Personal Income Tax

Residents	Nonresidents
Residents in Portugal are taxed on their worldwide income at progressive rates varying from 0% to 48%.	Nonresidents are liable to income tax only on Portuguese-source income, which includes not only that portion of remuneration that can be allocated to the activity carried out in Portugal but also remuneration that is borne by a Portuguese company or permanent establishment. As a rule, Nonresidents are taxed at a flat rate of 25% on their taxable remuneration.

A person is deemed to be resident in Portugal whenever spends more than 183 days, consecutive or not, in Portugal in any 12-month period starting or ending the fiscal year concerned. A person is also deemed to be resident in Portugal if a dwelling is maintained at any time of a certain 12-month period, indicating the existence of habitual residence in Portugal.

The PIT reform introduced a partial residence concept, so that there is a direct connection between the period of physical presence in Portuguese territory and the status of tax resident. Thus, as a rule, the taxpayer will become resident in Portugal as from the first day of stay in the Portuguese territory and non-tax resident as from the last day of stay in Portugal, with a few exceptions.

See point 11 below on the Tax Regime for Non-Habitual Residents.

PIT applies on the earned income of employed individuals, pensions and directors’ fees.

Employment income:

Employment income includes all payments in connection with work carried out, such as salary, bonuses, commissions, tax reimbursements, redundancy payments, pensions, allowances (e.g., cost-of-living and housing allowances), and benefits in kind (e.g., company cars), regardless of where the payment originates.

Domestic and foreign travel allowances, as well as mileage and lunch allowances in excess of those permitted to employees of State departments are also taxable as employment income.

Pension funds:

This category includes amounts received as retirement or retirement pensions, old age, disability, survivors' pensions, as well as any other pensions of the same nature, regardless of the designation they assume, including those granted by life insurance, pension funds and supplementary social security schemes.

This category also includes benefits received in the form of maintenance pensions, pensions for accidents at work and occupational diseases, as well as any temporary or lifelong annuities.

Members of internal bodies’ salaries

Salaries paid to members of internal bodies have the same tax treatment as employment income.

PIT taxable income includes all earned income of a self-employed individual and entrepreneurial income (including rental income upon option). Such income may be taxed either in accordance with a simplified regime or on statutory accounting.

The simplified regime will apply only to taxpayers who, not having opted for statutory accounting, have a turnover or a gross business and self-employment income lower than €200,000 in the previous year. Business and professional income is taxed at the progressive PIT rates.

Dividends and interest (bank interest, shareholder loans, from public company bonds, bills or other paper, as well as interest on public debt) are liable to taxation at a flat rate of 28%.

However, the taxpayer may elect to include such items in taxable income in the tax return, being taxed at marginal tax rates that vary between 14.50% and 48%.

If the taxpayer chooses to disclose dividends in their income statement, only 50% will be subject to taxation at the marginal rates in force, in relation to profits distributed by entities resident in Portugal or in other EU Member States, provided that they meet the requirements and conditions set out in Article 2 of Directive No. 90/435/EEC, of 23 July, but all income in the same category will be added to taxable income.

Interest on demand/term deposits/certificates of deposit/supplies/related to resident entities, as well as income from debt securities, registered or bearer, repo operations, credit assignments, securities accounts with price guarantees or other similar or similar operations, are also subject to a withholding tax in PIT, at the rate of 28%.

It should be noted that the interest on certain issues of public and non-public debt securities, when paid to non-residents, is exempt from PIT.

Capital income paid by non-resident entities without a permanent establishment in Portugal, but which are domiciled in a blacklisted jurisdiction, is subject to a tax rate of 35%, either by withholding tax or by the autonomous rate.

The withholding rate is also 35% whenever the income is paid or made available in accounts opened in the name of one or more holders, but on behalf of unidentified third parties, except when the beneficial owner is identified, in which case the general rules apply.

Rental income derived from rural, urban or mixed properties is, as a rule, subject to PIT.

In the case of residential lease agreements, a flat tax rate of 25% applies. However, reduced tax rates may be available depending on the duration of the rental contract.

