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Email: anabela.silva@pt.ey.com
+351 938-776-145
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The personal income tax rules described in this chapter are in line with the current legislation and are in force on 1 November 2024.
A. Income tax
Who is liable. Residents of Portugal are subject to tax on their worldwide income. Nonresidents are subject to personal income tax on income arising in Portugal.
An individual is considered resident in Portugal if, among other conditions, he or she meets either of the following conditions:
• He or she stays in Portugal for more than 183 days in any 12-month period, beginning or ending in the fiscal year concerned.
• He or she has a dwelling in Portugal, in any day of the abovementioned period, which may imply his or her intention to use it as his or her habitual residence.
derived from sales of the following assets are taxed at the personal income tax rates set forth in Rates:
• Real estate and associated rights
• A taxpayer’s property transferred to the taxpayer’s business (however, this gain may be deferred; see below)
Capital gains derived from sales of the following assets are exempt from tax:
• Securities acquired before 1 January 1989.
• Real estate, except land for construction, owned prior to 1 January 1989.
• A personal residence of the taxpayer or household, proven as the tax domicile for the 12 months prior to the sale (or, if prior, previous to the date of reinvestment), if, among other conditions, the proceeds are reinvested in another personal residence in Portugal (or in other EU Member States or EEA countries that have entered into an exchange-of-information agreement with Portugal concerning tax matters) within 36 months after the sale or 24 months before the sale, and the taxpayer or household has established in the residence its tax domicile.
• A personal residence if the proceeds are invested in a life insurance contract, individual membership in an open pension fund, contributions to the capitalized public regime or a PanEuropean individual savings product, and if the following conditions are met:
— The taxpayer or the respective spouse are retired or are, at least, 65 years old on the date of the sale of the personal residence.
— The purchase of the insurance contract, individual membership in an open pension fund or contributions to the capitalized public regime, occur within six months after the sale.
— In the case of the purchase of an insurance contract or individual membership in an open pension fund, the applications entitle exclusively the taxpayer or the respective spouse, to a periodic payment for a period equal or higher than 10 years of a maximum annual amount equal to 7.5% of the value invested.
Additional conditions may have to be met for the abovementioned exclusions from taxation to apply.
The following capital gains benefit from special tax treatment:
• Gains derived from the sale of real estate or associated rights, excluding real estate used in a trade or business, are taxed only to the extent of 50% of the gain.
• Gains derived from transfers of real estate from the taxpayer’s business to the taxpayer’s own property are not deemed a taxable event. However, when this transfer occurs, in the case of organized accounting, if depreciation or impairments have been booked, the corresponding expenses for tax purposes that have been deducted during the period of allocation of the property to the business activity must be added, in equal fractions, to the income of the year in which the transfer occurs and in each of the following three years.
• Gains derived from the transfer of real estate that has been allocated to the taxpayer’s business are taxed as business or professional income if the transfer occurs less than three years following the transfer of the real estate to the taxpayer’s own property.
auditors and tax advisors) have been eliminated. The new list is applicable from 1 January 2020, but there is a transitory regime applicable to individuals who were already registered as such or with pending registrations up to 1 January 2020 or who requested such registration up to 31 March 2020 (with effects for the 2019 tax year).
Foreign-source income, such as employment income, income from certain business or professional activities (as listed above), income from copyrights, industrial property rights or transfer of know-how, investment income, rental income and capital gains, is exempt from tax in Portugal if such income is effectively taxed (for employment income) or may be taxed (for other types of income) in either of the following countries:
• A tax treaty country, in accordance with the terms of the treaty.
• A non-tax treaty country in accordance with the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention rules, provided that the country is not a territory considered a tax haven (not applicable to employment income) and that the income cannot be deemed sourced in Portugal under domestic tax law.
According to the rules in force until the 2020 State Budget Law, foreign-source pension income not resulting from contributions that had been claimed as a tax deduction in Portugal was exempt from tax in Portugal if such income was taxed in a tax treaty jurisdiction or was not deemed sourced in Portugal under domestic tax law. According to the new rules introduced by the 2020 State Budget Law, foreign-source pension income not originating from contributions that have been claimed as a tax deduction in Portugal is subject to tax at the special tax rate of 10%, applicable to the net taxable income of pensions, including the income qualified under Category H – pension income, as well as amounts qualified as employment income, such as those made before the holder is placed in a situation equivalent to retirement, and as well as lump-sum payments when the contributions were not subject to taxation. A transitional regime has been introduced, under which the prior rules granting the exemption may still apply in certain conditions.
