Expatriate tax - Portugal

It is mandatory that the employers of non-EU nationals apply to the Portuguese Labour Authorities for a work permit prior to the employment of an expatriate in Portugal. This way, the expatriate’s employment contract shall be written considering its tax issues before it is considered by the Portuguese Labour Authorities.

Under the work permit procedure, the non-EU national when applying for a Residence Working Visa with the Portuguese Labour Authorities shall attach a copy of his contract and any proof of qualifications to the job exercise, if was required in Portugal. He shall also require a labor certificate at a Labor Authority (IEFP, I.P.), so he can complete all legal procedures and start working in Portugal.

You can request two types of visas, temporary or residence. Temporary visas have a maximum duration of 1 year and may be extended, at maximum, up to an identical period. However, if the employee wants to be established permanently in Portugal, he can request for a residence visa. The visas for family, spouse or children can not exceed the period of the employee visa.

Nevertheless, an EU expatriate does not have to accomplish the legal steps above mentioned.

The Portuguese tax year runs from 1 January to 31 December.

For 2025 (regarding income from 2024), the deadline to file the PIT return is from April 1 to June 30, 2025. The return is submitted by electronic transmission – this is compulsory.

Taxpayers are obliged to indicate the tax numbers for their dependents for the purpose of tax deductions and benefits.

Income Tax Rates – 2025

Taxable Income (€)                          Rate (%)                Progressive tax rate (%)
0 – 8,059                                                 13                                             13
More than 8,059 to 12,160                    16,50                                        14,18
More than 12,160 to 17,233                    22                                             16,482
More than 17,233 to 22,306                  25                                             18,419
More than 22,306 to 28,400                32                                             21,334
More than 28,400 to 41,629                 35,50                                       25,835
More than 41,629 to 44,987                 43,50                                        27,154
More than 44,987 to 83,696                45                                             35,408
Over 83,696                                           48                                                 ---

Income obtained in 2024, is subject to a solidarity surcharge of 2,5%, the income between 80,000 euros and 250,000 euros and a 5% rate for income above 250,000 euros.

Personal tax deductions apply to Portuguese tax residents which are based on their personal tax circumstances.

2024 
Portugal €                                   (Single individual with no children)
 
Employment Income                                                                                  60,000
Benefits provided                         Home                4,500 
                                                       Company car  2,250 
                                                       Total Benefits                                        6,750
Gross Income                                                                                              66,750
 
Less 
Pension Scheme contributions                                                                 (7,342.5)
Taxable Income                                                                                           59,407.5
 
Tax at    27,154%                            First 44,987     12,215.77 
45%                                                On balance     6,489.23 
Total tax                                                                                                       18,705
 
Less 
Other deductions                                                                                       (250)
 
Tax Bill                                                                                                          18.455
Effective tax rate                                                                                        30.76%

A charge to Portuguese tax is dependent on whether the income arises in Portugal and the extent of the charge will be determined by an individual’s tax residency status.

A resident of Portugal is taxed on his worldwide income for the period of residency. A non-resident of Portugal is taxed on Portuguese source income only.

Residence and Domicile

Exposure to Portuguese tax will be determined by the expatriate's residence and domicile status.

Tax residence in Portugal is determined by the expatriate's actual presence within a tax year. The Expatriate will be treated as Portuguese resident where:

• they spend 183 days or more in Portugal in any 12-month period, or
• they have stayed less than that period but in December 31, live in Portugal and intend to continue do so (e.g. own a dwelling in Portugal).

In both cases, it is important to note that once an individual becomes Portuguese tax resident, his/her family (i.e. the spouse and dependent children) will also become Portuguese tax residents.

If the spouse does not meet the conditions above referred related to tax residence and proofs that there is no connection between his/her majority of economical activity and the Portuguese territory then he/she can be treated as non-resident subject to taxation only for the income obtained in Portugal.

In this case the expatriate will file a tax return only with his/her Portuguese income and his/her part of the family income.

Besides the above, the expatriate could opt to be considered as a non-habitual resident in Portugal, if meeting the following conditions:

• The individual must become tax resident in Portugal, according to any of the criteria above referred;
• The individual must not have been taxed in Portugal as resident over the past five years.

The non-habitual residents could benefit from a 20% rate on income from employment or self-employment (if comes from the exercise of scientific or technical professions of high value) earned in Portugal, benefiting from exemption on the income earned abroad, provided that such income were subject to effective taxation at the State of source of that income, under the rules of the DTA between Portugal and the respective State of source.  

In relation to the passive income, when earned abroad will be exempt from taxation if it is not considered obtained in Portugal, the source state is not included in the black-list and was subject to taxation at the source State. The tax regime applicable to the non-habitual residents in Portugal is applicable for a period of ten consecutive years. 

A Portuguese tax charge arises on employment income derived from duties performed in Portugal.

Income from employment includes all forms of remunerations as salary, wages, commissions, gratuities, overtime premiums bonuses, benefits in kind and other accessory fixed or variable remunerations of contractual nature or not.

There is also a requirement on the expatriate's employer to deduct Portuguese payroll withholding tax from the assessable employment income.

As mentioned above, where duties are performed in Portugal, any remuneration received in respect of these duties is treated as Portuguese sourced income and subject to Portuguese income tax regardless of the expatriate's tax residence status (subject to the relevant Double Taxation Agreement).