Alternatively, taxpayers may elect for the aggregation (englobamento) of rental income, in which case such income will be taxed at the progressive PIT rates applicable to the taxpayer’s total taxable income.

General rule

Equity increases are made up of

(i) capital gains;

(ii) compensation for unproven consequential damages and loss of profits;

(iii) compensation for moral damages, except those established by judicial or arbitration decision or resulting from a judicially approved agreement;

(iv) amounts attributed by virtue of the assumption of non-compete obligations;

(v) unjustified income/assets increases, under the terms of the General Tax Law.

Income qualified as capital gains covers not only the disposal of securities and real estate, but also onerous assignment of credits, repayment of bonds and other debt securities and redemption of participation units in investment funds, and the value resulting from the sharing, liquidation, revocation or extinction of fiduciary structures is also recognised as capital gains or losses.

Regarding capital gains, the positive annual balance between capital gains and losses realized in the same year is subject to taxation at the special rate of 28%.

As a general rule, capital gains are subject to tax at a flat rate of 28%. Only 50% of capital gains arising on the sale of shares held on micro and small companies not listed in the stock exchange will be subject to taxation.

No withholding tax applies on capital gains and capital losses may offset capital gains only.

Capital gains by non-residents

Nonresidents may benefit from exemption from taxation of capital gains realised with the onerous disposal of shares, except when one of the following conditions is met:

- The seller is domiciled in a blacklisted jurisdiction;

- Capital gains are realised with the transfer for consideration of shares in companies resident in Portuguese territory whose assets consist of more than 50% of immovable property located there or which, being management companies or holding shareholdings, are in a controlling relationship, as dominants, with controlled companies, also resident in Portuguese territory, more than 50% of whose assets consist of immovable property located there.

Real estate capital gains

Fifty percent of capital gains arising from the sale of real estate by tax residents in Portugal is taxed at progressive tax rates.

The gain may be wholly or partially exempt if the property being sold is the taxpayer's primary residence and the sale proceeds, reduced by the value of any outstanding loans relating to the purchase of the property being sold, are reinvested in the acquisition, improvement or construction of another primary residence in Portugal, in another EU Member State, or in the EEA within 36 months from the sale or in the period of 24 months previous to the sale.

Employees

The greater of the following amounts is deductible from income from dependent work:

(i) 8.54 times the IAS (Social Support Index);

(ii) 75% of 12 times the IAS, provided that the difference results from contributions to professional associations borne by the taxpayer and that are essential to the exercise of the respective activity carried out exclusively as an employee; or

(iii) all mandatory contributions to social protection schemes and to statutory health subsystems.

Entrepreneurs and independent professionals (simplified regime)

As above mentioned, under the simplified regime, taxable income is calculated by applying predefined coefficients, which vary depending on the activity’s sector, to gross income. These coefficients have not yet been defined; currently, taxable income is determined by applying a fixed percentage, depending on the type of income. Under this simplified regime, the income is taxed on:

(i) 15% of sales of products and services in the hospitality sector,

(ii) 75% or 35% depending on the business and professional services that generated the income,

(iii) 95% of income arising from sale or utilization of IP rights, royalties, rental income and investment income,

(iv) 30% for public grants not destined to exploration of business,

(v) 10% for public grants destined to exploration of business activities,

(vi) 100% for services provided by the shareholder to the company subject to tax transparency regime,

(vii) Income from local accommodation situated in determined locations are taxed on 50% of the obtained income.

The full application of the 75% and 35% tax base is, however, partially conditioned by the verification of expenses and charges effectively incurred and related to the activity. Therefore, to the taxable income determined by applying the coefficients will be added the positive difference between 15% of the gross income and the sum of expenses with the acquisition of goods and services related to the activity.

