Property-Related Taxes in Portugal

Non-residents are taxed in Portugal only on income derived from Portuguese sources. Married couples are taxed jointly.

Personal income tax is progressive, with rates reaching up to 48%. Net rental income earned by non-residents is generally taxed at a flat rate of 28%, withheld at source. Capital gains from property sales are taxed on only 50% of the gain for both residents and non-residents, with the taxable portion added to annual income and taxed at progressive rates.

Annual property holding taxes apply through IMI and, in some cases, the additional AIMI surcharge. Property transaction costs are moderate by European standards, with roundtrip costs typically ranging from 5% to 17%.

Annual Property Tax

Municipal Property Tax (IMI)

IMI is levied annually on the officially assessed patrimonial value of property. This value reflects factors such as construction cost, land value, location, and property characteristics. IMI rates are set annually by each municipality. Rural properties are taxed at 0.8%.

Urban properties are generally taxed at rates between 0.30% and 0.45%. Properties not updated under the current valuation system may be taxed at higher rates ranging from 0.50% to 0.80%.

Additional Property Tax (AIMI)

Portugal also levies an additional property tax known as AIMI. The applicable rates are:

Income Tax

Taxable income is generally calculated by deducting allowable income-generating expenses from gross income. Taxable income from all sources is then aggregated and taxed at progressive income tax rates.

Income Tax Rates (2026):

Rental Income Tax

Rental income earned in Portugal is taxable regardless of whether the property is rented on a short-term or long-term basis. For non-resident individuals, net rental income is taxed at a flat rate of 28%, generally withheld at source. Taxable rental income is calculated as gross rent less allowable expenses such as maintenance, repairs, insurance premiums, and municipal property tax.

Mortgage interest costs are not deductible.

Capital Gains Tax

Capital gains are calculated as the difference between the selling price and the acquisition cost, adjusted for eligible expenses such as renovation works (supported by invoices), real estate agent commissions, legal fees, and other documented transaction costs.

Portugal does not tax the full gain. Only 50% of the capital gain is taxable for both residents and non-residents. This taxable portion is added to the individual’s annual income and taxed at the progressive income tax rates, which range from approximately 14% to 48%. In certain cases, an additional solidarity surcharge may apply to higher income brackets.

Capital gains tax may be reduced or eliminated in specific situations. Relief may apply if the property was the taxpayer’s primary residence and the proceeds are reinvested into another primary residence within the required timeframe. Individuals aged 65 or older may qualify for relief if proceeds are reinvested into eligible retirement-related financial products. Certain older properties may also benefit from transitional rules or exemptions.

Corporate Taxation in Portugal

Income and capital gains earned by companies are subject to corporate income tax at rates ranging from approximately 14.70% to 21.00%, depending on the level of taxable income and applicable municipal surtaxes. Expenses incurred in the production of taxable income are generally deductible.

Rental income received by companies is treated as business income and taxed at the corporate income tax rate.

Property Buying Costs and Transaction Taxes in Portugal