In general, benefits in kind are subject to Portuguese tax (for the provision of car to be taxable as income of the worker it is necessary that a written agreement attributing the benefit to the worker exists). Therefore, housing, meal allowances, provision of a car and relocation allowances will come within the charge to Portuguese income tax in addition to the individual's salary. In the case of health or life insurance, they can be exempt if are established for most of the employees and in an objective and identical criterion for all employees while not belonging to the same professional class.

The only expatriate concessions available are with respect to diplomatic missions and cooperation agreements with other countries. 

Where income has been simultaneously subject to tax in Portugal and in a foreign jurisdiction, relief will always be granted by the Portuguese Tax Authorities in a manner similar to what is provided for in the relevant Double Taxation Agreement (around 80 are included in the Portuguese net treaty).

Certain expenses can be provided by an employer free of income tax up to a certain amount (e.g. meal and travel allowances).

Limits are stipulated to the total amount deductible to the taxable income as well as to the use of tax benefits contained in the Tax Benefits Law. Both vary depending on the level of taxable income.

Capital gains are deemed to be the difference between the gains and the loss accomplished in the same year in respect of the same type of assets (real estate property, shareholding, etc.).

In case of real estate property, capital gains earned will be taxed only on 50% of its amount, being subject to the progressive rates (from 14,5% up to 48,0%, plus solidarity rate) depending on the level of income of such taxpayer.

It must be stressed that capital gains obtained on selling immovable properties located outside Portugal are also subject to Portuguese personal income tax. Nevertheless, Portuguese set of tax treaties allows capital gains to be taxed in the country where the good is located, therefore taking those capital gains outside Portuguese taxation.

In both cases, the acquisition price is adjusted by a coefficient whenever 24 months are elapsed between the date of the sale and the date of the acquisition of the property.

Capital gains arising from disposal of shares are subject to a flat rate of 28%, applicable both to Portuguese tax residents and non-residents.

This tax has been abolished as from January 1st, 2004. In some cases (not involving transmission from parents to sons and vice versa), this tax was replaced by stamp tax at the rate of 10% applicable to the transmission of all types of assets.

Dividends, interest and other financial incomes are subject to taxation once become due or assumed to be due or when they are at the holder’s disposal. Such incomes are in many cases subject to withholding tax, which is always a final tax for non-residents.

It is important to note that dividends paid by Portuguese Companies to Portuguese tax resident individuals, if aggregated with all other income, are taxed only on 50% of its amount. In this case, it is mandatory to aggregate all other financial income even subject to flat rate. Otherwise, dividends are subject to a flat rate of 28%. 

IMI (Municipal Property Tax) - same rules as for IMT (see "Real Estate Tax") are also applicable to IMI, which only considers immovable properties located in Portugal.

Tax rates are 0.8% for non-urban properties and between 0.3% and 0.45% for urban properties.

IMT (Real Estate Transfer Tax) - Any immovable property located in Portugal is subject to IMT, whether purchased by a resident or not.

The purchase of urban property for dwelling purposes is not subject to IMT for values up to Euro 92,407. For higher values, rates can go up to 6%.

The purchase of non-urban properties is taxed on a 5% rate and other urban properties purchases are taxed on a 6.5% rate.

Where duties are performed in Portugal, generally a charge to Portuguese Social Security (PSS) will arise. The expatriate will be treated as an employee and subject to PSS at 11%. The employer will also be required to contribute 23.75% of the relevant income and benefits to PSS.

A new Social Security Contributions Code entered into force on 1st January 2011, which expand the basis of the contributions and aligns the Social Security legislation more closely with the Personal Income Tax Law (IRS).Travelling expenses, representation expenses, personal use of the car, transport expenses, compensation due to contract termination are now subject to contributions. There are some specific provisions of the Personal Income Tax Law on which Social Security contributions are calculated.

Certain changes included in the Social Security Law were postponed with no fixed date in relation to certain provisions, namely the provision regarding different employer’s contribution rates (which currently stand at 23.75%), according to the kind of the employment contract. This deferral includes an increase of the contribution rate by 3 percent (to 26.75%) for fixed term employment contracts and the reduction of the contribution rate by 1 percent (to 22.75%) for permanent employment contracts.

PSS must be collected at source along with payroll taxes.

Where the expatriate is transferring from an EU jurisdiction and holds the relevant documentation an exemption to PSS will apply.

Where the expatriate is transferring from a jurisdiction outside the EU with which Portugal holds a Bi-Lateral Agreement and the expatriate holds the relevant documentation an exemption to PSS will apply.

Where the expatriate is transferring from a jurisdiction that does not fall into one of the above categories, the PSS rules will determine their liability.

Stock options can be taxed in the following moments:

moment of acquisition - if the price of acquisition benefits the employee vis a vis third parties; or,

moment when the option is exercised or when the stocks are sold or the employee renounces to the right of such option in favour of the employer, if a gain is obtained (i.e. whenever there is a difference between the price of exercising or alienating such right and the price of the stock).

The Portuguese law considers that the worker’s income includes the benefits or privileges conferred by the employer to any of the worker’s family members.

There is no wealth tax in Portugal.

Not applicable.