 

Taxable income		Rate (%)	Deductible amount (€)
From (€)	Up to (€)
0	8059			13	-
+8059	12.160	16,5	282,07
+12.160	17.233	22	950,91
+17.233	22.306	25	1.467,91
+22.306	28.400	32	3.029,38
+28.400	41.629	35,5	4.023,14
+41.629	44.987	43,5	7.353,76
+44.987	83.696	45	8.028,38
+ 83.696	-	48	10.539,00

 

On top of this a solidarity additional of 2,5% and 5% is also applied to income from €80.000 and €250.000 and €250.000 upwards, respectively.

When remuneration is paid in relation to overtime, the withholding rate to be applied is 50% of the rate applicable to the monthly remuneration of the dependent work for the month in which it is paid/made available.

For the purposes of determining the rate applicable to taxpayers married or living in a marital union, the taxable income should be divided by two.

Taxpayers may benefit from fixed deductions from the PIT collection, under the following terms:

Per dependent: €600 for each dependent who is part of the household. Increase of €126 per dependent aged 3 years or less, until December 31 of the year to which the tax relates, and additional increase of €300 per dependent, from the second, when there are at least two dependents under the age of 6.

In the case of alternating residence and joint parental responsibilities, the deduction amount is €300 per taxable person

Per ascendant: €525 for each ascendant who lives in communion with the taxpayer and does not earn income higher than the minimum pension of the general regime (indexed to the IAS). The deduction is increased to €635 when the ascendant is only dependent on a taxable person.

 

Type of expense	Deductions
General household expenses	Deduction of general household expenses, corresponding to 35% of the amount of expenses incurred by any member of the household, limited to € 250 per taxpayer, whose taxpayer number is included in invoices for services or goods acquired in any sector of activity, provided these expenses are communicated to the Portuguese Tax Authority, except for the sectors referred below. Therefore, in case of joint tax returns, the limit above referred is € 500. In the case of single parent household, the deduction is increased to 45% of the amount of expenses incurred by any member of the household, with the global limit of € 335.
Health expenses	Health expenses incurred with the acquisition of health goods and services that are exempt from VAT, or subject to the reduced rate of 6%, related to the taxable person or any member of the household that have been communicated by service providers or sellers of goods to the Tax and Customs Authority, as well as health premiums or contributions paid to mutual associations or non-profit institutions whose purpose is to health care: 15% up to a maximum limit of €1,000.
Education expenses	Education and vocational training expenses that have been reported by service providers or sellers of goods to the Portuguese Tax Authority: 30% of all education expenses up to a limit of €800.
Housing interest or rent	15% of debt interest, for contracts concluded until 31 December 2011, on loans made for acquisition of principal private residences in Portugal of a permanent house in the EU or the EEA, limited to €296. For the rental of a permanent house in the EU or the EEA the limit is €800.
Alimony payments	Amounts proven to have been borne and not reimbursed in respect of maintenance expenses to which the taxpayer is obliged by a court decision or by an agreement approved under civil law, except in cases where the beneficiary is part of the same household or for which other deductions are foreseen: 20% without limit.
Retirement Savings Funds and Retirement Savings Plans	Deduction of 20% of the amount invested, with the following limits: (i) people under the age of 35: €400; (ii) people aged between 35 and 50 years (inclusive): €350; (iii) people over the age of 50: €300.
Fees and expenses paid to retirement homes	Costs with home support, nursing homes and other institutions to support the elderly related to taxpayers, their dependents, ascendants and collateral up to the 3rd degree who do not have an income higher than the highest national minimum wage: 25% up to €403.75.
Individuals with disabilities	Persons with proven disabilities are entitled to deduct from income tax an amount of 4 times the IAS for each taxable person, and an amount of 2.5 times the IAS for each dependent and ascendant with a disability.

Limit to tax deductions (*)
Taxable income up to €8, 059	Unlimited
Taxable income between €8.059.00 and €80.000	€1,000+[(2.500-1.000)*[(80.000-taxable income)/(80.000-8.059)]]
Taxable income higher than €80.000	€1.000

(*) Health expenses, education and training expenses, nursing home fees, costs with immovable property and alimony expenses are included. These limits are increased by 5% for each dependent or civil godson, which is not a taxpayer.

