Taxation in Portugal
Taxation in Portugal is the source of many questions that those who are beginning to be interested in expatriation or investment in this country ask themselves, and for good reason. Portugal is indeed one of the most chosen countries in Europe for expatriation, according to the Expat Insider 2017 ranking. It offers many advantages for retirees but also for workers or business leaders. Here we will take a look at the Portuguese tax system.
If you want information about companies, please consult the page about company taxation in Portugal.
Tax Convention Europe (France)
A tax treaty was signed in the 1970s between France and Portugal to avoid double taxation between the two countries. This must also be the case for many European countries. In other words, this ensures that you only pay taxes to France or Portugal, even if you live in one and have financial interests in the other.
This convention defines according to the geography of your tax residence or the country of origin of your income, to whom you will pay your taxes. This can vary according to the type of income and interest, here is a point to help you see more clearly when it comes to real estate in Portugal :
- For rental income, property capital gains or industrial and commercial profits, taxes must be paid to the country in which the source of income is present. If it is in Lisbon, you will have to pay your taxes in Portugal, even if you are a tax resident in Paris.
- For interest (income from shares and profit-sharing certificates) and dividends (income from public funds, bonds, debts) from movable capital, the tax is payable in the state in which the beneficiary resides.
If you want to know more about taxation and real estate in Lisbon or more generally in Portugal, I invite you to read these dedicated articles :
- Taxes and duties on real estate purchases in Portugal
- Taxes on rental income in Portugal
- Buying a second home in Portugal
But this tax treaty between France and Portugal does not only concern real estate. You will find below some notions that concern individuals or companies:
- Wages are taxed in the country where the work is performed.
- Private pensioners pay their taxes in the country where they reside.
- Public pensioners pay their taxes in the country where the pension is paid.
- Dividends and royalties are tax-exempt under certain conditions
Taxation for NHR: Non Habitual Residents
The status of Portuguese Non Habitual Resident can be obtained simply by applying directly in Portugal and to the relevant authorities. This is a very advantageous status for tax purposes as it offers a tax exemption for 10 years if you reside in the country for more than 183 days in the year and have not been a Portuguese tax resident for the last 5 years.
This status applies to pensioners but also to certain entrepreneurs, if they carry out so-called high value-added jobs. Their taxation, if they also apply for Non-Usual Resident status, will be 20% on income received and generated in Portugal. Among these professions are the liberal professions, artists, engineers or architects… You can find the full list of the professions concerned in our article on high added value professions in the NHR.
Taxation of employed persons in Portugal
The taxation of employed persons in Portugal is based on income and a progressive scale. You will find below the new brackets of the IRS 2018 in Portugal :
- Less than 7,091€: 14.5%.
- Between 7,091€ and 10,700€: 23%.
- Between 10,700€ and 20,261€: 28.5%.
- Between €20,261 and €25,000: 35%.
- Between €25,000 and €36,856: 37%.
- Between 36 856€ and 80 640€: 45%.
- More than 80 640€ : 48%.
For your information, the tax declaration in Portugal is made every year between 1 April and 31 May. If you wish to get help and be accompanied for the declaration of your IRS, do not hesitate to contact me, I will put you in touch with the right person.
