Moving to Portugal proves very rewarding for many people, for a whole variety of reasons. While quality of life is the most important, Portugal can offer attractive tax benefits too. With early and careful planning, you can make the most of tax-efficient opportunities when moving to Portugal.
Tax residence in Portugal
You will be considered a tax resident if you spend more than 183 days in Portugal in a 12-month period. Even if you are here less days, you may be deemed tax resident if you have a ‘permanent home’available here and it appears you intend to occupy it as your permanent home at any point in the year.
Portuguese income tax
Tax residents are liable to Portuguese tax on worldwide income. Certain capital gains are added to income whereas others are exempt or taxed at a fixed rate.
The 2025 income tax scale rates range from 13% for income under €8,059 to 48% for income over €83,696. A 2.5% or 5% solidarity tax is levied on income over €80,000 and €250,000 respectively.
Investment income (interest, shares, securities, bonds, etc.) is taxed at a flat rate of 28%. You can opt for the scale rates if cheaper.
Portugal’s NHR and IFICI regimes
Portugal’s original Non-Habitual Residence regime has closed to new applicants. Those with a few years left of NHR status should review their assets sooner rather than later to fully benefit from the tax planning advantages while you have them.
The new Incentive for Scientific Research and Innovation (IFICI) is limited to qualified professionals employed in high-value sectors. It offers a flat 20% income tax rate for up to 10 years and possible exemptions on certain foreign income and capital gains.
Tax on UK pension income
Once tax resident in Portugal, your UK state and occupational pensions are only liable for Portuguese income tax. UK government service pensions remain taxed in the UK. The taxation of personal pensions gets complicated, so take personalised, specialist advice.
There is no 25% tax free lump sum in Portugal, so you would be better off taking yours before you leave the UK.
However, with careful planning, Portugal can offer attractive tax options for residents in a position to encash their funds. Talk to a cross-border wealth management specialist about your situation and aims to establish which pension options would work best for you.
Portugal’s tax on high value property
Portugal imposes a ‘wealth tax’ of sorts – Adicional Imposto Municipal Sobre Imóveis (AIMI) – on high-value local property.
You are only liable if your stake in Portuguese properties is over €600,000 (double for couples with jointly held property) and only on the value above that. Rates are 0.7% for individuals and 0.4% for companies, in both cases rising to 1% and 1.5% for properties over €1 million and €2,000,000 respectively. Some companies are not eligible for the allowance.
Portugal’s limited inheritance tax
Portugal has a benign inheritance tax regime. The 10% ‘stamp duty’ is only charged on Portuguese assets and spouses, ascendants and descendants are exempt.
British expatriates also remain liable to UK inheritance tax on worldwide assets for up to 10 years after leaving the UK. UK assets located always remain subject to this tax, and from 2027 this will include pension funds.
Minimising tax in Portugal
Don’t assume what was tax efficient in the UK is tax efficient here, but Portugal provides its own tax planning opportunities, particularly on capital investments.
Many expatriates benefit from holding capital in a structure similar to an offshore life assurance policy or bond that acts as an investment wrapper to a conventional portfolio. No tax is payable on the underlying investment income until a withdrawal is made. Even then, only a proportion of the profit is taxable in Portugal and the effective rate of tax drops over time.
There may also be tax-efficient opportunities for your pension funds.
Portugal succession law
Under Portugal’s succession law, your spouse and direct family could automatically inherit at least half of your worldwide estate. This regime applies by default, but you can opt for the EU ‘Brussels IV’ succession regulation to override it. Take expert advice to establish what works best for your family.
A helping hand
Cross-border wealth management is complex, with all the different various elements potentially having an impact on others. How you own assets can have repercussions on what tax you pay and your estate planning options. A specialist adviser can provide a strategic financial plan for whole process, from your planning stages in the UK if you haven’t moved yet, ensuring you do everything at the right time, right through your retirement years in Portugal and should you decide to return to the UK in future.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com.
