If you’re either already living, or thinking about living in Portugal it’s important to understand how tax works – including things like tax residency, tax rates, tax returns, tax incentives & much more!
Portugal has long been one of the most popular destinations, but with the (old) NHR no longer being around it’s important that expats consider how their income will be managed; once becoming a tax resident in Portugal. Whilst there’s a new tax incentive, known as the IFICI, it doesn’t apply to everyone (sorry to say, if you don’t have a degree then it won’t work for you)! But it shouldn’t stop you from making the move, and you’re in the right place to begin your research.
Understanding tax residency in Portugal
The classification of being a tax resident in Portugal comes down to two things:
- Is your NIF address linked to somewhere in Portugal?
- Have you been spending more than 183 days in Portugal, within the same tax year (January-December)?
Keep in mind, when requesting your address to be changed the Tax Authority usually make this change based on a residency document – such as temporary residency card, from AIMA. So if you request the change on 1 July 2026 but your residency card is actually dated 1 March 2026, then your status will be backdated. And with this, when submitting a tax return next year to declare your 2026 income you’ll have to declare income from 1 March onwards, not from 1 July onwards. That’s why we always advise individuals to plan ahead, and speak with all kinds of providers in Portugal to get things right – and we have you covered with most, if not all, providers.
Do you have the (old) NHR
In general terms, when submitting a personal income tax return alongside declaring that you have the NHR, you can benefit from:
- Special rate of 20% applicable to employment and self-employment income from ‘high value-added activities’;
- Exemption on foreign sourced income, provided that certain criteria is met;
- Flat rate of 10% on pensions from foreign sources, and other payments from pension funds and similar retirement schemes.
Exemption on foreign sourced income is the most tasteful advantage, and why wouldn’t it be – since most NHR status holders can apply this pathway to their situation. To ensure the benefit applies, this type of income should come from a country which has a Double Taxation Agreement (DTA) with Portugal; and then put simply you’ll pay no tax on it, in Portugal. Types of foreign income can include:
- Employment income
- Self-employment income
- Royalties and income from assets
- Real estate and capital gains income
- Pension income
If you’re perhaps not making the most use out of the NHR, speak with our team.
What happens if you have the IFICI
The benefits are pretty similar between the NHR and IFICI, the main difference is that you cannot take advantage of foreign source income exemption on pensions.
There’s not much else to say about the programme, and moreover our team will make sure that whichever tax incentive you have is applied to your personal tax return – if it’s beneficial.
Capital and crypto gains
Capital gains
Generally, capital gains are taxed at a flat rate of 28%. However, there are exceptions. For instance, only half (50%) of the capital gains from selling shares in unlisted micro and small companies is subject to tax.
And as of 1 January 2023, the net balance of capital gains and losses from selling shares and other securities are combined under specific circumstances:
- The assets were held for less than a year (365 days);
- The taxpayer’s total taxable income, including these net gains, is 86,634 EUR or higher.
These rules also apply to capital gains and losses that fall under the higher 35% tax rate (applicable to jurisdictions with more favourable tax regimes).
Recent updates to the Personal Income Tax (PIT) Code in 2024 introduced a tiered tax exclusion for gains from the sale of traded securities or units in investment funds:
- 10% exclusion – for assets held between two and five years;
- 20% exclusion – for assets held between five and eight years;
- 30% exclusion – for assets held for eight years or more.
Since 2023, for non-residents only 50% of capital gains arising from the sale of real estate is taxable. For 2026, this income is taxed at progressive rates from 12.50% to 48% (plus a solidarity rate where applicable). To determine the specific tax rate for non-residents, the total worldwide income is taken into account, even if it’s not taxed in Portugal.
Crypto gains
Before 2023, Portugal was a tax haven in which individuals could hold crypto without capital gains tax being applied. However, due to the new rules, a 28% tax is applied on short-term gains however long-term gains (more than 365 days) remain tax-free in most cases. The taxation can depend on your status, and whether you’re staking, day trading or earning professionally.
To provide more insight, common crypto transactions are treated as follows:
Receiving cryptocurrency as payment
Freelance invoices, wages or revenue falls into Category B, so when converting the coin values into euros the normal income scale will apply.
Selling cryptocurrency
If you sell within one year the gains will be taxed at 28%, however if selling after a year the gains are usually exempt. But other conditions apply to this, so best to double check.
Buying and holding cryptocurrency
The initial purchase doesn’t trigger anything, you just need to plan ahead before selling or swapping. Make sure to keep a record of each acquisition date, so you can easily prove a holding period of 366 days, or more.
Contributions if you work in Portugal
As an employee in Portugal, both you and your employer are required to make social security contributions. The rates are as follows:
- Employee Contribution: 11% of the gross salary (automatically deducted by your employer)
- Employer Contribution: 23.75% of the employee’s gross salary
So that your personal tax return is declared accurately, it’s important that these amounts are paid correctly. By checking your history on the Social Security website, you’ll be able to see how the contributions looked. And if it looks like mistakes were made, speak to your employer!
Freelance setup – did you tick all the boxes
We’ve seen many times that individuals don’t realise they should have been a freelancer in Portugal, to declare self-employment income. And by this, we mean official registration as a freelancer in Portugal, with the Tax Authority.
Let’s say you speak with our team at the start of tax season (1 April) and we notice you should have been registered as a freelancer from 1 January, but weren’t, that means the freelancer status has to be backdated (incurring fines, for not being registered on-time). Plus, if you’ve been a tax resident for a few years without realising that an official freelancer activity was needed, then that means amended tax returns; again resulting in fines.
So, well before tax season comes about, you need to make sure your income is being registered properly in Portugal – as a freelancer, or not. Ticking all these boxes will save you a lot of headaches later on.
How RHJ Accountants can help
The whole purpose of our team is to help you avoid tax surprises, or even car fine surprises. We’re well versed in supporting expats in Portugal, to make sure that their arrangement not only works for them, but also reflects how the Tax Authority like things to be setup.
Whether you need our help to simply file a tax return, or check your tax incentive schemes and how best to apply them; we can help. Most importantly, remember the tax filing period in Portugal is from 1 April to 30 June; to declare income from the previous year (from January-December).
