Portugal: Taxes and Costs

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Taxes range from moderate to high in Portugal

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	13.2%	13.1%	13.1%
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INDIVIDUAL TAXATION

Non-residents are liable to tax on their Portuguese-sourced income. Married couples are taxed jointly.

RENTAL INCOME TAX

Net rental income is taxed at a flat rate of 15%, withheld at source. Taxable income is gross rent less maintenance costs, repairs, and other related expenses (such as insurance premiums and municipal tax). Mortgage interest costs incurred when the property was purchased are not deductible.

CAPITAL GAINS TAX

Capital gains realized by non-residents on the sale of Portuguese property are taxed at a flat rate of 25%. Only 50% of the net taxable income is subject to capital gains tax if reinvestment relief applies. The taxable gain is computed by deducting the following from the selling price: the acquisition cost, costs of transferring ownership, and improvement costs incurred in the last 5 years prior to the sale.

Non-residents are required to appoint a local representative in Portugal for tax purposes. The appointment must be in writing and must show the representative’s express acceptance. Non-compliance with this obligation incurs a fine of up to €5,000. The representative fulfills all the tax obligations of the non-resident such as filing the income tax returns and paying the tax liability.

Furthermore, any Portuguese-sourced income of nonresidents cannot be transferred abroad unless it is conclusively proved that any underlying tax liability is paid or adequately secured. Non-compliance with this prohibition incurs a fine of up to €25,000.

PROPERTY TAXATION

Property Tax (Immovable Property Tax, IMI)

This tax is levied on the officially assessed values or “patrimonial value” of the buildings located in the territory of each municipality. The calculation of the patrimonial value takes into consideration the cost of the building, the average value of the land, the location of the property, etc.

The applicable rate is defined annually by each municipality in a decision taken by the respective municipal assembly. Rural properties are taxed at 0.8% while urban properties can be taxed from 0.4% to 0.8%.

Houses destined to be used as a permanent home and those destined for rental may benefit from exemption, upon application to the director of the local tax office. Exemption from this tax may be granted for periods ranging between three and six years depending on the patrimonial value of the building in question.

Portugal - more data and information

• Guide to buying houses and registering property sales in Portugal

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