What Taxes Will You Pay in Portugal? A 2025 Guide for Residents and Buyers

Planning a move or investment in Portugal requires understanding the local tax landscape to avoid surprises and plan effectively for your lifestyle. Portugal offers many advantages, but being informed about your tax obligations helps you manage your budget confidently while enjoying your new life in the sun.

Here are the top taxes and contributions you’ll encounter in Portugal in 2025:

Income Tax (IRS)

Portugal’s personal income tax (IRS) is progressive, with rates in 2025 ranging from 14.5% to 48% depending on your income bracket. The first €7,703 is taxed at 14.5%, while income over €81,199 falls into the highest bracket. Non-Habitual Residents (NHR) may benefit from a flat 20% tax on certain income types for 10 years, subject to eligibility.

• IVA (VAT)

Value Added Tax (IVA) in Portugal applies to goods and services at a standard rate of 23%. Reduced rates of 13% (restaurants, certain food and drink) and 6% (basic goods, transport, healthcare) also apply, depending on the service or product category.

• Health Insurance Contributions

If you are employed or self-employed, you contribute to Portugal’s public healthcare system through social security. Additionally, many residents opt for private health insurance for faster access to private healthcare, with plans averaging €50–€150 per month, depending on age and coverage level.

• Pension Insurance Contribution

Pension contributions are part of your social security payment, which is 11% of your gross salary for employees, while employers contribute an additional 23.75%. For self-employed individuals, social security contributions are typically 21.4% of declared income.

• Unemployment Contribution

This is included within your social security payment. It ensures you qualify for unemployment benefits if needed, forming part of the comprehensive social security framework supporting residents in Portugal.

• Car Tax (IUC)

If you own a car in Portugal, you will pay an annual Vehicle Circulation Tax (IUC), which depends on the vehicle’s engine size, emissions, and year of registration. For most standard vehicles, expect to pay €50–€200 per year.

• House Tax (IMI)

Owning a home in Portugal comes with annual property taxes known as IMI (Imposto Municipal sobre Imóveis), often referred to simply as house tax.

The IMI rate typically ranges from 0.3% to 0.45% of the property’s taxable value, depending on the municipality and the type of property. For rural properties, the rate is 0.8%. The property’s taxable value (VPT - Valor Patrimonial Tributário) is usually lower than the market value, but it is recalculated periodically.

Example:
If your Algarve property has a taxable value of €250,000 and your municipality’s IMI rate is 0.35%, your annual house tax would be:
€250,000 x 0.0035 = €875 per year.

IMI is typically paid in one, two, or three instalments per year (April, July, November) depending on the amount due.

• Capital Gains Tax

When selling a property, capital gains may apply:

• For residents, 50% of the gain is added to your taxable income and taxed at progressive IRS rates.

• For non-residents, the gain is taxed at a 28% flat rate (or 25% for entities without a permanent establishment).

At Premium Houses Algarve, we understand that navigating taxes and contributions is part of your investment and relocation journey. We work closely with trusted legal and tax advisors to help you understand your obligations while ensuring your move to Portugal is clear, secure, and aligned with your lifestyle goals.

Considering buying a home or relocating to Portugal?
Contact Premium Houses Algarve to guide your property journey with clarity, confidence, and the insights you need to make informed decisions.