Property-Related Taxes in Portugal

Non-resident individuals are generally taxed in Portugal on Portuguese-source income, including income and taxable gains arising from Portuguese real estate.

Income Tax

Portugal applies progressive personal income-tax (IRS) rates to income subject to aggregation. For 2026, the principal rates are:

Additional solidarity tax can apply to high levels of taxable income.

Rental Income Tax

Portuguese-source rental income earned by non-resident individuals is generally subject to Portuguese personal income tax (IRS).

Residential rental income is generally taxed at 25% of net taxable rental income, while non-residential rental income is generally taxed at 28%. Reduced
rates may apply to qualifying long-term residential tenancy agreements, subject to statutory conditions.

Qualifying residential rental income may benefit from a 10% rate until 31 December 2029, subject to statutory monthly rent limits and other applicable
requirements, unless a more favourable rate applies. Specific exemption regimes may also be available. Net taxable rental income is calculated by deducting eligible, documented expenses from gross rental income. These may include maintenance and repair costs, condominium charges and municipal property tax (IMI), subject to the applicable legal requirements. Financing costs, including mortgage interest, are generally not deductible.

For comparison purposes, annual gross rental income of €18,000, €72,000 and €144,000 is assumed to incur deductible expenses equal to 30% of gross rent, leaving net taxable rental income of €12,600, €50,400 and €100,800, respectively.

Applying Portugal's standard 25% tax rate for residential rental income results in estimated annual income tax of €3,150, €12,600 and €25,200, respectively. This represents an effective income-tax burden of 17.5% of gross rental income at each income level.

The 30% expense assumption is used solely to standardize the international comparison. Actual Portuguese taxable rental income depends on the qualifying expenses incurred by the property owner. Financing costs, including mortgage interest, are generally not deductible.

Capital Gains Tax

Capital gains arising from the sale of Portuguese real estate by a non-resident individual are generally subject to Portuguese personal income tax (IRS).
The gain is generally calculated as the difference between the disposal value determined under Portuguese tax rules and the acquisition value, adjusted
where applicable for inflation, after deducting eligible acquisition and disposal expenses and documented property improvement costs incurred within the preceding 12 years. 

Generally, 50% of the positive net balance of relevant real estate capital gains and losses is included in taxable income, subject to statutory exceptions. This taxable portion is subject to Portugal’s progressive IRS rates. For non-resident individuals, worldwide income must be considered when
determining the applicable progressive tax rate, under the relevant Portuguese rules. This does not make foreign-source income taxable in Portugal.

Exclusions or relief may apply in specific circumstances, including qualifying reinvestments. Eligibility depends on the applicable statutory requirements;
reinvesting the sale proceeds does not automatically eliminate the tax liability.

Corporate Taxation

For tax periods beginning in 2026, the standard Portuguese corporate income-tax (IRC) rate is 19%.

Qualifying SMEs and Small Mid Caps can benefit from a reduced 15% rate on the first €50,000 of taxable profit, with the ordinary rate applying to the excess.

Rental income earned by a Portuguese company is generally included in its taxable business income, with qualifying business expenses deductible.

Taxable gains arising from the disposal of real estate are likewise generally included in the company's taxable corporate income.

Municipal surtax (derrama municipal) can additionally apply, generally up to 1.5% of taxable profit, depending on the municipality. Larger companies can also become subject to the state surtax (derrama estadual).

Property Buying Costs and Transaction Taxes in Portugal

Annual Property Tax

Municipal Property Tax (IMI)

Portugal levies an annual Municipal Property Tax (Imposto Municipal sobre Imóveis, or IMI) on a property’s officially assessed taxable value (Valor
Patrimonial Tributário, or VPT), rather than its purchase price or market value. For urban property, municipalities generally set the annual rate between
0.30% and 0.45% of the VPT. In specific statutory circumstances, the rate may reach 0.50%. Rural property is generally taxed at 0.80% of the VPT.
Exemptions, reductions and increased rates may apply in specific cases. The VPT is determined under statutory valuation rules. For residential buildings,
relevant factors include construction value, property area, use, location, quality, comfort and age. The resulting taxable value may differ substantially from the property’s market value.

IMI is generally payable by the person who owns the property on 31 December of the relevant tax year. Specific rules apply to usufruct and surface rights.  For example, an urban residential property with a VPT of €500,000 would incur annual IMI of €1,500 at 0.30% or €2,250 at 0.45%, before any applicable exemption, reduction or increase. For an urban residential property with a VPT of €1 million, annual IMI would be
€3,000 at a municipal rate of 0.30% or €4,500 at 0.45%, before any applicable exemption, reduction or increase. These amounts exclude any Additional
Municipal Property Tax (AIMI) that may be payable separately.

Additional Property Tax (AIMI)

Portugal also imposes an Additional Municipal Property Tax (Adicional ao IMI – AIMI) on the aggregate VPT of qualifying Portuguese real estate held by an individual or company.

For an individual, a €600,000 deduction generally applies before AIMI is calculated. Married couples and civil partners who elect joint AIMI taxation can generally benefit from a combined deduction of €1.2 million.

For individuals, the principal AIMI rates are 0.7% on the taxable amount up to €1 million, 1.0% on the portion between €1 million and €2 million, and 1.5% on the portion exceeding €2 million.

These thresholds apply to the taxable amount after the €600,000 individual deduction. Where spouses or civil partners elect joint taxation, the corresponding thresholds are effectively doubled.

Companies are generally subject to AIMI at 0.4% on qualifying Portuguese real estate. Special rules and higher rates can apply in certain circumstances, including residential properties held by companies for the personal use of shareholders, board members or members of corporate bodies.

Certain categories of property are excluded from AIMI, including qualifying properties classified for commercial, industrial or service use.

A residential property investor can therefore be subject to both IMI and AIMI. IMI applies annually to the property's VPT, while AIMI becomes relevant once the investor's aggregate qualifying Portuguese property value exceeds the applicable deduction.

Property Transfer Tax (IMT)

Property Transfer Tax (Imposto Municipal sobre as Transmissões Onerosas de Imóveis, or IMT) is generally payable by the buyer on the higher of the purchase price and the property’s taxable value (Valor Patrimonial Tributário, or VPT).  Under the general 2026 rules for mainland residential property not intended as the buyer’s own permanent home, progressive marginal rates range from 1% to 8% at lower values. A 6% flat rate applies to the entire taxable value where it exceeds €633,931 but does not exceed €1,150,853. Above €1,150,853, a 7.5% flat rate applies to the entire taxable value. Different
thresholds and reliefs apply to qualifying purchases of a permanent home. 

A specific rule applies to non-resident buyers: residential acquisitions are generally subject to a 7.5% flat IMT rate, regardless of value, subject to statutory exceptions. These include qualifying Portuguese tax-residence circumstances and qualifying residential letting arrangements. Certain exceptions operate through a subsequent refund application, subject to conditions and deadlines. 

For example, a non-resident investor purchasing residential property for €1.2 million would generally pay €90,000 in IMT, assuming the VPT does not
exceed the purchase price and no special rule applies. Acquisition stamp duty would generally add €9,600, bringing these two acquisition taxes to €99,600, before legal, registration and financing costs.

This article was written in cooperation with beyondlegal.pt