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While living in Portugal can be a dream — the gorgeous beaches, the pleasant climate, the rich culture — it’s important to consider practical matters, too. Like US expat taxes in Portugal. You should know, for example, that moving to Portugal doesn’t absolve you of your US tax obligations.
That’s because the US’s citizenship-based taxation system requires all US citizens and Green Card holders who meet the minimum reporting thresholds — regardless of where in the world they live — to file a federal US tax return. In many cases, US expats living in Portugal are subject to the Portuguese tax system as well — and as of 2024, there have been some big changes.
The good news? As a tax provider that caters specifically to Americans abroad, we know the ins and outs of US expat taxes in Portugal. Below, we’ll go over how Portugal defines tax residency, what the US-Portugal tax treaty includes, how Non-Habitual Residence status has changed, and more.
Snapshot of taxes in Portugal
Here are some of the main details of Portuguese taxes at a glance:
- Primary tax form: Automatic IRS (Imposto sobre o Rendimento das Pessoas Singulares) return or Modelo 3
- Tax deadline: Forms must be submitted by June 30; any additional payments necessary must be paid by August 31
- Reporting website: Portal das Finanças
- Administrative language(s): Portuguese
- Tax treaty with the US: Yes
- Totalization agreement with the US: Yes
How do Portuguese taxes work for Americans living there?
People living in Portugal long-term are typically considered tax residents (with a few exceptions, such as for students and volunteers) and must, therefore, file a return and pay taxes to the Portuguese government.
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 a habitual residence in Portugal at any time within a 12-month period starting or ending in the relevant fiscal year
What’s the tax-governing authority in Portugal?
Portugal’s governing tax body is the Autoridade Tributária e Aduaneira (AT), or Portuguese Tributary & Customs Authority. They are responsible for:
- Informing & assisting taxpayers with their obligations
- Assessing & collecting taxes
- Inspecting, preventing, & combating tax fraud & evasion
- Enforcing tax law & defending the interests of the Public Treasury in court
It is with the AT that you must register as a Portuguese taxpayer and file your tax return. Most people apply for a Número de Identificação Fiscal (NIF), or taxpayer identification number, at their local tax office (which typically 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.
The AT offers many other services, including self-employment registration, VAT declarations, real estate tax payments, and more.
Tax rates in Portugal
Portugal has a progressive tax system in which the more someone earns, the higher their tax rate is. Portugal’s IRS, or personal income tax, is applied at marginal rates that vary from 14.5% for the lowest earners to 48% for top earners for the 2023 tax year (aka the taxes you’ll pay in 2024).
Portuguese Tax Rates for Tax Year 2023
| Income Range | Tax Rate |
| Up to €7,479 | 14.50% |
| €7,479–€11,284 | 21% |
| €11,284-€15,992 | 26.50% |
| €15,992-€20,700 | 28.50% |
| €20,700-€26,355 | 35% |
| €26,355-€38,632 | 37% |
| €38,632-€50,483 | 43.50% |
| €50,483-€78,834 | 45% |
| €78,834+ | 48% |
Pro tip:
Rental income is generally taxed distinctly in Portugal at a rate of either 28% or 25% for contracts signed or renewed by or after October 2023.
As of 2023, Portugal also levies an additional solidarity tax applied at a rate between 2.5% and 5% on those who earn more than €80,000.
Non-Habitual Residence (NHR) status
For years, Portugal had a Non-Habitual Residence tax program, which granted new Portuguese tax residents who met certain requirements 10 years of lower taxes. However, in October 2023, Portugal announced that they would be discontinuing this tax benefit. Now, anyone who moves to Portugal after January 1st, 2024 is not eligible for the Non-Habitual Residence (NHR) tax regime.
Those already granted NHR status will continue to benefit from it until the end of their 10 years.
There are some cases in which those who have not yet registered for NHR status may still be eligible, such as if they had:
- Signed a lease agreement in Portugal before October 10th, 2023
- Enrolled in a Portuguese educational institution before October 10th, 2023
- Signed a contract to purchase real estate in Portugal before October 10th, 2023
- Held a valid residence card or visa before December 31st, 2023
- Submitted the application (or had requested an appointment to submit the application) for a valid residence card or visa before December 31st, 2023
- An employment agreement in Portugal before December 31st, 2023
Additionally, they must not have resided in Portugal within the previous five years.
Those who are granted NHR status receive the following benefits for 10 years (after which they are taxed per standard rates):
- No taxes on foreign-earned income
- A flat 20% tax on Portuguese-sourced income from a “high-value activity”
- No taxes on capital gains
- A flat 10% tax on pension income
Property taxes in Portugal
There are several different taxes associated with acquiring or owning property in Portugal, including:
- Imposto Municipal Sobre Imóveis (IMI): A tax placed on the value of your property, similar to US property tax. Rates vary from municipality to municipality — however, urban properties are usually taxed at a rate between .3% and .45% while rural properties tend to be taxed at .8%
- Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT): The tax you pay upon purchasing a property. Rates vary depending on the value, location, and purpose of the property, but primary residences are typically taxed at a rate between 0% to 6%, depending on the value
- Imposto de Selo (IS): A stamp duty tax placed on official documents related to real estate purchase (e.g. contracts, loans, deeds, etc.) that generally ranges from .4% to .8% depending on document type
- Adicional Imposto Municipal Sobre Imóveis (AIMI): A wealth tax on properties worth over €600,000 at a rate of either 0.4% for companies or 0.7% for individuals. Properties worth over €1,000,000 are taxed at a rate of 1%
Pro 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.
