Portugal Tax Guide 2025: Income, Corporate, Property, and Double Taxation Explained

Portugal’s tax system for 2025 is comprehensive and carefully structured. Residents are taxed on a progressive income scale, and qualifying businesses can reduce their corporate tax rate to 5%. Only high-value real estate is subject to a wealth tax. To qualify as a tax resident, an individual must spend more than 183 days in Portugal during the calendar year from January 1 to December 31. The days of residence do not need to be consecutive but must total more than half the year.

This guide explains the current Portuguese tax structure, including personal and corporate income taxes, property and capital gains taxes, social contributions, and the new IFICI regime for foreign residents. It also outlines how to establish tax residency, the key filing deadlines, and the network of double-taxation treaties that help prevent paying tax twice on the same income. By understanding these rules, individuals and businesses can meet their obligations, avoid penalties, and make use of available deductions and exemptions.

How the Tax System Works in Portugal

Portuguese taxpayers include both individuals and legal entities, and the applicable rates depend on whether the payer is a tax resident of Portugal. For an individual, living in Portugal for at least 183 days in a calendar year is enough to qualify as a tax resident. However, the change of tax residence does not happen automatically. To formalize it, you must submit an application to the Portuguese tax office and provide a Portuguese registration address.

Golden Visa holders can relocate to Portugal and become tax residents. Along with visa-free travel across the Schengen Area, they gain access to European banking services and the right to live, work, and study in Portugal. After five years of residence, they may also apply for Portuguese citizenship and EU nationality.

For companies, becoming a tax resident requires registering a head office in Portugal and obtaining a Portuguese tax number. The main taxes in Portugal are federal and include income tax, corporate tax, VAT, capital gains tax, property transfer tax, and inheritance tax. Homeowners and local companies also pay municipal taxes, which vary depending on the property’s value and its location. Revenue from these taxes funds local services such as garbage collection.

The fiscal year in Portugal coincides with the calendar year, running from January 1 to December 31. Tax returns must be submitted to the authorities between April 1 and June 30 of the year following the reporting one.

Personal Income Tax in Portugal

When Income Tax Applies

Income tax is levied if a person receives salary as an employee of a Portuguese company, payment for activities performed as an individual entrepreneur, interest and royalties on investments, rent payments, or pension income, including from private pension savings.

Tax Rates for Residents and Non-Residents

A flat rate of 25% applies to non-residents, but only income earned from a source in Portugal is taxed. For example, if a Portuguese client pays an individual entrepreneur, that income is subject to the flat rate. Residents of Portugal pay income tax on a progressive scale, with the rate depending on annual income.

Tax Deductions

Portuguese tax residents may be eligible to recover part of the tax paid. An automatic deduction applies if income comes only from Portuguese sources and exclusively from salaries or pensions. Additional deductions can be claimed for expenses such as medical treatment, education, life and health insurance, and care for elderly or disabled relatives. A deduction is also available if the taxpayer has already paid income tax in another country, provided Portugal has a double taxation agreement with that country.

Income Tax Rates and Deductions for 2024–2025

The following tables outline the progressive income tax brackets for residents in 2024 and 2025.

Portugal Resident Income Tax Rates 2025

An additional solidarity surcharge applies: 2.5% on income between €80,000 and €250,000, and 5% on income above €250,000.

Portugal Resident Income Tax Rates 2024

Income Withholding and Key Exemptions

For salaries and pensions, income tax is withheld at the time of payment by the employer or pension fund. The first €4,104 of pension income is tax-exempt, but pensions and salaries must still be declared in the annual tax return. 

Married couples or registered partners may choose to file jointly or separately. If filing separately, each spouse reports 50% of the income received by dependent family members. 

Former tax residents returning to Portugal between 2024 and 2026 may qualify for a 50% exemption on employment or self-employment income, up to €250,000 annually, for five years. Late filing can result in fines from €300 to €3,750, while late payment may incur penalties of 30% to 100% of the unpaid tax.

Annual Tax Filing Schedule

Portugal’s tax process follows a strict timeline: By February 17, family information must be updated. By February 25, taxpayers must verify income and expenses on the E-Fatura portal. By March 15, deductible expenses are confirmed. Between April 1 and June 30, the return is filed. By July 31 or November 30, the tax office issues an invoice. Final payment is due by August 31 or December 31.

Other Taxes Paid by Individuals

In addition to income tax, Portuguese residents may face several other taxes and contributions. An additional solidarity surcharge applies to annual income above €81,199: 2.5% for income up to €250,000 and 5% for income above that threshold.

Dividends are taxed at a flat rate of 28% for both residents and non-residents, though this may be reduced if a double tax treaty applies. If the paying company is registered in a jurisdiction on Portugal’s blacklist of tax havens, the rate increases to 35%.

