A new proposal is being debated in parliament on reducing rental income tax rates for landlords (except short-term lets), as well as an exemption from capital gains tax when the proceeds of sale of property are reinvested into a new rental property. This law is not yet approved.
Income tax
For residents of Portugal, worldwide employment earnings, pension, rental and most other income earned over the year is combined to calculate your income tax bill. For non-residents, only Portugal-sourced income is taxable.
In order to reduce tax burdens and boost household incomes, income bands have increased and most tax rates are slightly lower. For example, in 2025, the starting tax rate was 13% for income up to €8,059, while in 2026 it is 12.5% for income up to €8,342. The top 48% rate now applies to income over €86,634, up from 2025’s €83,696.
The additional solidarity tax continues to apply to high earners, at rates of 2.5% on income over €80,000 and 5% on income exceeding €250,000.
Investment income
Investment income is taxed at a flat rate of 28% (35% if from a ‘tax haven’ jurisdiction), with no change from previous years. This rate covers interest and income from capital investments such as shares, securities and bonds. Residents can opt for the scale rates.
Portugal continues to offer the potential to enjoy extremely favourable tax treatment on capital investments. If you have not reviewed your investment approach and structures since moving to Portugal, it is certainly worth doing so.
Capital gains tax
There are no changes to Portugal’s capital gains tax regime. If you are a resident and sell worldwide property, 50% of the gain is added to your annual income and taxed at the relevant income tax rate. You won’t be taxed if you sell a main home and reinvest the proceeds in a new main home in the EU/EEA.
Retirees or residents aged over 65 can also avoid capital gains tax when reinvesting into an eligible insurance contract or pension fund, if you meet the conditions. Life assurance policies – where you can hold a wide range of investment assets within its tax-efficient structure – are eligible.
Gains made on the disposal of shares, securities and bonds are taxed as capital gains tax at 28%, and indexation may be available to reduce the overall tax payable.
NHR status residents – it’s time to act
If you obtained non-habitual residence status before the regime closed two years ago, watch how long you have left on your term. Once you reach the 10-year limit, you lose the tax benefits you have been enjoying.
Take advantage of your NHR status and restructure your assets now to vastly improve your post-NHR tax position. Allow plenty of time to restructure your assets for the most tax-efficient transfer out of NHR possible, whether you stay in Portugal or relocate.
NHR 2.0 / IFICI
Portugal’s new version of non-habitual residence – the Tax Incentive for Scientific Research and Innovation or IFICI – offers some tax benefits but is much more restrictive and not designed for retirees and those with passive income. It strictly targets highly-qualified professionals in fields such as science, technology, education and innovation.
High-value property
Portugal’s Adicional Imposto Municipal Sobre Imóveis (AIMI) applies tohigh-value Portuguese property regardless of residence, but you are only liable on any value exceeding €600,000 per person. Rates are 0.7% for individuals, 0.4% for companies, 1% for properties over €1 million, and 1.5% for the value in excess of €2 million. Most companies are not eligible for the allowance.
Stamp duty on inheritances
Stamp duty, Portugal’s inheritance tax, compares very favourably to neighbouring countries and the UK. The rate is fixed at 10% and only applies on Portuguese property and assets inherited or gifted outside the direct family.
Previously, most British expatriates remained subject to UK inheritance tax (IHT) on worldwide assets. Since April 2025, once you have been outside the UK for over 10 years, only UK-situated assets are liable. With this new system and Portugal’s regime, you may be able to structure your assets so that no inheritance taxes are due anywhere.
Tax planning
Portugal remains a tax-friendly country, but specialist advice is more essential than ever to ensure you make the most of the local regime.
It is sensible to regularly ensure your financial planning is optimised for your circumstances and goals. How you structure your assets and wealth can make a big difference to your tax bill, so take personalised advice to make the most of tax-efficient opportunities and secure financial peace of mind in Portugal.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com
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; individuals should seek personalised advice.
Read Dan Henderson previous article: Tax and residence UK: Statutory Residence Test vs Long-Term Residence