Income benefiting from the exemption method is considered to determine the tax rate applicable to the remaining income (except capital gains from securities, dividends, interest and other investment income sourced abroad, rental income and employment and business or professional income subject to the 20% rate mentioned above, which are taxed at special flat rates). Taxpayers may opt to apply the credit method (rather than the exemption method) to this income. In such case, such income is aggregated with the remaining income and taxed at the normal IRS rates.
As from 1 January 2024, the non-habitual residents’ regime ended. However, a transitional regime has been introduced, and the regime will continue to apply for those already registered as non-habitual residents and for those who become tax residents of Portugal until 31 December 2023.
In addition, the transitional regime determines that the regime will still be applicable to individuals who become tax residents of
This regime operates as an exemption with progression.
Taxation of crypto assets. According to the legislation introduced with the 2023 State Budget, income arising from operations with the issuance of crypto assets, including mining or the validation of cryptocurrency transactions through a consensus mechanism, is considered to be business and professional income, applying a coefficient of 0.15 (or of 0.95 in the case of income from mining) under the simplified regime. The income is subject to taxation at the time of the sale (or when the individual ceases his or her professional activity or becomes a nonresident in Portugal). In contrast, income resulting from the remuneration of operations related to crypto assets is considered investment income (benefiting from an exemption from withholding tax), unless obtained in the course of a business or professional activity, except when it takes the form of crypto assets in which they will be considered a capital gain and taxed upon their disposal.
Income arising from the disposal (or at the moment the owner becomes nonresident in Portugal) of crypto assets is treated as a capital gain or loss, unless obtained as part of a business or professional activity. Gains and losses are excluded from taxation relating to crypto assets held for a period equal to or greater than 365 days. If the result of the disposal results in the attribution of crypto assets, there is no taxation and the acquisition value of the crypto assets delivered will be attributed to the crypto assets received.
Exclusion and “neutrality” rules only apply if both the taxable person and the debtor entity are residents of an EU or EEA Member State or of a country with a bilateral or multilateral double tax treaty signed by Portugal that provides for the exchange of tax information.
Deductions
Personal deductions and allowances. For 2024, employees may deduct an amount of EUR4,350.24. Compulsory social security contributions in excess of EUR4,350.24 are deductible without limitation. Union contributions and indemnities paid to employers may also be deducted, subject to applicable limits.
Business and professional deductions. Professionals and individuals carrying on a business may be taxed under one of the following two regimes:
• Simplified regime
• Organized bookkeeping regime
Business and professional income may be taxed under the simplified regime if the taxpayer does not choose to use and is not required to use organized bookkeeping and if the annual gross business and professional income for the preceding year did not exceed EUR200,000.
Under the simplified regime, taxable income is calculated by applying the following predefined coefficients, which vary depending on the activity’s sector, to gross income:
• 0.15 on sales of goods and products and operations with crypto assets (except mining), as well as hotel and similar services
For married taxpayers, the progressive tax rate is determined by dividing taxable income by two.
For 2023 and 2024, taxable income exceeding EUR80,000 but not exceeding EUR250,000 is subject to an additional solidarity tax of 2.5%, and taxable income exceeding EUR250,000 is subject to an additional solidarity tax of 5%.
Credits. For 2023 and 2024, individuals may credit the following amounts against their tax liability:
• EUR600 for each child (EUR726 for the first child in case he or she is younger than three years old or EUR900 for the second child and following, as long as he or she is younger than six years old, independently from the age of the first child).
• EUR300 for each child (EUR363 for the first child in case he or she is younger than six years old or EUR450 for the second child and following, as long as he or she is younger than three years old, independently from the age of the first child) for each taxpayer with parental responsibilities, whenever the agreement for the exercise of parental responsibility establishes joint responsibility and alternating residency.
• EUR525 for each ascendant who lives with the taxpayer and does not receive income above the minimum social security retirement pension. This credit is increased to EUR635 if only one ascendant complies with the abovementioned requirements.
• 35% (45% for single-parent families) of general expenses borne by any member of the household, with the limit of EUR250 (or EUR335 for single-parent families) per taxpayer.
• For health expenses that are exempt from value-added tax (VAT) or are subject to VAT at a rate of 6%, health insurance premiums of the taxpayer or any member of the household, or health expenses subject to the standard rate of 23% that are duly documented by a doctor’s prescription and 15% of unreimbursed medical expenses borne by any member of the household. The tax credit cannot exceed EUR1,000.
• 15% of interest on certain loans and financial leasing rent for the acquisition or improvement of a residence in Portugal or a country in the EU or EEA (with which Portugal has entered into an exchange-of-information agreement concerning tax matters), limited to EUR296, and 15% of the rental payments made to the owner of a residence in Portugal or a country in the EU or EEA (with which Portugal has entered into an exchange-ofinformation agreement concerning tax matters), limited to EUR502 for 2023 and EUR600 for 2024. These limits may be increased for taxpayers with lower levels of income.
• 30% of education expenses, including professional training expenses, of the taxpayer or any member of the household, limited to EUR800 (this limit can be increased to EUR1,000 for 2023 and EUR1,100 for 2024 in case the difference relates to rents for members of the family household, younger than 25 years old [inclusive], who are attending schools that are more
than 50 kilometers away from the permanent residence of the family household).
• 25% of expenses incurred on retirement homes and similar homes, limited to EUR403.75.
• 15% of the VAT borne in the following sectors, limited to EUR250:
— Maintenance and repair of motor vehicles
— Maintenance and repair of motorcycles
— Accommodation and food services
— Hairdressers and beauty salons
— Veterinarian services
— Sport and recreational teaching, sport clubs, and gyms and fitness (in 2024, 30% of the VAT borne with these expenses are applicable instead of 15%, concurrent with the EUR250 ceiling)
• 100% of the VAT borne by any member of the household with monthly passes for use of collective public transport (concurrent with the EUR250 ceiling applicable to the VAT borne in the sectors mentioned in the preceding bullet).
• 100% of the VAT borne by any member of the household with the purchase of subscriptions to periodicals (newspapers and magazines), including digital ones, taxed at the reduced rate of VAT (concurrent with the EUR250 ceiling applicable to the VAT borne in the sectors mentioned in the preceding bullets).
• 35% of the VAT borne by any member of the household with medicines for veterinarian purposes (concurrent with the EUR250 ceiling applicable to the VAT borne in the sectors mentioned in the preceding bullets).
• 5% of the amount borne by any member of the household as remuneration for the provision of housework, with an overall limit of EUR200.
• 20% of pension fund contributions that meet certain conditions, limited to EUR300, EUR350 or EUR400 per taxpayer, depending on the taxpayer’s age.
• 25% of donations to the state or municipalities, increased by 20%, 30%, 40% or 50%, depending on the type of the beneficiary entities.
• 25% of donations to religious institutions, public utility collectives, schools, museums, libraries, cultural associations, and philanthropic and charitable institutions, increased by 30%, with the credit limited to 15% of the total tax liability.
• 20% of alimony payments, in certain conditions.
• 20% of investments made by business angels (individual venture capital investors), provided certain conditions are satisfied, limited to 15% of the total tax liability.
• Advance personal income tax payments and taxes previously withheld at source.
To benefit from the credits, these expenses must be reported (generally by the suppliers) to the Portuguese tax authorities.
For 2024, tax credits concerning medical expenses, education expenses, alimony payments, retirement homes and expenses related to residential property, as well as 15% of the VAT borne in some sectors (100% for monthly transportation passes and purchase of subscriptions to periodicals [newspapers and magazines]; 30% for sport and recreational teaching, sport clubs, and gyms and fitness; as well as 35% for medicines for veterinary
purposes), and tax benefits and remuneration for the provision of housework are also capped as a whole in accordance with the taxpayer’s level of income, as shown in the following table.