Stamp duty is charged only in specific cases, such as gifts and inheritances or the sale of a business or shareholding, and applies equally to residents and non-residents.

Social contributions are another obligation. Employees contribute 11% of their salary, covering family, pension, and unemployment benefits. Self-employed individuals pay a contribution rate of 21.4%. For those under the simplified tax regime, the monthly contribution base is calculated as one-third of relevant income for the reporting period, with the assessment applying to that month and the following two months.

How Foreigners Are Taxed in Portugal

Foreign tax residents are subject to tax on their worldwide income, while non-residents are taxed only on income sourced in Portugal. For residents, income tax is applied progressively, with rates ranging from 13.25% to 48% depending on the income bracket. Non-residents are taxed at a flat rate of 25% on their Portuguese-sourced income.

Until recently, Portugal was especially attractive to expats through the Non-Habitual Resident (NHR) regime, which granted generous tax benefits for the first ten years of residency. However, beginning in 2025, the old NHR program has been phased out. In its place, Portugal introduced the IFICI (Innovative Fiscal Incentive for Scientific Research and Innovation), often referred to as “NHR 2.0.” This new regime provides a flat 20% tax rate on eligible Portuguese income and relief from double taxation on certain foreign-sourced income, but it is limited to highly qualified professionals working in innovation-driven sectors.

Corporate Tax Rules for Businesses

All companies operating in Portugal must pay corporate income tax. Non-resident companies are taxed only on profits generated within Portugal, while resident companies are taxed on their worldwide profits.

The standard corporate tax rate is 21% on the mainland, with reduced rates in the autonomous regions: 14.7% in both Madeira and the Azores. In addition to this, companies may face municipal, regional, and federal surtaxes depending on where they operate. A state surtax also applies, but only on the portion of profits exceeding €1.5 million.

Corporate Tax Payments and Audit Requirements

Companies in Portugal pay corporate income tax in three equal installments each year. To meet this obligation, financial statements must be prepared in advance and approved by the shareholders’ meeting.

Certain companies are also subject to mandatory audits. This requirement applies if a company meets at least two of the following three conditions for two consecutive years:

• Annual income exceeds €3 million
• Net assets are valued at more than €1.5 million
• The workforce includes more than 50 employees

Value Added Tax (VAT) Obligations

In addition to corporate tax, companies must also pay Value Added Tax (VAT) when they provide services, import goods, or sell products. The VAT rate depends on the type of goods or services and the region where the company is registered.

• Mainland Portugal: 23% standard, 13% intermediate, and 6% reduced.
• Madeira: 22% standard, 12% intermediate, and 4% reduced.
• Azores: 16% standard, 9% intermediate, and 4% reduced.

Filing frequency also depends on company turnover. Businesses with annual revenue under €650,000 file VAT returns and pay quarterly, while companies above that threshold are required to file and pay VAT monthly.

Property Taxes in Portugal

Property Transfer Tax (IMT)

The property transfer tax (Imposto Municipal sobre Transmissões, or IMT) is a municipal tax paid once when buying real estate.

• Rural properties: taxed at 5%.
• Commercial properties: taxed at 6.5%, regardless of whether the location is urban or rural.
• Residential properties: subject to a progressive scale that takes into account both the purchase price and whether the property is a permanent home or for rental:
  • Up to €101,917: 0% for permanent residence, 1% for non-permanent
  • €101,917 – €139,412: 2%
  • €139,412 – €190,086: 5%
  • €190,086 – €316,772: 7%
  • €316,772 – €633,453: 8%
  • €633,453 – €1,102,920: 6%
  • Above €1,102,920: 7.5%

IMT must be paid after the preliminary purchase contract is signed, but no later than three days before the final transaction is completed.

Municipal Property Tax (IMI)

The municipal property tax (Imposto Municipal sobre os Imóveis, or IMI) is levied annually. The rate depends on the type and location of the property:

• Urban properties: 0.3% – 0.45%
• Rural properties: 0.8%

Certain exemptions apply:

• No tax is charged if the annual household income is below €15,295, provided the property is used as a permanent residence and valued at no more than €66,500.
• Properties valued up to €125,000 are exempt from IMI for three years if the owner’s annual income does not exceed €153,300.
• Buildings undergoing reconstruction financed by the municipality are exempt for three to five years.

IMI can be paid in one installment or split, depending on the amount due:

• Up to €100: one payment by May 31
• €100 – €500: one payment by May 31, or two installments by May 31 and November 30
• Over €500: one payment by May 31, or three installments by May 31, August 31, and November 30

Capital Gains Tax

Capital gains tax applies to both individuals and legal entities, for example on the sale of shares. If the shares are not listed on a stock exchange, only 50% of the profit is subject to tax. The general rate is 28%, which applies equally to residents and non-residents.

