Portuguese Tax in Plain English
Clear, accurate tax guidance for expats, property buyers, and investors in the Algarve.
Property Taxes
Every tax you will encounter when buying, owning, or selling property in the Algarve.
IMT: Transfer Tax
Imposto Municipal sobre Transmissoes Onerosas de Imoveis. Paid on property purchases, calculated across 7 progressive bands by property value and type. Permanent residence purchases below EUR 101,917 are exempt. Rates range from 0% to 7.5%. Above EUR 1,050,400, a flat 7.5% applies to the full purchase price. Legal persons (companies) pay a flat 6.5%.
0% to 7.5%IMI: Annual Property Tax
Imposto Municipal sobre Imoveis. Annual municipal property tax set by each council. Urban properties taxed at 0.3% to 0.45% of the Valor Patrimonial Tributario (VPT). Rural properties at 0.8%. All 16 Algarve councils set their own rate within the permitted range. Payable in up to 3 instalments.
0.3% to 0.45% urbanStamp Duty (Imposto do Selo)
A flat 0.8% tax on the purchase price or VPT (whichever is higher) of any property transaction. Payable at completion alongside IMT. Also applies to mortgages at rates of 0.5% to 0.6% on the loan amount, depending on the term.
0.8% on purchaseAIMI: Additional IMI
Adicional ao Imposto Municipal sobre Imoveis. Applies to the total VPT of all Portuguese properties owned, with an exemption for the first EUR 600,000 (EUR 1.2M for jointly assessed couples). Rates: 0.7% up to EUR 1M, 1% above EUR 1M. Corporate-owned property: 0.4% on total VPT (no exempt threshold).
0.4% to 1.0%Capital Gains Tax
On property sales, residents are taxed on 50% of the gain at progressive IRS rates (effectively up to 24%). Non-residents pay a flat 28% on the full gain. Reinvestment relief available for primary residence if reinvested in another EU/EEA primary residence within 36 months. Acquisition costs and improvements deductible.
Residents: 50% at IRS ratesRental Income Tax
Rental income (Category F) taxed at a flat autonomous rate of 28% for residents who opt out of aggregation, or at progressive IRS rates if aggregated. Non-residents pay 28% flat. Allowable deductions include maintenance, IMI, insurance, and condominium fees. Short-term rental (AL) has specific rules and municipal licensing requirements.
28% autonomous or progressiveIncome & Residency Tax
Understanding IRS, the NHR/IFICI regime, and how residency affects your tax position.
IRS Overview: Personal Income Tax
Imposto sobre o Rendimento das Pessoas Singulares. Progressive rates across 9 brackets from 14.5% (up to EUR 7,703) to 48% (above EUR 81,199). A solidarity surcharge of 2.5% applies to income between EUR 80,000 and EUR 250,000, and 5% above EUR 250,000. Six income categories: employment (A), business/professional (B), capital (E), rental (F), capital gains (G), and pensions (H). Annual filing between April and June.
14.5% to 48%NHR / IFICI Regime
The Non-Habitual Resident regime closed to new applicants from 1 January 2024. Existing NHR holders retain their benefits for the remainder of their 10-year period: 20% flat rate on qualifying Portuguese-source income and broad foreign income exemptions. The replacement IFICI regime (Incentivo Fiscal a Investigacao Cientifica e Inovacao) offers a 20% flat rate for qualifying professionals and a 10% rate on certain categories. Eligibility requires not being a Portuguese tax resident in the prior 5 years.
NHR: 20% flat / IFICI: 10-20%Tax Residency Rules
You become a Portuguese tax resident if you spend more than 183 days in Portugal in any 12-month period, or if you maintain a habitual abode in Portugal on 31 December suggesting intention to use it as a permanent residence. Once resident, you are taxed on worldwide income. The "centre of vital interests" test applies where physical presence is borderline: family ties, economic interests, and social connections in Portugal all count.
183-day ruleDouble Taxation Treaties
Portugal has over 80 double taxation agreements. The UK-Portugal DTA (1968, amended 1994) is particularly relevant for British expats. Key provisions: pensions are generally taxable only in the country of residence (with exceptions for government pensions), employment income taxed where work is performed, and capital gains on property taxed in the country where the property is located. Relief typically via credit method.
80+ treatiesBusiness & Other Taxes
Corporate tax, VAT, social security, and other obligations for business and self-employment.
IRC: Corporate Tax
Imposto sobre o Rendimento das Pessoas Coletivas. Standard rate of 21% on taxable profits. Small and medium enterprises pay a reduced 17% on the first EUR 50,000 of profit. Municipal surcharge (Derrama Municipal) of up to 1.5% may apply. State surcharge of 3% on profits EUR 1.5M to EUR 7.5M, 5% on EUR 7.5M to EUR 35M, and 9% above EUR 35M.
VAT / IVA
Imposto sobre o Valor Acrescentado. Three rates apply in mainland Portugal: 23% standard, 13% intermediate (food service, some food products), and 6% reduced (basic foodstuffs, books, pharmaceuticals). The Azores and Madeira have lower rates. Businesses must register for VAT when turnover exceeds EUR 15,000 (2025 threshold). Quarterly or monthly reporting depending on turnover.
Social Security Contributions
Employer contributions: 23.75% of gross salary. Employee contributions: 11%. Self-employed workers pay 21.4% on 70% of their declared income (effectively around 15% of gross). First year of self-employment is exempt. Contributions fund state pension, unemployment benefit, sickness, and maternity. Voluntary contributions possible for non-residents.
Self-Employment Tax
Two accounting regimes: simplified and organised. The simplified regime applies automatically below EUR 200,000 annual turnover, with deemed expense coefficients (e.g. 75% for services, 85% for goods sales) reducing the taxable base. Organised accounting requires a certified accountant (Contabilista Certificado) but allows actual expense deduction. Green receipts (recibos verdes) required for all invoicing.
Vehicle Tax (ISV & IUC)
ISV (Imposto sobre Veiculos): one-off tax on registering a vehicle in Portugal, based on engine capacity and CO2 emissions. Importing a UK-registered car triggers ISV. IUC (Imposto Unico de Circulacao): annual road tax, payable each year in the month of first registration. Rates depend on engine size, emissions, fuel type, and year of registration. Due annually in the month of the vehicle's first registration.
Inheritance & Gift Tax
Portugal abolished inheritance and gift tax in 2004, replacing it with stamp duty (Imposto do Selo) at 10% on the value of assets transferred. Transfers between spouses, descendants, and ascendants are fully exempt. All other beneficiaries pay 10%. Portuguese property is always subject to Portuguese stamp duty regardless of the deceased's residence. Stamp duty of 0.8% also applies to property within the estate.
Key Tax Dates
Important deadlines for Portuguese tax obligations throughout the year.
Latest Tax News
Recent developments in Portuguese tax policy and regulation.