Capital gains tax in Portugal
As a rule, capital gains in Portugal are taxed at a flat rate of 28%. However, there are exceptions:5
- Only 50% of the capital gains derived from the sale of shares of small private companies are subject to taxation
- Only 50% of the capital gains derived from the sale of real estate are subject to taxation; furthermore, gains will be taxed at ordinary rates between 14.50% and 48% (plus a solidarity tax, if applicable)
- Note: Moves from one primary home to another may be exempt
- Capital gains derived from the sale of assets located in “tax havens” is taxed at 35%
Payroll tax in Portugal
Employers pay a total of 26.50% of an employee’s earnings in payroll taxes, divided among three categories:
- Social Security: 23.75%
- Labor Accident Insurance: 1.75%
- Wage guarantee fund: 1.00%
Besides having income taxes withheld, the only payroll tax employees are responsible for is social security.
Value Added Tax (VAT) in Portugal
A value-added tax (VAT) is a tax levied on the sale of most goods and services. In Portugal, where VAT is known locally as the Imposto Sobre Valor Agregado (IVA), there are several different rates:
- Standard (23%): Levied on all goods and services that don’t fall under the reduced, super-reduced, or zero-rated categories
- Reduced (13%): Levied on some food products, food/beverage services, and musical instruments (among others)
- Super Reduced (6%): Levied on some essential food products, pharmaceutical items, books, hotel stays, and passenger transport, among others
- Zero-rated (0%): Goods coming from within the EU and some staple food products
Pro tip:
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 pass those payments onto the government.
Do US expats living in Portugal also have to file US taxes?
Yes, any expat who is a US citizen or US permanent resident must file a federal tax return with the IRS. The only way to opt out of this obligation is to formally renounce your citizenship or formally abandon your status as a long-term US Permanent Resident (Green Card holder).
However, doing so can trigger expensive exit taxes and significantly complicate your ability to travel to or reside in the US in the future.
Does Portugal have a tax treaty with the US?
Portugal has a tax treaty with the US that helps expats living in Portugal avoid double taxation in theory. Unfortunately, a clause authorizes the US to apply tax as if that treaty doesn’t exist. It’s called the Saving Clause (but it doesn’t do much saving!). The best bet for US expats to avoid double taxation is to take advantage of a tax break (more on that later).
The Portugal/US Totalization Agreement
Portugal has a totalization agreement with the US, which means that Americans living in Portugal (or 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 health system.
US tax deductions available for expats in Portugal
Three of the most common tax breaks for US expats in Portugal on their US tax return include the:
Foreign Tax Credit (FTC)
The Foreign Tax Credit essentially allows US expats to deduct what they have paid the Portuguese government in income taxes from what they owe the US government in income taxes. Because income is generally taxed at a higher rate in Portugal, expats who make use of the FTC typically end up with either no US income tax bill at all or surplus credits that can be applied toward future US income tax bills. To qualify for the FTC, the foreign taxes you have paid must be:
- Based on income
- Legal
- Levied by your country of residence
- Charged to you specifically
Foreign Earned Income Exclusion (FEIE)
Another popular tax break for US expats is the Foreign Earned Income Exclusion. This provision allows expats to exclude a certain amount of their earned income (up to $120,000 for the 2023 tax year) from taxation. In order to qualify for the FEIE, expats must meet one of the two following tests:
- Physical Presence Test: The Physical Presence Test requires expats to prove that they were physically present in another country than the US for at least 330 of 365 days.
- Bona Fide Residence Test: The Bona Fide Residence Test requires expats to prove residence of more than one calendar year in a foreign country, often substantiated by official documentation such as a residence card, foreign income tax records, or a housing contract in the US expat’s name.
Child Tax Credit (CTC)
With the Child Tax Credit, any US taxpayer — including expats — can claim a partially refundable credit of as much as $2,000 for each of their qualifying children/dependents (as of the 2023 tax year).
Tax implications of renting out your US residence while in Portugal
Many expats who own property in the US choose to rent it out while living in another country. If you choose to do so, be aware that you’ll need to report any associated income and expenses to the IRS on Schedule E.
Rental income while living in Portugal
Rental income is considered unearned income by the US government. So, while it won’t be subject to Social Security or Medicare taxes, you won’t be able to exclude it using the FEIE.
If I own a rental property in the US or outside of Portugal, do I have to report it to Portugal?
Yes. You’ll need to report the income you receive on a rental property to the Portuguese government, even if it’s not actually located in Portugal.
Which country do I pay taxes to on my rental property income?
Technically, any rental income a US expat receives is subject to taxation by both the US and Portugal. However, if you claim the FTC, you’ll rarely owe taxes on the same income to both governments. In addition, those with NHR status in Portugal do not have to pay rental income taxes on properties based outside of Portugal.
Getting caught up on your US taxes with the Streamlined Procedures
If you unintentionally fell behind on your US tax returns while abroad, don’t panic. The IRS offers an amnesty program called the Streamlined Procedure, allowing expats to catch up penalty-free. Under this program, you’ll have to:
- File your last three tax returns and six FBARs
- Pay any back taxes you owe
- Declare that your previous failure to file taxes was unintentional
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
- Portugal – Individual – Income determination
- NHR, out with the old and in with the new
- Portugal’s non-habitual residence (NHR) regime – 10 years of tax benefits
- Property Taxes in Portugal: The Ultimate Guide
- Payroll and Benefits Guide: Portugal
- Self-employed tax in Portugal for freelancers
- Portugal – Corporate – Other taxes
