were consecutive or not) starting or ending in the relevant fiscal year, OR
- Maintain their primary residence in Portugal at any time within a 12-month period starting or ending in the relevant fiscal year
What is the Portuguese tax authority called, & what do they do?
Portugal’s governing tax body is the Autoridade Tributária e Aduaneira (AT), or Portuguese Tributary & Customs Authority. They are responsible for:
- Informing of & assisting taxpayers with their tax obligations
- Assessing & collecting taxes
- Inspecting, preventing, & combating tax fraud & evasion
- Enforcing tax law & defending the interests of the Public Treasury in court
In order to file and pay taxes in Portugal, you must first apply for a Número de Identificação Fiscal (NIF) — or taxpayer identification number — at your local AT office. Typically, this requires an appointment.
However, some people living outside the EU, Norway, Iceland, and Lichtenstein, can have a representative request an NIF on their behalf through the Portal das Finanças.
Besides getting your NIF, the AT can help you with many other services like registering as a self-employed individual, signing up for the NHR tax regime, declaring VAT, and more.
Personal income taxes in Portugal
Portugal is one of the many tax systems in the world with progressive tax rates. With progressive rates, the more you earn, the higher your tax rate will be. Taxes are also marginal, meaning that the Portuguese government levies different tax rates on different bands of income.
For tax year 2024 — aka the taxes you’ll pay in 2025 — tax rates vary from 13.25% to 48%, depending on how much you earn.
Portuguese income tax rates for 2024
| Income (EUR) | Income (USD) | Tax rate |
| Up to €7,703 | Up to ~$8,250 | 13.25% |
| €7,704 to €11,623 | ~$8,251 to ~$12,448 | 18% |
| €11,624 to €16,472 | ~$12,449 to ~$17,641 | 23% |
| €16,473 to €21,321 | ~$17,642 to ~$22,834 | 26% |
| €21,322 to €27,146 | ~$22,835 to ~$29,072 | 32.75% |
| €27,147 to €39,791 | ~$29,073 to ~$42,612 | 37% |
| €39,792 to €51,997 | ~$42,613 to ~$55,683 | 43.5% |
| €51,998 to €81,199 | ~$55,683 to ~$86,974 | 45% |
| €81,200+ | ~$86,975+ | 48% |
Note:
Certain types of income are subject to different tax rates. Rental income, for example, incurs a rate of either 25% (residential) or 28% (commercial) for contracts signed or renewed by or after October 2023. Dividends and interest income are taxed at a flat rate of 28% unless the taxpayer elects to pay taxes at ordinary income tax rates.
Portugal also levies a solidarity tax of 2.5% to 5% (depending on overall taxable income) on those who earn more than €80,000.
Non-Habitual Resident (NHR) status
After years of having a Non-Habitual Resident (NHR) tax regime that offered new Portuguese tax residents up to a decade of major tax breaks, Portugal announced in 2023 that they would not approve any new applications for the regime. Months later, however, they reversed course and announced they would instead modify the NHR program.
Portugal’s so-called “NHR 2.0” tax regime offers the following benefits for up to ten years:
- A tax exemption on foreign-source dividends, interest income, capital gains, and rental income (provided that it’s taxed in the source country)
- A 20% flat tax on Portuguese-source employment or self-employment income
Now, only those living and working in Portugal can benefit from NHR 2.0. Specifically, they must work in research and development, for startup organizations, or in otherwise innovative fields.
Note:
Those previously accepted to the initial NHR program can maintain all of the original tax breaks until their ten-year tax treatment has ended.
Other taxes in Portugal
Capital gains tax in Portugal
As a rule, the Portuguese government taxes capital gains at a flat rate of 28%. However, there are exceptions:
- Only 50% of the capital gains derived from the sale of shares of small private companies are subject to taxation
- Those whose income exceeds €81,199 pay ordinary income tax rates on gains from assets held for less than 365 days
- Only 50% of the capital gains derived from the sale of real estate are subject to taxation for non-residents. However, they must pay ordinary income tax rates (plus a solidarity tax, if applicable) on gains
- Note: In some situations, gains from the sale of primary homes are exempt from taxation
Social security taxes in Portugal
The general tax rate for family, pension, and unemployment benefits in Portugal is 34.75%. However, employees pay only 11% of that rate, with employers covering the other 23.75%. Employers must also pay for workplace accident insurance premiums.
Self-employed individuals pay social security taxes at a rate of 21.4% or ⅓ of their relevant remuneration under the simplified tax regime. Under the simplified tax regime, relevant remuneration refers to 70% of income related to services rendered and 20% of income related to the production and sale of products.
Gift, estate, & inheritance taxes in Portugal
The only inheritance/estate tax in Portugal is a 10% stamp tax on property inherited or received from someone who is not a relative. Donation of property incurs a .8% tax.
