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Portugal taxes individual income at progressive rates that reach 48% plus surcharges, except that it offers a special regime to new residents, which during 10 years may effectively exempt them from tax on non-Portugal-sourced income.
In Portugal there is no capital duty or wealth tax, and aninheritance or gift received by thespouse, a descendant or an ascendant is tax exempt, there being otherwise stamp duty at therate of 10%.
Real estate is subject to an annual municipal tax and to tax on the transfer ofproperty, except forqualifying rehabilitated property.
Non-Residents
Except for exemptions or reduced rates applicable under a double taxation agreement, non-residents are taxed at either 25%, on wages, fees, royalties, commission, pensions and certain indemnity compensations, or 28% on investment income and net rental income.
Resident Individuals
Taxable income falls into the following 6 categories: employment, business and professional, investment, real estate, net capital gains and pension income. Income is generally taxed at progressive rates, except for some types, which may be taxed autonomously (not contributing to the tax bracket computation) at flat rates, notably investment income and net capital gains from the disposal of securities, generally taxed at 28%.
In the computation of income tax some deductions from taxable income up to certain (relatively low) limits are available, such as expenses in connection with health, education, social security and pension plans; and certain tax credits are applicable in connection with marital status, number of dependants and overall level of income.On the disposal of real estate only 50% of the capital gain is subject to tax, at the normal progressive rate, except where the property is one’s main residence and the sale proceeds are used to buy another main residence in the EU (or in an EEA member country that is a signatory to a tax information exchange agreement), in which case the gain is tax exempt.
A 50% exemption of income from patents and industrial designs applies under certain circumstances.
Except in the case of “non-habitual residents”, 7 progressive rates of taxation apply in 2018, from 23% to 48%.
Resident individuals are liable to income tax on their worldwide income and non-residents on their Portugal-sourced income only. A person is deemed resident in Portugal either if more than 183 days (whether or not consecutive) are spent in the country in any given calendar/tax year, or if a place of abode is kept in the country in a way that indicates its use as a habitual residence. As a rule, the liability to income tax starts on the first day of stay in the country and ceases on the last day of stay, there being a few exceptions.
