As with many other European countries, taxes in Portugal are geared towards creating ideal conditions for attracting foreigners who can bring added value to the country. Besides being one of the best countries in which to live, Portugal is also generous to its non-permanent residents in terms of taxes.
How does the income tax work in Portugal
The Income Tax (IRS) is a Portuguese tax on the income of individuals. Every year the Portuguese state budget sets the yield ranges and the tax to be levied upon each one. Here you will find information on the income taxes for 2019 for all those who have income in the country, provided they don’t qualify as a special case, such as those who are considered non-permanent residents (see below).
IRS scale for 2019 in Portugal
|Yield ranges||Taxable income*||Rate|
|1||Until 7,091 €||14,5%|
|2||More than 7,091 € until 10,700 €||23%|
|3||More than 10,700 € until 20,261 €||28,5%|
|4||More than 20,261 € until 25,000 €||35%|
|5||More than 25,000 € until 36,856 €||37%|
|6||More than 36,856 € until 80,640 €||45%|
|7||More than 80,640 €||48%|
* Taxable income is the gross annual income minus applicable income deductions. In cases of joint taxation, it is the gross annual income minus applicable income deductions and then divided by the family quotient.
Special regime for non-permanent residents
Not all foreigners residing in Portugal are eligible for non-habitual resident status. But those who do meet the requirements can have access to a special tax regime. This special Income Tax Regime lasts at most for 10 consecutive years. Here you can learn more about the benefits for both workers and pensioners.
Workers and managers
There is a fixed rate of 20% Income Tax for qualified professionals in “high added value activities” who receive income in Portugal. Besides this, any income they receive in their country of origin is tax free.
Investors, administrators and managers with management or administration level income can also benefit from this 20% flat rate.
Income tax exemption for pensions domiciled in Portugal and received in the country of origin.
Advantageous situations, provided there is an agreement between both states to avoid dual taxation.
Who can apply?
These are the situations in which you can be eligible for this special regime. The following foreigners can apply, provided:
- they can, for tax purposes, be considered residents in Portugal in the year in which they intend to begin to benefit from this regime;
- they have not been considered residents in Portugal over the five years previous to the one in which they intend to be taxed according to this regime;
- they can prove that they have lived in the country for over 183 days, consecutive or interspersed over a period of twelve months. This regime also applies to those who have spent less time in the country but who possess, at any given time over the aforementioned period, a residence in such condition that it credibly attests to an intention to be kept and occupied as a permanent residence.
How to benefit from this tax regime in Portugal
The first step is to register, for tax purposes, as a resident in Portuguese territory. Do you already have a tax number, but are still registered as a non-resident? Ask to have your address and status changed to resident in Portuguese territory. This change can be requested in Tax Offices or Lojas do Cidadão. After this you will be able to request having your tax status changed to non-permanent resident.
Where and when can you register as non-permanent resident?
Registration as a non-permanent resident can be requested in two ways: online, through the website of the Tax Office, or by mail. You will be sent a password to your address which will enable you to submit a request to register as non-permanent resident over the Tax Office website.
Please note that the deadline for requesting this status is March 31st of the year following the one in which you became a Portuguese resident. The tax benefits kick in the same year you register as a non-permanent resident, and carry on for up to ten years, provided you can prove your status as a resident in each of those years.
How about other income obtained abroad?
Non-permanent resident status also comes with advantages for foreigners who work in Portugal and have taxed income in their countries of origin. Portugal has established international agreements to eliminate double taxation. Non-permanent residents in Portugal who obtain income abroad, from a number of categories, benefit from an exemption regime in Portugal, the condition being that they are taxed in the original state.
Pensions and salaries of dependent workers are the most obvious cases of exemption. Learn about other cases of foreign based income which are exempt:
- independent and corporate work;
- capital income (interest, dividends);
- property income and profits from real estate.