Nonresidents are taxed on their Portuguese-sourced income. Married couples are taxed jointly.

Income Tax

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

Income Tax Rates

Rental Income Tax

Whenever you rent out your property in Portugal, whether short-term or long-term, you are obligated to pay taxes.

Non-Resident Individuals

Net rental income earned by nonresidents is taxed at a flat rate of 28%, 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.

Resident Companies

Income and capital gains earned by companies are subject to corporate income tax at a flat rate of 21%. Income-generating expenses are deductible when calculating taxable income.

Non-Resident Companies

Income and capital gains earned by non-resident companies are taxed at a flat rate of 25%. Income-generating expenses are deductible when calculating taxable income.

If you are considering short-term letting your property in Portugal, keep an eye on the latest updates from the local council. New laws are being introduced across the country affecting short-term rentals, most recently in Porto.

Capital Gains Tax

Capital gains tax in Portugal is charged on the sale of property or other assets at a rate of 28% for individuals and 25% for corporations.

Capital gains realized by nonresidents on the sale of Portuguese property are taxed at a flat rate of 28%. The taxable gain is computed by deducting the following from the selling price: the acquisition cost adjusted for depreciation and increased by the official inflation coefficient, costs of transferring ownership, and improvement costs incurred in the last five years prior to the sale.

For capital gains realized from fixed assets such as real property, only 50% of the capital gains will be taxable if the capital gains are reinvested in fixed assets such as real property during the year the sale occurred, the previous year, or within two years after the sale.

Nonresidents 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 nonresident, 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.

Corporate Taxation

Income Tax

Income and capital gains earned by companies are taxed at a rate from 14.70% to 21.00%. Income-generating expenses are deductible when calculating taxable income.

Property Buying Costs and Taxes in Portugal

Property Holding Tax

Property Tax (Immovable Property Tax, IMI)

Property 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 are taxed from 0.30% to 0.50%. Properties not updated in accordance with the new property tax rules are taxed from 0.50% to 0.80%.

Additional Property Tax (AIMI)

In Portugal, there is also an additional property tax called AIMI. Regardless of residency status, the rates applied are as follows: