Taxes in Portugal for Foreigners: Portuguese Tax System in 2025

Q: What is the tax rate for non-residents in Portugal?

Non-residents pay a flat tax rate of 25% on income earned from Portuguese sources, such as employment, self-employment, and pensions.

Q: What are the income tax rates for residents in Portugal in 2025?

Residents in Portugal pay progressive income tax rates ranging from 13.25% to 48% . The higher your income, the more tax you pay. The income is taxed in brackets.

Q: How does the Non-Habitual Residency (NHR) scheme work?

The NHR scheme offered a 10-year tax break to qualifying expats. However, the program ended in 2023, meaning new applicants can no longer apply, but those already enrolled will still benefit for the remainder of their 10-year period.

Q: What is IMI and do I need to pay it?

IMI (Imposto Municipal sobre Imóveis) is a property tax in Portugal. If you own property, you'll need to pay this tax, which ranges from 0.3% to 0.45% in urban areas and 0.8% in rural areas.

Q: Do I need to pay VAT in Portugal?

Portugal has a standard VAT rate of 23% on most goods and services. There are 13% and 6% reduced rates for specific goods, such as food, medicines, and books.

Q: What are the taxes on rental income in Portugal?

Rental income from a Portuguese property is taxed at a flat 15% rate for non-residents.

Taxes in Portugal for Foreigners: Portuguese Tax System in 2025

Are you thinking of moving to Portugal? With its sunny weather, beautiful beaches, and affordable lifestyle, it’s no wonder many expats choose Portugal as their new home. But before you settle in, have you considered how the tax system works for foreigners? Understanding taxes is essential to avoid any surprises and ensure you meet the legal requirements.

In this article, we’ll cover everything you need to know about taxes in Portugal for foreigners. You’ll learn about the different types of taxes, including income tax, property tax, and capital gains tax. We’ll also explain the tax rates for residents and non-residents, changes in 2025, and essential details like VAT and rental income taxes. Plus, we’ll provide tips on getting professional tax advice and help with services like obtaining your NIF and Portugal D types visas consultations.

What’s New About Taxes in 2025?

The 2025 State Budget in Portugal has introduced several significant changes to taxes:

1. Income Tax Bracket Adjustments:

The income thresholds for each tax bracket have been raised by 3%, meaning you can earn more before moving to a higher tax bracket. The tax rates on the first five income tax brackets have been lowered so that workers will pay less tax on their lower earnings in 2025.

2. VAT on Essential Food Items:

The temporary VAT exemption for essential food items, which was in place in 2023, has been removed.

3. Corporate Tax for Start-Ups:

A new lower corporate tax rate has been introduced for start-up businesses, offering a lower rate on the first €50,000 taxable income (details mentioned earlier).

4. End of the Non-Habitual Resident (NHR) Tax System:

The NHR tax system, which provided 10 years of tax breaks for expats, has ended as of the close of 2023. This marks a significant change for foreigners looking to benefit from the scheme in Portugal.

Who Needs to Pay Taxes in Portugal?

If you’re wondering whether you need to pay taxes in Portugal, it depends on your residency status. Here’s a simple breakdown:

Tax Resident vs. Non-Resident

Tax Resident: If you live in Portugal for more than 183 days in a year or have a permanent home there, you’re considered a tax resident. Tax residents pay taxes on their worldwide income, meaning income earned in Portugal and other countries.
Non-Resident: If you spend less than 183 days in Portugal without a permanent home, you’re considered a non-resident. Non-residents only pay taxes on income earned in Portugal.

Criteria for Tax Residency

183-Day Rule: If you stay in Portugal for 183 days or more a year, you become a tax resident.
Permanent Residence: Even if you spend fewer days in Portugal, you can still be considered a tax resident if you have a permanent home. Moreover, you can get legitimate information for Portugal Job seeker visa.

Types of Taxes in Portugal for Foreigners

If you’re a foreigner in Portugal, it’s important to know which taxes you need to pay and how they are calculated. Here’s a detailed overview of the main types of taxes:

1. Income Tax (IRS)

Income tax in Portugal is known as IRS (Imposto sobre o Rendimento das Pessoas Singulares). Your income tax depends on whether you’re a tax resident or non-resident.

a. Residents’ Income Tax for 2025

If you’re a resident of Portugal, you have to pay tax on all your income, no matter where in the world you earn it. The tax rates in Portugal are progressive, which means that the more money you make, the higher the percentage of tax you will pay. Below is a simple breakdown of the tax brackets for residents in 2025:

Taxable Income (EUR)	Tax Rate (%)	Deductible Amount (EUR)
0 – 7,703	13.25%	0
7,703 – 11,623	18.00%	365.89
11,623 – 16,472	23.00%	947.04
16,472 – 21,321	26.00%	1,441.14
21,321 – 27,146	32.75%	2,880.47
27,146 – 39,791	37.00%	4,034.17
39,791 – 51,997	43.50%	6,620.43
51,997 – 81,199	45.00%	7,400.21
Over 81,199	48.00%	9,836.45

Key Point: For married couples or those in de facto unions (not judicially separated), the taxable income is divided by two when applying the tax rates, provided they choose joint taxation.

b. Non-Residents’ Income Tax for 2025

If you’re a non-resident in Portugal, you only have to pay taxes on money you earn in Portugal. This could be income from:

A job in Portugal,
Work you do in Portugal as a freelancer, or
A pension that’s paid from a Portuguese source.

Non-residents pay a flat tax rate of 25% on any money earned in Portugal. This means that no matter how much you earn, you’ll pay 25% of that amount in taxes. Unlike residents, non-residents don’t get extra tax breaks or lower rates for smaller incomes. This makes it simple, but there are fewer ways to lower your tax amount.

c. Special Tax Regimes

Portugal offers a Non-Habitual Residency (NHR) scheme, which can provide significant tax benefits for foreigners who qualify (see more details in the NHR section).

2. Corporate Tax in Portugal

Businesses in Portugal must pay corporate tax on their profits at a flat rate of 21%. On top of that, there are extra local taxes that can be up to 1.5% and additional taxes on earnings over €1.5 million.

For small and medium-sized businesses, there is a lower tax rate of 17% on the first €50,000 of profit. Starting in 2025, start-up companies can get an even lower rate of 12.5% on their first €50,000 of income.

Small businesses that earn less than €200,000 a year can use a simplified tax system, where they pay taxes based on their total sales (turnover) instead of their profits.

The deadline to submit corporate tax returns is the last day of the fifth month after the end of the company’s tax year. For example, if the tax year is from January to December, the deadline would be the end of May the following year.

3. VAT in Portugal

VAT (Imposto Sobre o Valor Agregado- IVA in Portugal) is a tax on most goods and services. It was introduced in 1986 and has three different rates:

General rate: 23% on most goods and services.
Intermediate rate: 13% on things like food and drinks.
Reduced rate: 6% on essential items like some foods (meat, fruits, vegetables), books, newspapers, medicines, transport, and hotel stays.

Different VAT rates apply in the Portuguese islands:

Madeira: 22%, 12%, and 5%
Azores: 16%, 9%, and 4%

4. VAT for Businesses

If a business in Portugal makes more than €14,500 a year in sales, it must register for VAT. This threshold will increase to €15,000 in 2025. Businesses must have a special tax number called a NIPC (Número de identificação de pessoa coletiva) to pay VAT. VAT is paid monthly or quarterly, depending on the company’s setup.

5. Municipal Property Tax (IMI) in Portugal

IMI (Imposto Municipal sobre Imóveis) is similar to council tax and is charged by your local municipality based on the value of your home and the area you live in. The money from IMI helps pay for local services like trash collection, road repairs, and park maintenance.

In urban areas, IMI rates range from 0.3% to 0.45% of the property’s value.
In rural areas, the IMI rate is 0.8%.

For properties worth more than €600,000, homeowners must pay an additional tax called AIMI (Additional ao IMI), often seen as a kind of wealth tax in Portugal.

There’s good news for some homeowners: if your property is worth less than €125,000 and you live in it, you can get a three-year exemption from paying IMI.

6. Capital Gains Tax in Portugal

When you sell property or other valuable assets in Portugal, you may need to pay capital gains tax:

For individuals, the tax rate is a flat 8% on the profit made from the sale.
For companies and non-residents, the tax rate is 25%.

If you’re a resident of Portugal, you only pay taxes on 50% of the profit from the sale.

There are some exemptions for residents:

If you sell your main home and use the money to buy another property in Portugal or elsewhere in the EU, you may avoid paying the tax.
If you sell a property you bought before 1989, you’re also exempt from paying capital gains tax.

7. Rental Income

If you rent out a property you own in Portugal, you’ll need to pay tax on the profits you make from rental income. The tax rate is a flat 15% on your rental earnings.

