Taxes in Portugal for expats and real estate investors – clear guide 2025

Practical, up-to-date overview of the main taxes that matter to expats and property investors in Portugal in 2025 — residence rules, NHR, property taxes, capital gains, and practical tips to reduce surprises.

Taxes are one of the first questions people ask when they consider moving to Portugal or investing in Portuguese real estate. The rules changed several times in recent years and continue to evolve, so it’s essential to understand the main taxes you will face, the difference between tax residency and non-residency, and the opportunities available to new arrivals — notably the NHR (Non-Habitual Resident) special tax regime. This guide breaks everything down in plain English and gives practical examples and planning tips for 2025.

Who is a tax resident in Portugal?

You become a Portuguese tax resident for a calendar year if you:

• Spend more than 183 days in Portugal during that year (consecutive or not); or
• Have, on 31 December, a habitual residence in Portugal — meaning your centre of economic interests or family ties are in the country.

Tax residency matters because residents are taxed on their worldwide income while non-residents are taxed only on income sourced in Portugal. If you’re unsure about your situation, document travel dates and the location of your primary economic activities: these are the main evidence Portuguese tax authorities use.

What is the NHR (Non-Habitual Resident) regime?

The NHR regime remains one of Portugal’s most attractive tax tools for new residents. It’s designed to bring skilled professionals, high-net-worth individuals, and pension income into the country. Key points in 2025:

• Eligibility: You must not have been a tax resident in Portugal for the previous five years, and you must become tax resident during the year you apply.
• Duration: The NHR status is granted for 10 consecutive years.
• Tax benefits: Certain foreign-source pensions and incomes may be exempt in Portugal if they are taxable in the source country under an applicable double tax treaty or under domestic rules. Qualified professional income from high value-added activities may receive a flat rate (historically 20%).

The exact benefits depend on your income type and whether a double tax treaty applies. Always get tailored advice — many aspirational residents rely on NHR for the first step of their tax plan, but assumptions can be costly without correct documentation.

Personal income tax (IRS) basics

Portugal uses a progressive personal income tax system known as IRS. Rates vary annually, and for residents the IRS applies to worldwide income (employment, self-employment, rental income, pensions, investment income). Non-residents are taxed only on Portuguese-source income.

Typical taxable income categories:

• Employment and self-employment income
• Rental income
• Pension income
• Investment income (dividends, interest)
• Capital gains

Portugal offers some standard deductions (e.g., dependent family members, certain professional expenses) but the exact calculation depends on filings and status. For many expats, the two most relevant items are rental income taxation and capital gains rules when selling property.

Taxation of rental income

Rental income from Portuguese property is taxable in Portugal. You have two options when declaring gross rents:

1. Actual expenses method: Declare gross rents and deduct actual eligible expenses (maintenance, repairs, IMI property tax, condominium fees if applicable). Net taxable income is taxed at progressive IRS rates.
2. Simplified regime (flat deduction): The simplified method allows an automatic 28% deduction of gross rents (meaning only 72% is taxed). This method is simpler but may be less favorable if your real expenses exceed 28% of rental income.

Short-term tourist rentals are treated the same for tax purposes, but you must also respect local licensing rules and tourism registration (Alojamento Local) where required.

Property taxes: IMI, AIMI and stamp duty

When you own property in Portugal, expect several recurring or one-off property taxes:

• IMI (Imposto Municipal sobre Imóveis): annual municipal property tax. Rates generally range from 0.3% to 0.8% of the taxable property value (the municipal rate). Renovated urban properties in some councils may enjoy reductions; check the municipality.
• AIMI (Adicional ao IMI): an additional net wealth tax on high-value property portfolios. AIMI applies to the total taxable value of residential properties owned in Portugal above a threshold (it targets high-value owners and is charged at progressive rates).
• IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis): property transfer tax paid on purchase. The rate depends on property type and price; for primary residences, there are progressive tables; for second homes and investment properties, different rules apply.
• Stamp duty: a one-off tax on certain transactions (e.g., mortgages, leases, some contracts).

When buying, IMT + stamp duty + notary/registration costs typically add a significant percentage to the purchase price; budget accordingly.

Capital gains tax on property sales

Capital gains from selling Portuguese property are taxable. For residents, 50% of the gain is added to taxable income (effectively 50% taxation) and then subject to progressive IRS rates; non-residents are taxed at a flat rate (usually 28%).

There are important exemptions and postponements:

• Primary residence reinvestment: if you sell your primary residence and reinvest the proceeds in another primary residence in Portugal (or EU/EEA in some cases) within specific timelines, you may qualify for partial or full tax exemption on the gain.
• Costs and improvements documented over time reduce the taxable gain — keep receipts for renovations, not just purchase price.

Wealth taxes and inheritance

Portugal does not have a general wealth tax for individuals beyond AIMI on high-value property. Inheritance and gift tax were effectively replaced by a stamp duty on transfers to non-spouses; transfers between spouses and direct descendants often enjoy exemptions but must be structured correctly.

Estate planning is essential for international families: local laws, forced heirship rules in some cases, and cross-border estate tax considerations can create surprises — speak to an Anglo-Portuguese notary or tax lawyer before finalizing large transfers.

Corporate structures and VAT basics for investors

If you’re investing through a company (for example, managing multiple rental properties or launching a Portuguese business), corporate taxation and VAT rules apply:

• Corporate income tax (IRC) standard rate is generally around 21% at the national level, plus municipal surcharges that may increase effective rates for larger profits.
• Small companies may qualify for reduced rates on the first tranche of profits; consult a local accountant for exact thresholds.
• VAT (IVA) standard rate is 23% on the mainland (reduced rates apply in Madeira and the Azores). Property sales are generally exempt from VAT unless it’s a new building sold by a developer under specific conditions.

Practical tax planning tips for 2025

• Obtain NIF early: you need it for nearly every transaction (banking, property, services). Apply through a fiscal representative if you are outside the EU initially.
• Keep excellent records: invoices, contractor receipts, and a clear paper trail for funds reduce tax risk and maximize deductible expenses.
• Consider timing: capital gains and IMT can be sensitive to timing (sale date, reinvestment windows). Plan sales and purchases with a local tax lawyer.
• Use local advisors: laws and administrative practice vary by municipality; a local accountant will save time and money.
• Check applicable double tax treaties: many countries have treaties with Portugal that prevent double taxation on the same income; verify how your pension, dividends, and capital gains will be treated.

Common pitfalls to avoid

• Assuming NHR benefits without confirming treaty interactions — some pensions or income types may still be taxable depending on treaty rules.
• Failing to declare foreign income when you become resident — penalties and back taxes are common if migration occurs without proper filings.
• Misclassifying rental income (tourist vs long-term) — local licensing can affect tax treatment and obligations like VAT or municipal tourist taxes.

Taxes in Portugal reward careful planning and local advice. For most expats and real estate investors, the combination of a favorable lifestyle, the NHR regime (when applicable), and reasonable tax rates makes Portugal attractive. But the rules are complex and fact-specific. Before making large decisions — buying property, moving tax residence, or changing corporate ownership — consult a Portuguese tax lawyer or registered accountant to build a tailored plan.

Last updated: November 2025 — this overview is informative and not a substitute for personalized tax advice. Always confirm the latest rules with a qualified Portuguese tax professional before acting.