Last Updated on September 29, 2025 by Emily Hopkins
Do employees need to pay income tax in Portugal?
Let’s talk about taxes in Portugal. Before doing this, please consider that each case is different. We will explain only the guidelines, as an individual analysis must be carried out for a tax decision.
To pay taxes in Portugal, the person must have a NIF (Tax Number) and be a resident of this country.
But what does it take to be considered a resident? Article 16 of the Income Tax Code explains: a person qualifies if, within the relevant tax year, they have either lived in Portugal for more than 183 days, or spent less time but under circumstances that indicate an intention to reside permanently.”
So, calculating income tax is not simple, we need the guidance of an accountant.
Let us give you some helpful information:
To calculate the Portuguese Income Tax (IRS) in 2025, you need to consider several factors: your gross monthly salary, the tax withheld at source (your employer withholds an amount of your tax in advance), your monthly social security contributions, and any reimbursable expenses. At the end of the year, your total annual income is summed, from which allowable deductions and abatements are subtracted to arrive at your taxable income (rendimento coletável). Once this figure is determined, the progressive IRS scale is applied.
It’s important to understand that Portugal applies a progressive tax system, where income is divided into brackets and each portion is taxed at its corresponding rate, rather than the entire income being taxed at a single rate. For 2025, the IRS brackets for mainland Portugal are as follows:
| Taxable Income (€/year) | Marginal Rate (%) | Deduction (Parcela a abater) |
| Up to €8,059 | 12.5% | – |
| €8,059 – €12,160 | 16.0% | €282.07 |
| €12,160 – €17,233 | 21.5% | €950.91 |
| €17,233 – €22,306 | 24.4% | €1,450.67 |
| €22,306 – €28,400 | 31.4% | €3,011.98 |
| €28,400 – €41,629 | 34.9% | €4,006.10 |
| €41,629 – €44,987 | 43.1% | €7,419.54 |
| €44,987 – €83,696 | 44.6% | €8,094.51 |
| Over €83,696 | 48.0% | €10,939.90 |
Data is from the Portuguese Tax Authority website.
In addition, a Solidarity Surtax applies to very high incomes:
- 2.5% on taxable income between €80,000 and €250,000
- 5% on taxable income above €250,000
This means that while lower earners are taxed at 12.5% on their first €8,059 of taxable income, higher earners can face marginal rates of up to 48% (plus surtax). However, because of the progressive system, your effective tax rate will usually be lower than your top marginal rate.
How are income tax rules for businesses?
Corporate income is also taxed in Portugal.
The IRC (Imposto sobre o Rendimento das Pessoas Coletivas) is the main tax levied on income resulting from the exercise of a business activity. There are many rules for calculating IRC, and a good accountant can save a company a lot of money just by choosing the best tax regime.
It’s also worth noting that profits earned by non-resident companies with a permanent establishment in Portugal may also be subject to taxation in the country.
As mentioned, the calculation of IRC is a complex process that implies understanding some important concepts, such as:
- Taxable profit , which is the income obtained by the development of the company’s activity, minus allowable expenses.
- Taxable amount – the amount of taxable profit, after applying tax benefits and deducting carried-forward tax losses.
- IRC rate – the standard rate is 21% for most companies on the mainland. However, SMEs benefit from a reduced rate of 17% on the first €50,000 of taxable profit. Also, Madeira and Azores have slightly lower rates (14–15% standard; even lower for SMEs).
- Municipal surcharge – municipalities may levy up to 1.5% on taxable profits.
- Autonomous taxation – certain costs (fuel, allowances, representation expenses, excessive benefits, etc.) are taxed separately, regardless of profit.
- State surcharge / Extra fee (Derrama Estadual) – applies progressively on profits above €1.5M:
- 3% on €1.5M–€7.5
- 5% on €7.5M–€35
- 9% on anything above €35M)
Therefore, keep in mind that the standard corporate tax rate in Portugal is 21%, though additional surcharges and regional variations may apply.
It is also mandatory for companies to appoint a certified accountant (Contabilista Certificado) to handle their tax obligations.
What is the Non-Habitual Resident regime?
If you’ve been researching a move to Portugal, chances are you’ve come across the Non-Habitual Resident (NHR) regime. For over a decade, it was the golden ticket for expats: a tax scheme created in 2009 that offered lower tax rates and generous exemptions to people moving to Portugal for the first time.
The old NHR regime in Portugal was once a favorite among expats, but things have shifted. As of 2024, the classic NHR is no longer open to new applicants and has been replaced by the IFICI regime (Tax Incentive for Scientific Research and Innovation). The name might sound complex, but don’t worry—we’ll break it down in simple terms.
Under the old NHR regime, almost anyone moving to Portugal could apply as long as they hadn’t been a tax resident in the previous 5 years. It was broad: retirees with pensions, freelancers, and professionals in a wide list of “high value” jobs could all get in.
The new IFICI regime is much tighter. To qualify you must:
- Not have been a Portuguese tax resident in the last 5 years.
- Have not used the old NHR before.
- Work in specific high-skilled roles (like doctors, engineers, IT specialists, professors, and directors) or be employed by companies in innovative or export-focused industries.
The key difference is that the old NHR was open to retirees and a wide range of expats, while IFICI is mainly for professionals in science, tech, research, and innovation. Retirees no longer get special tax breaks on pensions under the new rules.
Read also: Portugal NHR Regime 2.0: IFICI – Tax Benefits In 2025
If I receive income outside Portugal, will I also have to pay taxes in Portugal?