Taxable income Limit
Up to EUR7,703
More than EUR7,703 and less than EUR80,000
More than EUR80,000
None
EUR1,000 + (1,500 x [EUR80,000 – taxable income] ÷ [EUR80,000 – EUR7,703])
EUR1,000
Each of the above limits is increased in 5% for each dependent, in families with three or more dependents.
Relief for losses. Losses from business or professional activities may be carried forward and offset against profits from activities of the same type in the following 12 years. Losses may not be carried back.
B. Inheritance and gift taxes
Inheritance and gift taxes were eliminated, effective from 1 January 2004. However, stamp duty at a rate of 10% applies if the beneficiary is an individual; some exceptions are allowed (spouse or life partner, ascendants and descendants benefit from an exemption). For a beneficiary that is a collective person, a corporate tax applies at a maximum rate of 21%, plus the following surcharges:
• Municipal surcharge of up to 1.5% for residents or permanent establishments
• A state surcharge of 3% on taxable income between EUR1,500,000 and EUR7,500,000, 5% on taxable income between EUR7,500,000 and EUR 35,000,000, and 9% on taxable income exceeding 35,000,000
Specific rules apply to determine whether an asset is deemed to be located in Portugal for stamp duty purposes.
C. Social security
Contributions. Social security contributions are payable on all salaries, wages, bonuses and other regular income, excluding lunch subsidies. No ceiling applies to the amount of wages subject to social security contributions for employers or employees, including members of the board. The employer’s share is 23.75%, and the employee’s share is 11%, of salaries. An employer must deduct an employee’s contribution and pay the total amount by the 20th day of the following month.
A self-employed individual engaged in a business or professional activity is subject to monthly social security contributions. The basis for contributions corresponds to 70% of the total amount of services provided (20% for income from production and sale of goods) in the three preceding months, with a monthly cap of EUR5,765.16 for 2023 (12 times EUR480.43) and EUR6,111.12 for 2024 (12 times EUR509.26). If the individual is taxed under the organized accounting, the relevant income is determined based on the profit of the previous year. Social security contributions are first due on the first day of the 12th month after the beginning of activity.
Self-employed individuals should file a return to the social security authorities in the months of April, July, October and January, for the income earned in the previous three months.
The following are the contribution rates for self-employed individuals:
• 21.4% in general
• 25.2% for specific situations
Entities contracting service providers may be subject to a 10% (when more than 80% of the services are rendered to the same entity) or 7% (when more than 50% but less than 80% of the services are rendered to the same entity) social security contribution rate levied on the amount paid for the services.
Members of a company’s governing bodies (management, supervisory and general meeting) are usually subject to social security contributions based on actual compensation. For contribution purposes, the actual compensation base must equal at least one monthly notional salary. This limit does not apply if members of the board are not remunerated and simultaneously carry on another remunerated activity that is liable to mandatory social security contributions and if the tax base is equal to or higher than EUR480.43 for 2023 or EUR509.26 for 2024, or in the case of pensioners.
For management, the rates are 11% for individuals and 23.75% for companies. For other governing bodies, the rates are 9.3% for individuals and 20.3% for companies.
Totalization agreements. Foreigners who work temporarily (generally up to two years) in Portugal and who contribute to a compulsory social security regime in their country of origin may not be subject to Portuguese social security contributions. To provide relief from double social security contributions and to assure benefit coverage, Portugal has entered into totalization agreements, which apply to different periods (up to 60 months), with the following jurisdictions.
Andorra Estonia
Norway
Angola* Finland Philippines
Argentina France Poland Australia Germany Quebec
Austria Greece Romania
Belgium Guinea*
São Tomé and Brazil Hungary Príncipe*
Bulgaria Iceland Slovak Republic
Canada India Slovenia
Cape Verde Ireland Spain
Channel Islands Italy Sweden (Alderney, Latvia Switzerland Guernsey, Herm, Liechtenstein
Tunisia
Isle of Man, Lithuania Türkiye
Jersey and Jethou) Luxembourg Ukraine
Chile Malta
Croatia Moldova
United Kingdom
United States
Cyprus Morocco Uruguay
Czech Republic Mozambique
Denmark Netherlands
* This agreement is not yet in force.
