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Who has to pay tax in Portugal?
Non-Habitual Residents (NHR) Tax status
Property Tax in Portugal
Capital gains tax
Rental Tax
Property purchase & owning Taxes
Fiscal representation in Portugal
Download here our Portugal Tax Guide for foreigners:
Who has to pay tax in Portugal?
Your tax liability as a foreigner Citizen depends on your residency status, which is defined by how much time you spend living and working in Portugal each year.
If you reside in Portugal for 183 days or more in a calendar year, you’ll be considered a resident and will need to pay income tax on your worldwide income. However, if you live in Portugal for fewer than 183 days in a calendar year, you’ll only need to pay on income earned within Portugal.
Income tax rates for residents in Portugal are progressive, meaning you pay more tax the more you earn.
Non-residents are subject to a 25 percent flat tax rate on employment income derived from Portuguese sources.
Other income is also subject to flat rates that may vary between 10 percent and 28 percent.
Non-Habitual Residents (NHR) Tax status
Special Tax Status for non-residents
Some foreigners living in Portugal can take advantage of the Non-Habitual Residency (NHR) tax codes, which provide substantial exemptions for the first 10 years of residence.
It works like this: the tax code allows expats in some professions to benefit from a tax exemption on all forms of income (employment, business, investment, rental, capital gains, and pension) that they receive from abroad. Further income from inside Portugal is taxed at a flat rate of 20%.
NHR status is available for workers in qualifying professions and has trhee main benefits:
- Firstly, you can live as a Portuguese resident but not pay tax on your earnings elsewhere in the world (including employment and capital gains), effectively giving you non-resident status.
- Secondly, you’ll pay income tax on Portuguese earnings at a flat rate of 20%, rather than the standard progressive rates of up to 48%.
- Thirdly, the tax rate on foreign pension income is only 10%.
Property Tax in Portugal
If you purchase property in Portugal and you are not a resident in Portugal, you are liable to pay some taxes. By definition you are considered to be not living in Portugal if you do not spend 183 days per year (Tax Calendar Year) or more living in Portugal or if your primary address is not there.
Individual taxation as a Non-Portuguese resident, you are liable to tax on your Portuguese sourced income and a married couple are taxed jointly. When you purchase a property in Portugal you be subject to the taxes described below:
Capital gains tax
There is a Capital Gains tax in place in Portugal on the sale of a property by a Non-Resident at a flat rate of 28% for individuals and 25% for companies.
If the money from a sale is re-invested, then only 50% of the net taxable income will be subject to capital gains tax.
To calculate the taxable gain, you take the selling price, minus the acquisition costs, any costs incurred during the transfer of ownership, and also any property improvement costs that have incurred within 5 years of the sale.
There are a couple of exceptions to Capital Gains Tax in Portugal:
• If you are a tax resident of Portugal (Domiciled in Portugal) and you are selling your primary resident in Portugal and you buy another residence in Portugal. Importantly this rule applies for sales that are within 3 years after, or 2 years before.
• If the property in question was first occupied before January 1989 in your name.
• If you decide to reinvest the monies made from the sale of your Portugal primary residence into another primary residence in the EU, you are then able to roll over the costs.
Agency Fees
In Portugal, only sellers pay agency fees, not the buyers. Since July 2008, the deduction of agency fees is possible as a sales cost from any capital gains obtained from a property sale.
Rental tax
If you decide after you have purchased your property that you wish to rent it out, then you will be taxed on that rental income. Net rental income is taxed at a flat rate of 15%, which is withheld at the source.
The Taxable income, can be calculated as the gross rent minus any maintenance costs, related expenses for example insurance premiums and the municipal tax, and also any repair costs that may have arisen. You cannot deduct your interest costs which may have incurred when you bought the property.
Property purchase & owning Taxes
Property Purchase Tax - IMT (Imposto Municipal sobre Transmissoes)
IMT is a property purchase tax which is calculated by the higher value of either the value of the deeds or on the rateable value. The rate is variable, and depends on the type of property and the value of the property.
Example for secondary Home property - Non-resident
Value of the Property rate Amount to be deducted
up to €92,407.00 1% €0.00
from €92,407.00 up to €126,403.00 2% €924.07
from €126,403.00 up to €172,348.00 5% €4,716.22
from €172,348.00 up to €287,213.00 7% €8,163.09
from €287,213.00 up to €550,836.00 8% €11,035.30
from €550,836.00 up to €1,000,000.00 6% --
over €1,000,000.00 7.5% --
Property Purchase Tax - Stamp duty (Imposto de Selo)
The Stamp Duty, or Imposto de Selo, is another property transfer tax that buyers should be familiar with. It’s reportedly the oldest tax in Portugal and is charged for pretty much all contracts and legal affairs regarding your real estate. This includes deeds, contracts, and bank mortgages to do with the house. The duty is accounted for by the buyer, charged at a fixed rate of 0.8% of the property’s registered fiscal value.
Property Owning Tax (Immovable Property Tax, IMI)
As a property owner in Portugal, you must pay IMI, the Portuguese version of council tax. Each individual municipal sets its own rate, which is decided by the municipal assembly.
IMI varies from around 0.3% to 0.45% of the value of a home in urban areas. In rural areas, it can be as much as 0.8%.
Homeowners in urban areas with properties worth less than €125,000 can benefit from a three-year exemption on IMI, as long as they live in the property themselves.
You can get a further deduction of around €20 for each dependant, and exemptions also exist for people with low incomes or those with energy-efficient homes.
Property Owning Wealth Tax ( Adicional IMI - AIMI)
First introduced back in 2017, the Adicional Imposto Municipal Sobre Imóveis (AIMI) is seen as Portugal's version of a wealth tax, which affects owners with a share in Portuguese property worth over €600,000. Regardless of residency status, rates applied are 0.4% on the total amount for properties held by companies, 0.7% for individuals and 1% for those owning property valued over €1 million.
There is some relief which comes via a €600,000 allowance per person, deducted from the value of all Portuguese properties.
The values below are based on the Patrimonial Values of the property:
• Up to the value of €600,000 No AIMI is payable
For both IMI and AIMI, the tax authorities calculate property value using the Valor Patrimonial Tributário (VPT), bear in mind these values are usually lower than the actual market value (usually from 40 to 60% of Market value).
Fiscal Representation
For all non-resident individuals or companies having assets based in Portugal, it is a legal necessity to assign a fiscal representative. Non-resident taxpayers gaining taxable income in Portugal must also assign a fiscal representative to guarantee that they obey the tax obligations in Portugal.
A fiscal representative is responsible for any tax calculations regarding the individual or company’s tax obligations. They include properties, bank accounts, income, and all tax bills.
Through our Legal & Tax advisor Partners, you can have a Fiscal representation in Portugal:
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