One of the biggest questions expats ask is: “If I earn money outside Portugal, will I be taxed here too?” Well, the short answer to this common question is that it depends.
As a Portuguese tax resident, you’re generally taxed on your worldwide income—meaning even foreign income can fall under Portuguese taxation. However, this is where things get interesting: Portugal has signed dozens of Double Taxation Agreements (DTAs) with other countries. These treaties determine whether Portugal, the other country, or sometimes both can tax that income, with credits in place to prevent being taxed twice.
Under the old NHR regime, many types of foreign income (like dividends or capital gains) could be exempt. The new IFICI regime in 2025 keeps that in place for a lot of investment income, but with a big change. Let’s discuss a few
- Foreign pensions are no longer given special low rates, they’re now taxed in Portugal at the regular progressive scale.
So the real answer depends on where your income is from, the kind of income, and whether or not Portugal has a tax treaty with your country.
That’s why most people relocating to Portugal choose to get a professional tax review. Even a small detail in a treaty can mean the difference between paying nothing at all or facing rates as high as 48%.
Property Tax related questions
What are the taxes related to buying a property in Portugal?
As with most purchases and sales, taxes apply, and real estate is no exception. When you buy a property in Portugal, several types of taxes come into play. So, what exactly should you expect to pay?
Here’s what you should know for 2025 in Portugal:
- Municipal Property Transfer Tax (IMT): Paid by the buyer before the deed is executed. Depends on whether the property is a permanent residence or second home/investment, its value, and other factors. Progressive rates apply; there are exemptions and deductions in certain cases.
- Stamp Tax (Imposto do Selo): A flat 0.8% on the higher of the purchase price or the property’s fiscal (tax) value (VPT). It also applies on the mortgage loan amount if financing is used.
- Municipal Property Tax (IMI): Paid annually by the owner. Based on VPT. For urban properties, rates are typically between 0.3%-0.45%; rural properties about 0.8%.
- And other purchase-costs: notary/registry fees, legal/attorney/broker fees, certificates etc.
Check out the simulated table for calculating the IMT rate for permanent residents in mainland Portugal.
| Property Value | IMT Marginal Rate | Deductions |
| Up to €104,261 | 0% | €0 |
| €104,261 – €142,618 | 2% | €2,085.22 |
| €142,618 – €194,458 | 5% | €6,363.76 |
| €194,458 – €324,058 | 7% | €10,252.92 |
| €324,058 – €648,022 | 8% | €13,493.50 |
| €648,022 – €1,128,287 | 6% flat rate | – |
| Above €1,128,287 | 7.5% flat rate | – |
Data is from the Portuguese Tax Authority website.
Beyond taxes, acquiring a property also involves additional costs, such as certificate issuance, attorney fees, broker commissions, and other related expenses.
Read also: How To Get A House Mortgage In Portugal
Will I have to pay tax if I sell a property in Portugal?
Along with all the expenses related to the purchase of the property, the sale of a property will certainly result in capital gains that, as imagined, will be taxed.
Like many other countries, Portugal imposes a capital gain tax on the sale of assets in general (depending on the capital origin).
Capital gains from selling a property are calculated as the difference between the sale price and the purchase price, adjusted by monetary coefficients and increased by certain charges and expenses.
Depending on whether you are a resident or not in Portugal, and also if this property is your primary residence, different tax rates will apply.
If you are a resident of Portugal:
The gains obtained worldwide (including the sale of the property or even retirement) are taxed as income. Any real estate gains are added to your income for the year and taxed based on income tax rates, which range from 14.5% to 48%. Capital gains will be considered at 50% of their value, applying the general rates provided for in the IRS Code.
If you reinvest the proceeds in another primary residence in Portugal (or in an EU/EEA country with a tax treaty with Portugal), you may be exempt from paying capital gains tax.
The new property must be purchased between 24 months prior and 36 months after the date of sale of the property that generated the capital gain.
If you are not resident of Portugal:
In Portugal, capital gains from the sale of real estate are taxed at a rate of 28% for individuals and 25% for legal entities. Since this is a topic that often raises many questions, feel free to reach out if you’d like clarification on any specific aspect.
How is inheritance tax in Portugal?
Inheritance is taxed under the Stamp Tax at a rate of 10%. To calculate the tax payable on inheritance, you must multiply that tax by the taxable amount of all goods received.
The value of each type of the asset is determined according to specific rules.
The good news is that spouses or de facto partners (since 2009), as well as direct descendants and ascendants, are exempt from paying Stamp Tax on inheritances.
They are called legitimate heirs. Although they do not have to pay inheritance tax, these family members have to declare the assets received to Finance.
Read Also: Quality of life in Portugal: Experience what peace feels like
Does Portugal taxes wealth?
No, Portugal does not tax wealth.
Nowadays, just four countries charges wealth tax: Switzerland, Norway, Spain and France.
The main purpose for not charging wealth tax is certainly to avoid the withdraw of money by wealthy people from the country.
The main reason for not imposing a wealth tax is to prevent wealthy individuals from withdrawing their money from the country.
Have more tax related questions?
Portugal’s tax system may seem complex at first, but with the right guidance, it’s completely manageable, and potentially very rewarding for your business. If you want to stay up to date and connect with other expats navigating life in Portugal, join our Facebook Group – All About Portugal For Expats, where over 15,000 members share tips, experiences, and support.
And if you want personalized advice tailored to your situation, don’t wait; set up a consultation with our expat experts. We can help you understand your tax obligations, identify savings opportunities, and make your move to Portugal as smooth as possible.
