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Taxation in Portugal for Expats: Facts and Positive Aspects Image

Taxation in Portugal for Expats: Facts and Positive Aspects

November 15, 2021

Whether it’s a new job, the lifestyle, or family connections that have you considering a move to Portugal, taxation will always be an important issue for expatriates.

 

The subject is also a positive one as their tax system is one of the most agreeable in Europe and provides yet another reason why the country is attracting high earners to its shores.

 

National taxes in Portugal are mainly calculated on a person’s income, financial expenditure, and the value of their property. The Portuguese tax system addresses several factors related to personal wealth, so the subject is of particular interest to affluent individuals. If you are relocating for work be aware that charges on personal earnings are incurred for both employees and self-employed workers.

 

These taxes also cover pensions and income derived from dividends, so high-level business professionals negotiating a remuneration package or becoming a shareholder should consider these factors in detail.

 

Likewise, any expatriate, whether they intend to work in Portugal or not, will be charged a capital gains tax on income acquired from the rental or sale of property, or via inheritance.

 

Portuguese tax year: follows a calendar year from 1 January to 31 December.

 

Personal income tax on earnings

 

When you are an established resident in Portugal you will be taxed on your worldwide income at a rate that will vary between 14.5% to 48% for 2021.

 

Areas of income that will be considered taxable are:

  • Salary including bonuses and benefits
  • Self-employed earnings
  • Investments and saving interest
  • Property rental income
  • Capital gains from the sale of a property or other assets
  • State and private pension schemes
  • Inheritance gift or settlement

 

Tax Bands & Rates in Portugal

 

Portuguese-Tax-Rate

 

For anyone moving to Portugal to take up new employment, it is important to note that foreigners residing in the country must register as a taxpayer before they can earn a salary.

 

C-level executives should understand that income tax rates in Portugal are based on progressive terms, so therefore you will pay more tax as your salary increases.

 

Taxes on Property & Wealth in Portugal

 

Capital gains tax will be applied to individuals earning income from selling a property or assets in Portugal, normally at a rate of 28%. However, there are some exemptions in place if you are a resident selling your main residence whilst purchasing a new property within the European Union.

 

Appealing Inheritance Tax Terms

 

Portugal changed it’s inheritance tax terms some years ago and they now run more favourably at a fixed rate of 10%. The taxes are charged only on Portuguese property, and to gifts and inheritance awarded by people from outside of the immediate family.

 

These terms are very appealling in contrast to the inheritance tax laws that exist in the UK and they once again offer high earners and wealthy individuals an incentive to move permanently to Portugal.

 

How UK Pensions are Taxed in Portugal

 

Most foreigners living in Portugal will pay tax on their pension income and normally will fall under the nation’s standard income tax rates of between 14.5% and 48%. However, if you are eligible to apply for Non-Habitual Residency (NHR) when you relocate it is likely you will be allowed to pay a flat rate of 10% tax on your pension for the first ten years of your residency.

 

Non-Habitual Residency (NHR)

 

The NHR is another positive scheme implemented to encourage people to move to and settle in Portugal. It is available to many non-nationals but restricted to those who have not been resident in the country within the previous five years.

 

The good news for ex-pats with NHR status continues beyond pensions as it also applies to income earned worldwide and Portuguese earnings. These exemptions will normally stand for a period of ten years.

 

Foreigners with NHR status living in Portugal may be able to benefit from:

  • not paying tax on income earned outside of Portugal

  • paying a lower tax rate on Portuguese earnings

  • paying lower taxes on personal pensions

 

Golden Visa Programme

 

Although the Portuguese government has recently placed some restrictions on this scheme, it still offers benefits that are worth looking into. Most importantly, foreigners who purchase property in Portugal valued at over €500,000, can gain residency in the country and travel freely within the EU.

 

Positive News on Property Wealth Tax

 

When a property is owned by cohabiting or married couples, property wealth tax is only applicable to real estate worth over €1.2 million.

 

Residency & Taxes in Portugal

 

For individuals contemplating part-time residency in Portugal - the general rules are:

 

  • Reside in Portugal for 183 days or more in a year, and you will be considered a resident and will need to pay tax on any income you earn, anywhere in the world.

 

Reside in Portugal for less than 183 days in a year, you will only need to pay tax on income you earn in Portugal.

 

Helpful Advice on All Tax Issues in Portugal

 

Areas of taxation in Portugal may have positive aspects for ex-pats moving their career and home to the country, but they can be complicated and extensive. Fiduciary Wealth Management is a company with experts that work specifically in this area of European finance that can provide services to support your positive move abroad.

 

Contact Fiduciary Wealth Management today for help with every financial aspect of your relocation and residency in Portugal.