Type of taxable income	WHT applicable to non-residents
Employment income	25%
Directors’ salaries and similar
Business and professional services income
Royalties and copyright income
Commissions
Bank deposit interest	28%
Income from life insurance policies
Interest from state bonds
Dividends
Gains arising on “swaps,” other credit operations and other financial instruments
Income from the use or concession of equipment	25%
Rentals
Pension
Other investment income (including other interest)	28%
Certain indemnities	25%
Investment income if beneficial owner is not disclosed	35%
Investment income obtained by residents in blacklisted jurisdictions

This regime was repealed with effect from 1 January 2024, having been replaced by a new, more restrictive regime (Tax incentive for scientific research and innovation – see point 12. below).

It provided for the taxation of net income from employment and self-employment, at a flat rate of 20%, in relation to income derived from activities considered to have high added value. Foreign-sourced income may be exempted from taxation (or benefit from a 10% rate in the case of pensions) in certain circumstances.

There is, however, a transitional regime applicable to taxpayers who have met the requirements for registration as NHR by 31 December 2023, who can still benefit from the previous regime for a maximum period of 10 years.

IFICI was created to succeed the NHR regime. However, its application is more limited and is restricted to individuals who become residents in Portugal for the development innovation and scientific research activities.

It depends on prior registration, which must be made by January 15 of the year following the year in which they become residents. This registration must be duly documented before the Tax and Customs Authority or another entity specified in the regime. In addition, accreditation by the respective employers or by the entities that hire their services is required.

Furthermore, registration is dependent on the taxpayer having not qualified as resident in national territory in any of the 5 years prior to the one they became tax residents, and having invested in one of the eligible activities, namely, teaching in higher education and scientific research; qualified professions in companies carrying out their activities in eligible business sectors; employees and members of corporate bodies in start-ups, among others.

As a rule, the regime is valid for a period of 10 consecutive years, starting from the first year of residence.

The regime provides a special rate of 20% applicable to employment and self-employment income arising from the exercise of one of the eligible activities. Exemption for foreign source income, with the exception of pensions and certain income from “tax havens”.

Portuguese Blacklisted jurisdictions:

American Samoa	Costa Rica	Labuan
Anguilha	Djibouti	Lebanon
Antigua and Barbuda	Dominica	Liberia
Aruba	Falkland Islands or Malvinas	Liechtenstein
Ascension Island	Fiji Islands	Maldive Islands
Bahamas	French Polynesia	Marshall Islands
Bahrain	Gambia	Mauritius
Barbados	Gibraltar	Monaco
Belize	Grenada	Monserrat
Bermuda	Guam	Nauru
Bolivia	Guyana	Netherlands Antilles
British Virgin Islands	Honduras	Northern Mariana Islands
Brunei	Hong Kong	Niue Island
Cayman Islands	Isle of Man	Norfolk Island
Channel Islands	Jamaica	Pacific Islands
Christmas Island	Jordan	Palau Islands
Cocos (Keeling)	Kingdom of Tonga	Panama
Cook Islands	Kiribati	Pitcairn Island
Qatar	Kuwait	Porto Rico
Queshm Island	United Arab Emirates
Saint Helena	United States Virgin Islands
Saint Kitts and Nevis	Vanuatu
Saint Lucia	Yemen Arab Republic
Saint Pierre and Miquelon	Uruguay
Samoa
San Marino
Seychelles
Solomon Islands
St Vicente and the Grenadines
Sultanate of Oman
Svalbard
Swaziland
Tokelau
Trinidad and Tobago
Tristan da Cunha
Turks and Caicos Islands
Tuvalu

Employment and professional income received by a person that becomes a tax resident in 2024, 2025 and 2026 is excluded from taxation in the amount of 50% if the following requirements are met:

- The individual has not been considered to be a tax resident in Portugal in any of the five previous years (before returning);

- The individual was deemed resident in Portugal before the five aforementioned years;

- The individual has its tax situation regularized (does not have tax debts).

A person may not benefit from the regime if he/she has requested its inscription as a non-habitual resident.