When selling real estate, Portuguese tax residents are taxed on only half of the profit. This amount is added to the taxpayer’s annual income when filing a return. If the property sold is a primary residence and the proceeds are reinvested in another permanent home, the tax is waived. However, if the new property is purchased at a lower price, half of the difference between the sale profit and the cost of the new property is taxed.

Special rules apply for retirees and residents over 65. If they sell their home, they may avoid capital gains tax by reinvesting the profit in a pension fund or insurance product within six months of the transaction. Non-residents, however, are taxed on the total amount of capital gains from real estate sales.

Inheritance Tax

Portugal does not impose a general inheritance tax. Instead, transfers are subject to Stamp Duty (Imposto do Selo). A flat rate of 10% applies when assets are inherited by distant relatives or individuals outside the immediate family.

Transfers between spouses, children, grandchildren, parents, and grandparents are exempt from this tax, meaning assets inherited within the direct family line are not subject to Stamp Duty.

Taxation of Crypto Assets

Portugal introduced specific rules for taxing cryptocurrencies in February. Income from the sale of crypto assets held for less than one year is taxed at 28%. If the assets are held for more than a year, the taxpayer is fully exempt from capital gains tax.

Crypto-to-crypto transactions and the sale of non-fungible tokens (NFTs) are also tax-exempt. However, all crypto income must be declared as part of the IRS (personal income tax return).

Comparing Portugal and U.S. Tax Systems

The United States has a more straightforward tax structure in some areas, but high earners often face heavier tax burdens, especially when state taxes are factored in. Like Portugal, U.S. residents are taxed on their worldwide income, so individuals must carefully weigh their personal and financial circumstances before deciding where to live or invest.

• Personal income tax: U.S. federal income tax rates range from 10% to 37%, depending on income level. On top of that, most states levy their own income taxes, which vary widely by jurisdiction.
• Corporate tax: The federal corporate income tax rate is 21%, introduced under the 2017 Tax Cuts and Jobs Act. State corporate taxes are added on top, which increases complexity for businesses.
• Capital gains tax: Long-term capital gains are taxed at 0%, 15%, or 20%, depending on the taxpayer’s income bracket. Short-term capital gains (assets held for less than one year) are taxed as ordinary income.
• Inheritance and gift taxes: A federal estate tax applies to estates worth more than $12.06 million (2022 threshold), with rates up to 40%. The same lifetime exemption applies to federal gift tax.
• Social security and Medicare contributions: Employees and employers each pay 6.2% for Social Security (on income up to $147,000 in 2022) and 1.45% for Medicare, with no income cap.

Avoiding Double Taxation

Portugal has double tax treaties (DTTs) in force with 78 countries, including all EU member states as well as major economies such as the United States, Canada, Japan, China, India, and the United Arab Emirates. These treaties are designed to prevent individuals and companies from being taxed twice on the same income.

Under a DTT, income is typically taxed in the country where it is earned, with a credit or deduction applied in the country of residence. If the tax rate is higher in the country of residence, the taxpayer pays the difference. Many treaties also establish preferential rates for dividends, interest, and royalties.

In addition to DTTs, Portugal has signed Tax Information Exchange Agreements (TIEAs) with several jurisdictions, including:

• Andorra
• Antigua and Barbuda
• Bermuda
• British Virgin Islands
• Cayman Islands
• Gibraltar
• Liberia
• St. Kitts and Nevis
• St. Lucia
• Turks and Caicos

The U.S.–Portugal Tax Treaty

The tax treaty between the United States and Portugal is designed to prevent double taxation on income earned in either country. It provides clarity for residents and businesses operating across borders, ensuring they are not taxed twice on the same income.

Both countries apply the credit method to eliminate double taxation. This allows taxpayers to offset income taxes paid in one country against their liability for the same income in their country of residence.

The treaty also sets out rules for determining tax residency. A resident is defined as an individual or entity that is liable to tax in a country due to domicile, residence, place of management, or a similar criterion. For individuals considered dual residents, the treaty applies tie-breaker rules based on factors such as permanent home, center of vital interests, habitual abode, and nationality.

Key Takeaways for Residents and Investors

Portugal’s tax system combines progressive personal income taxes, competitive corporate rates, and a range of deductions and exemptions that can ease the burden for both residents and investors. From property and capital gains to social contributions and special regimes for foreigners, the framework is detailed and compliance-driven, but also offers opportunities for careful planning.

For individuals and businesses, understanding filing schedules, residency rules, and the impact of international tax treaties is essential to avoid penalties and optimize tax liabilities. With recent reforms such as the phase-out of the old NHR regime and the introduction of the IFICI program, Portugal continues to adapt its tax policies in ways that balance fiscal responsibility with economic competitiveness.

Ultimately, whether you are considering relocation, investment, or corporate expansion, being well-informed about Portugal’s tax obligations helps ensure not only compliance but also the ability to take full advantage of the country’s financial and lifestyle benefits.