Property taxes in Portugal
There are several different taxes associated with acquiring or owning property in Portugal, including the:
- Imposto Municipal Sobre Imóveis (IMI): An annual tax on the value of your property. Urban properties incur tax rates of .3% to .5% while rural properties typically incur a rate of .8%. Properties located in offshore “tax havens” are subject to a whopping 7.5% annual tax
- Adicional Imposto Municipal Sobre Imóveis (AIMI): A wealth tax on properties worth over €600,000 at a rate of 0.7% to 1% for individuals
- Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT): The tax you pay upon purchasing a property (aka transfer tax). Rates vary between 0% to 8%, depending on the value, location, and purpose of the property (i.e. commercial vs. residential)
- Imposto de Selo (IS): A stamp duty tax placed on official documents related to real estate purchase (e.g. contracts, loans, deeds, etc.). Typically .8%
- Note: If property is inherited or transferred as a gift from a non-relative, stamp duty increases to 10%
Tip:
In some circumstances, you may be able to claim exemption on one or more of the property taxes above — consult with a Portuguese tax professional to learn more.
Value-Added Tax (VAT) in Portugal
Portugal levies a value-added tax on the sale of most goods and services called the Imposto Sobre Valor Agregado (IVA). The standard IVA rate is 23%, but there are reduced rates available on certain products:
- Intermediate (13%): Some food products, food/beverage services, musical instruments, etc.
- Reduced (6%): Some staple food products, pharmaceutical items, books, hotel stays, passenger transport, etc.
- Zero-rated (0%): Goods coming from within the EU and certain staple food products
Note:
Those living in the Portuguese autonomous regions of Madeira or Azores pay lower VAT rates.
Many self-employed individuals must charge VAT on the goods/services they provide and remit the proceeds to the government.
Do US expats living in Portugal also have to file US taxes?
Yes. Due to the US’s citizenship-based taxation system, all Americans are subject to US taxes. Any US citizens or permanent residents who meet the minimum reporting thresholds must file (and potentially pay) US taxes, even if they live abroad.
While the standard tax deadline is April 15th, US expats receive an automatic extension until June 15th to file their taxes. You can file Form 4868 to extend this date even further to October 15th. However, you’ll still need to make an estimated tax payment by April 15th regardless of when you submit your tax return.
Does Portugal have a tax treaty with the US?
Portugal does indeed have a tax treaty with the US that helps Americans living in Portugal avoid double taxation, at least in theory. Unfortunately, most US double taxation treaties — including the one with Portugal — contain a clause authorizing the US to levy taxes as if the treaty didn’t exist.
As a result, your best bet to avoid double taxation is usually to take advantage of an expat-specific tax break (more on that in a bit).
The Portugal/US Totalization Agreement
Portugal also has a totalization agreement with the US, which means that Americans living in Portugal (and vice versa) do not have to pay social security taxes to both governments. Which country you pay social security taxes to generally depends on how long you plan to live in Portugal:
- Less than 5 years: Pay US social security taxes
- 5 years or more: Pay Portuguese social security taxes
However, there are situations in which American expats living in Portugal may want to pay Portuguese social security taxes regardless, such as if they want access to the public healthcare system.
US tax breaks available for expats in Portugal
Two of the most beneficial tax breaks for US expats in Portugal include the:
Foreign Tax Credit (FTC)
The FTC gives you dollar-for-dollar US tax credits for any foreign income taxes you’ve paid. Essentially, this allows you to subtract what you’ve paid in taxes to Portugal from what you owe the US in taxes. To qualify, taxes must be legal, paid/accrued, based on income, and charged to you specifically.
Since income taxes are generally higher in Portugal, expats who make use of the FTC often end up with no US tax bill at all. In fact, they may even receive surplus credits that they can apply toward future US income tax bills for up to ten years. To take advantage of the FTC, you must file Form 1116.
Foreign Earned Income Exclusion (FEIE)
Another popular tax break for US expats is the FEIE. This provision allows expats to exclude a certain amount of their earned income (up to $126,500 for tax year 2024, and $130,000 for 2025) from taxation. In order to qualify for the FEIE, expats must meet one of the two following tests:
- Physical Presence Test: Requires expats to prove that they were physically present in a country other than the US for at least 330 of any 365 day period overlapping the tax year.
- Bona Fide Residence Test: Requires expats to prove residence of more than one calendar year in a foreign country. You should be able to substantiate this through official documentation like a residence card, foreign tax returns, or a housing contract in your name.
In addition, US expats can claim most of the tax breaks that they would if they were still in the US (such as the Additional Child Tax Credit).
Americans in Portugal who don’t meet the tax residency definition, meanwhile, would only pay taxes on rental income from a US-based property to the US government.
Resources:
- Personal income tax (IRS) in Portugal
- Portugal – Individual – Residence
- How to request NIF and NISS for foreign citizens in Portugal
- Portugal – Individual – Taxes on personal income
- NHR 2.0: Portugal’s New NHR Tax Regime 2024
- Portugal – Individual – Income determination
- Taxes on Portugal Real Estate
- Portugal – Individual – Other taxes
- Portugal – Corporate – Other taxes