8. Inheritance Tax

Portugal no longer has a traditional inheritance tax, but there is a stamp duty called Imposto do Selo. This applies at a rate of 10% on inheritances, but close family members (like spouses, children, and parents) are usually exempt from this duty.

If you do need to pay the stamp duty, it must be paid within three months of the person’s death. If you miss this deadline, there could be fines.

9. Road Tax in Portugal

Drivers in Portugal need to pay 2 types of taxes:

ISV (Imposto Sobre Veículos): This is a one-time tax you pay when registering your vehicle. The amount depends on your car’s CO2 emissions. You’re exempt from paying this tax if you have an electric car.

IUC (Imposto Único de Circulação): This annual road tax you pay yearly to keep your vehicle on the road. You can calculate how much you owe by entering your car’s details on the IUC website.

Non-Habitual Residency (NHR) Scheme

The Non-Habitual Residency (NHR) scheme was a unique tax program introduced in Portugal to attract foreign retirees, remote workers, and investors. This program offered tax benefits for 10 years to qualifying individuals who became tax residents in Portugal.

Explanation of the NHR Program

The NHR scheme was designed to provide reduced taxes or tax exemptions on certain types of income, such as pensions, foreign-sourced income, and capital gains. It was particularly attractive for:

Foreign retirees receiving pensions from abroad,
Remote workers with income from outside Portugal, and
Investors earn dividends or capital gains internationally.

End of the NHR Program

As of the end of 2023, the Portuguese government has closed the NHR scheme under its 2024 budget, meaning new applicants can no longer join the program. However, those already enrolled will still be able to benefit from its tax breaks for the remainder of their 10-year period.

Tax Advice in Portugal

Filing a tax return in Portugal can be challenging, especially if you’re self-employed or own a business. For this reason, it’s a good idea to seek help from a professional tax expert or accountant.

You can contact firms like All Finance Matters, which specialize in providing tax advice and helping with complex tax situations.
You can also use the Institute of Chartered Accountants in England and Wales (ICAEW) directory for English-speaking tax support. It provides a list of international accountants who can help with Portugal’s tax and social security issues.

Frequently Asked Questions

Yes, if you live in Portugal for more than 183 days in a year or have a permanent home there, you are considered a tax resident and must pay taxes on your worldwide income. Non-residents only pay taxes on income earned within Portugal.

Non-residents pay a flat tax rate of 25% on income earned from Portuguese sources, such as employment, self-employment, and pensions.

Residents in Portugal pay progressive income tax rates ranging from 13.25% to 48%. The higher your income, the more tax you pay. The income is taxed in brackets.

Yes, capital gains tax applies in Portugal. Non-residents pay a flat 25% on capital gains from Portuguese assets. Residents pay tax on 50% of the gain, and there are exemptions if you reinvest in another property within the EU or if the property was bought before 1989.

The NHR scheme offered a 10-year tax break to qualifying expats. However, the program ended in 2023, meaning new applicants can no longer apply, but those already enrolled will still benefit for the remainder of their 10-year period.

IMI (Imposto Municipal sobre Imóveis) is a property tax in Portugal. If you own property, you’ll need to pay this tax, which ranges from 0.3% to 0.45% in urban areas and 0.8% in rural areas.

Portugal has a standard VAT rate of 23% on most goods and services. There are 13% and 6% reduced rates for specific goods, such as food, medicines, and books.

Portugal does not have a traditional inheritance tax, but a 10% stamp duty (Imposto do Selo) applies to inheritances, although close family members like spouses and children are usually exempt.

Rental income from a Portuguese property is taxed at a flat 15% rate for non-residents.

Yes, filing taxes in Portugal can be complex, especially for foreigners. It’s highly recommended to seek advice from an accountant or tax expert to ensure compliance with the tax laws. You can find English-speaking accountants through directories like the Institute of Chartered Accountants in England and Wales (ICAEW).

Conclusion

Understanding taxes in Portugal is essential for foreigners living or working in the country. Whether you’re a resident or non-resident, staying informed about the tax system will help you avoid surprises and ensure compliance. If you’re unsure, seeking professional tax advice can make the process more manageable.

At our firm, we offer assistance with obtaining your NIF Portugal, the tax identification number required for all financial activities in Portugal, and your visa Application services, which is necessary for social security registration. Our team ensures a hassle-free process, guiding you through every step to help you set up in Portugal quickly and efficiently.

Taxes in Portugal for Foreigners: Portuguese Tax System in 2025