The Portugal 2024 budget introduced one significant tax reform for 2024 – the popular non-habitual residence programme closed for new applicants. Otherwise, Portuguese taxation remains similar to recent years.
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. Non-residents are taxed on Portugal source income.
For 2024, the rates for the first five income bands were reduced and income bands increased in line with inflation.
| INCOME | TAX RATE |
| Up to €7,703 | 13.25% |
| €7,703 – €11,623 | 18% |
| €11,623 – €16,472 | 23% |
| €16,472 – €21,321 | 26% |
| €21,321 – €27,146 | 32.75% |
| €27,146 – €39,791 | 37% |
| €39,791 – €51,997 | 43.5% |
| €51,997 – €81,199 | 45% |
| Over €81,199 | 48% |
Investment income
Investment income continues to be taxed at a flat 28%. This covers interest and income from capital investments such as shares, securities and bonds. Residents can opt for the scale rates instead.
If a bank account or investment is within a jurisdiction classed as a ‘tax haven’ by Portugal (including Gibraltar and Guernsey), the rate increases to 35%.
Capital gains tax
When Portuguese residents 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 to buy a new home in Portugal or 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 – great news for downsizers. Life assurance policies – where you can hold a wide range of investment assets within its tax-efficient structure – are eligible for this relief.
There is a change for non-residents owning Portuguese property. Whereas previously they were taxed on 100% of the gain at 28%, now only 50% is taxed and at the scale rates (same as residents).
Gains made on the disposal of shares, securities and bonds are taxed as investment income.
Non-habitual residence (NHR)
The non-habitual residence programme closed on December 31, 2023. You can no longer apply unless you prove you initiated your residence visa application in 2023 and secured a property, employment or school places last year.
If you already have NHR status, you continue to receive the tax advantages until the end of your 10-year term. You then become liable to Portuguese tax on your worldwide income and gains, facing tax rates up to 48% or 28% on investment income. 50% of any property gain will be taxable.
Take advantage of your NHR benefits and restructure your assets now to vastly improve your post-NHR tax bill. Allow plenty of time for the most tax-efficient transfer out of NHR possible – whether you stay in Portugal or move elsewhere. With specialist cross-border advice and careful planning, the Portuguese tax regime provides compliant opportunities to enjoy extremely favourable tax treatment on capital investments, and attractive options for residents in a position to encash their pension, making it comparable to NHR benefits.
Tax regime for skilled professionals
The replacement regime only applies to individuals employed/self-employed in roles such as teachers, scientific research, technology and startups, and who are new residents.
Your status will last 10 years, during which you benefit from a 20% flat tax rate on employment/self-employment income, and an exemption for foreign income (employment, rent, dividends etc).
High-value property
Portugal’s Adicional ao Imposto Municipal Sobre Imóveis (AIMI) applies a limited form of wealth tax to high-value Portuguese property. You are only liable if your stake in Portuguese properties is over €600,000, and only on the value above that. Jointly owned property will attract AIMI if valued over €1.2 million. Rates are 0.7% for individuals, 0.4% for companies, 1% for properties over €1 million, and 1.5% for any excess over €2 million. Most companies are not eligible for the allowance.
Stamp duty on inheritances
Stamp duty, Portugal’s version of inheritance tax, compares 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 of the direct family.
Many UK expatriates continue to remain UK-domiciled, so take care to review your position regarding UK inheritance tax.
Tax planning for Portugal
In summary, Portugal remains a tax-friendly country to live in, but specialist advice is more essential than ever to ensure you make the most of the local regime.
It is sensible to regularly review your financial planning to ensure it is optimised for your circumstances and goals. The way 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.
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.
Keep up to date on the financial issues that may affect you on the Blevins Franks news page at www.blevinsfranks.com.
Dan Henderson is a Partner of Blevins Franks in Portugal. A highly experienced financial adviser, he holds the Diploma in Financial Planning and advanced qualifications in pensions and investment planning from the Chartered Insurance Institute (CII). | www.blevinsfranks.com
