Portugal's Tax System

Portugal’s taxation system is similar to the systems of other EU countries. There is a double taxation agreement between Portugal and the UK.

Personal taxation: non-residents

In general, non-residents are only subject to income tax on income sourced in Portugal, for example, interest paid by Portuguese banks. They may also be liable for value added tax, wealth tax, capital gains and inheritance tax, according to individual circumstances.

Non-residents must complete an annual income tax return if they receive income from letting property. Such income is taxed at a flat rate of 25 per cent. In Portugal, only repairs and maintenance costs are tax-deductible. Deduction of mortgage interest against rents, permitted by some other countries, is not allowed.

Personal taxation: residents

Residents of Portugal are subject to taxation on worldwide income, capital gains and inheritances. For tax purposes, a foreign national staying in Portugal for more than 183 days during a tax year (January 1 to December 31) is considered a resident. The 183 days need not be consecutive.

Residents of Portugal are also subject to other taxes, including value added tax, vehicle sales tax, stamp tax, rental property tax and taxes on real estate transactions.

Local taxes

Collected annually, Contribuicao autarquica is a municipal property tax calculated according to a property’s registered value and the local services available. For rural properties, it is currently 0.8 per cent and for urban properties between 1.1 and 1.3 per cent.

Inheritance tax

Upon presentation of the appropriate documentation, inheritance tax (known as Stamp Tax in Portugal) is not payable when a property is passed to a member of your immediate family. For this reason, it is recommended that you make a specific will upon arrival in Portugal.

As with anything which is so technical, we would advise you engage as specialist in international taxation to make sure that while your liability is covered adequately, you are not paying more than you should.

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