Taxes for Expats in Portugal

By Jony - On Mar 18, 2024

Portugal is a nice country to live in, but what about its taxes? The fiscal system is easy to understand and transparent, and the taxes are moderate. The prices in Portugal are quite affordable, making living in the country comfortable even for people whose income is not very high. This is one of the main reasons why expats and digital nomads flock to this hospitable destination. If you need more detailed information, please visit a trusted portal and read a longer article devoted to taxation in Portugal for those expats who pay taxes. You will also be able to talk to an expert using live chat and get professional advice free of charge.

It is the residency status that determines the amount of taxes payable by companies and individuals in Portugal. Residents pay taxes on their global income, while non-residents are only taxed in Portugal if they generate some profit within the country. The individual income tax is charged at a progressive rate and ranges between 14.5% and 48%. As for the corporate tax, it equals 21%, but a reduced rate may be applicable in some cases.

Personal Taxes in Portugal

Let’s look at the most important personal taxes payable in Portugal:

Social insurance taxes (11% is paid by the employee and 23.75% is paid by the employer, while a self-employed person is liable for 21.4% or 1/3 of the remuneration).
Personal income tax may vary from zero to 48% depending on whether the person is a resident or a non-resident.

Personal taxes in Portugal related to a certain category of individuals and expats:

Car tax (the rate depends on the amount of emitted carbon dioxide, engine, car type and capacity).
Municipal allowance and property transfer tax.
Property tax that varies depending on the cost and the area where the facility is located.

Standard income tax rates:

Income that ranges between 0 and 7,478 euros a year is taxed at 14.5%
The income from 7,749 to 11,283 euros is subject to 21%
The amounts between 11,284 and 15,991 euros are taxed at 26.5%
The income that varies between 15,992 and 20,699 euros is charged at a rate of 28.5%
The income ranging between 20,700 and 26,354 is taxed at 35%
You will pay 37% on income from 26,355 to 38,631 euros
43.5% is payable on the income that ranges between 38,632 and 50,482 euros
The income in the range between 50,483 and 78,834 euros is taxable at 45%
And if the income you get annually is above 78,834 euros, you are subject to a 48% rate

How to Pay Taxes in Portugal?

First of all, you will need to visit the nearest tax office and get an NIF (tax ID). The documents required for that are minimal: an ID and proof of your residence address (provide a lease agreement or a utility bill). You can use a representative’s services to get an NIF (it can be done by a lawyer or an accountant). Once this is done, you can file a tax return and set up an account with a local bank.

Here is some additional information on tax payments in Portugal:

Income and expenses are accounted for on a mandatory basis
Non-payment of taxes on time will result in fines and penalties
The tax return needs to be submitted from March to June (it depends on the kind of tax payable). The exact dates are annually provided by the tax service as they may vary.

NHR Scheme

If you are a temporary resident of Portugal, we highly recommend using a NHR (Non-Habitual Resident) scheme. This is an excellent option that gives access to tax incentives available to Portuguese citizens without the need to acquire a local passport.

Let’s take a look at the main peculiarities of the NHR scheme used by expats:

The benefits under this scheme are provided for 10 years.
If you generate income in Portugal, the personal tax rate is reduced to 20% (though this concerns some professions only).
As for the income derived abroad, the personal tax rate is reduced as well, but the actual amount depends on the type of income and profession.
You will not have to pay the wealth tax.
There is no tax on gifts for family members.
You will not have to pay any commission for financial transactions to Portugal.
Expats are not required to stay in Portugal for any definite term to benefit.
If expats receive passive foreign income abroad (such as interests, dividends, or royalties), they will pay zero tax on it. However, a relevant double taxation treaty should be available to confirm that this tax is paid in another jurisdiction.

Here are the basic requirements for foreigners and expats wishing to take advantage of the NHR scheme:

Obtaining an NIF connected with a local address
Becoming a tax resident of Portugal, which means that you have to live in the country for most of the year (183 days). If this period is shorter, you must have a local address.
Being a legal resident of Portugal (if you are a resident of a non-EU country, you will need a D7/D2 Visa or Golden Visa)
No status of the Portuguese tax resident in the past 5 years (however, you can be an owner of local real estate)

Here is the basic package of documents required to benefit from the NHR scheme:

Proof of local residence address
A standard tax return spanning the past 60 months
A document which proves that the applicant had no status of a tax resident in the past 5 years

Recommendations:

You will save on taxes, but it does not mean that you will be free from the attention of the local tax service. Please keep all the documents in order.
If your documents seem questionable, you will be required to pay the taxes in full and even be subject to fines and penalties.
If you try to acquire the NHR status without sufficient grounds, it may be considered an administrative offense (aggressive tax optimization), and your application will be automatically rejected.

Need more details on taxation in Portugal? Please follow the above link and read the full text of the article. Feel free to talk to an expert and get professional assistance on tax optimization, obtaining a residence permit, and any other aspects of life in Portugal.

Spread the love