Venezuela
Married taxpayers who are not legally separated, as well as joint couples (in some cases), can opt for joint taxation. Under Portuguese law, joint couples are taxpayers who are not married but live together for at least two years.
The tax year in Portugal is the calendar year. However, it is possible to split the year for tax purposes. Residents, as well as nonresidents who have filing obligations, must file their personal income tax returns between 1 April and 30 June of the following year. Any balance of tax due or excess tax paid is payable or refundable when the Portuguese tax authorities issue the respective tax assessment.
An extension to the filing of personal income tax returns with foreign tax credit is granted until 31 December of the year following the tax year. For that purpose, individuals must report the nature of the income and the country of source by the standard deadline for the personal income tax return filing (through Form 49) and subsequently file the return when the foreign tax assessment is available.
The foreign tax credit may be carried forward for five years.
Nonresidents who receive rental income from Portugal or who realize a capital gain in Portugal that is not excluded from taxation must file tax returns between 1 April and 30 June of the year following the year of receipt.
E. Double tax relief and tax treaties
Residents who receive foreign-source income are generally entitled to a tax credit equal to the lower of the foreign tax paid or the Portuguese tax payable on such income. The credit applies to income derived from treaty and non-treaty countries; however, for treaty countries, the credit is limited to the amount of tax payable in the country of source in accordance with the treaty.
Brokers resident in countries with which Portugal has entered into double tax treaties are exempt from tax on commissions received from Portuguese entities. This exemption also applies to income from business and professional services. Specific forms are required to qualify for the exemption.
Compulsory social security contributions and other deductible expenses (see Sections A and C) incurred overseas may be deducted if properly documented.
Portugal has entered into double tax treaties with the following jurisdictions.
Algeria Hong Kong SAR Poland
Andorra Hungary Qatar
Angola Iceland Romania
Australia (a)
India Russian
Austria Indonesia Federation
Bahrain
Barbados
Belgium
Brazil
Bulgaria
Canada
Ireland
Israel
Italy
Japan
Kenya (a)
Korea (South)
San Marino
São Tomé and
Príncipe
Saudi Arabia
Senegal
Singapore
• For professions that are not regulated, proof of higher professional qualifications in the occupation or sector specified in the employment contract
The applicant must meet the salary criteria of 1.5 times the Portuguese average gross annual salary.
The application for the EU Blue Card should be submitted by a national of a third state or by the employer with the regional offices of the immigration authorities.
The EU Blue Card is issued for an initial term of validity of two years, renewable for successive periods of three years. The renewal of the EU Blue Card must be requested by the interested party within 30 days before the expiration of its validity.
I. EU, EEA and Swiss nationals
EU, EEA and Swiss nationals do not need any permits to enter and work in Portugal. An EU, EEA or Swiss national who intends to reside and work in Portugal must register with the local city hall (of his or her area of residence in Portugal) if his or her stay exceeds 90 days. In principle, the EU registration is valid for a period of five years, after which EU, EEA and Swiss nationals should apply for a permanent residence permit, which is valid for 10 years.
J. Golden Visa
The rules governing the granting of a Residence Permit for Investment (known as an ARI/Golden Visa), which entered into force on 8 October 2012, enable third-country nationals to obtain a temporary residence permit to conduct business activities with visa waiver to enter Portugal.
The beneficiaries of an ARI/Golden Visa are entitled to the following:
• Residence visa waiver for entering Portugal
• The right to live and work in Portugal, on the condition that they stay in Portugal for a period of seven or more days in the first year and 14 or more days in the subsequent years
• Visa exemption for traveling within the Schengen Area
• Family reunification
• The right to apply for permanent residence after five years
• The right to apply for Portuguese citizenship, by naturalization, provided all other requirements set out by the Nationality Act are fulfilled after five years
Eligible individuals are all third-country citizens who conduct an investment activity in Portugal, as individual businesspersons or through a company set up in Portugal or in another EU Member State and who are stably settled in Portugal, provided that these citizens fulfill the quantitative requirements and the time requirements set out by the relevant legislation, by one of the following actions:
• The creation of at least 10 job positions
• Capital transfer with a value equal to or above EUR500,000 for investing in research activities conducted by public or private scientific research institutions involved in the national scientific or technological system