Live Smart in Portugal: What you need to know about Tax and Wealth

Thinking of Moving to Portugal?

Essential Tax and Wealth Insights Before You Go

Portugal continues to attract individuals and families from around the world—not just for its stunning coastlines, mild climate, and relaxed lifestyle, but also for its favourable tax framework. At Premium Houses Algarve, we don’t just help you find your ideal home—we help you understand the financial and legal landscape that comes with relocating.

Whether you're planning retirement, remote work, or a lifestyle change, understanding Portuguese taxation is crucial. Here's what you need to know:

1. Income Tax in Portugal: What to Expect

Once you become a tax resident in Portugal (typically after 183 days of residence), you're liable to pay tax on your worldwide income.

Portuguese income tax rates are progressive, starting at around 14.5% and rising to 48% for higher income brackets. An additional solidarity surcharge may apply to very high incomes.

Capital income—such as interest, dividends, and bonds—is generally taxed at a flat rate of 28%, or 35% if held in a blacklisted jurisdiction. You may opt for progressive tax rates if that proves more beneficial.

2. The Non-Habitual Residency (NHR) Regime

Portugal’s NHR regime has long offered substantial tax benefits to new residents, such as:

• A 20% flat tax rate on qualifying ‘high value-added’ professions.
• Tax exemptions or reductions on certain types of foreign income, including pensions and rental income.
• No Portuguese tax on gains from selling property in the UK.

⚠️ Please note: The Portuguese government has proposed to phase out the NHR regime for new applicants. It's essential to check whether you're still eligible and seek professional advice promptly.

3. UK Pension Income in Portugal

Once you're tax resident in Portugal, your UK state and occupational pensions are subject to Portuguese tax—with the exception of UK government service pensions, which remain taxable in the UK.

• Under NHR status, UK pensions are often taxed at a flat 10%.
• Portugal does not offer the 25% tax-free lump sum available in the UK, so you may want to consider taking it before relocating.

The rules around pension taxation are nuanced, so personal financial advice is strongly recommended.

4. Wealth Tax on Portuguese Property

Portugal applies a form of wealth tax, known as AIMI (Adicional Imposto Municipal Sobre Imóveis), on high-value real estate.

This applies if your share of Portuguese property exceeds €600,000, or €1.2 million for jointly held property. Tax rates vary:

• 0.7% for individuals
• 0.4% for companies
• 1% for property valued above €1 million

5. Inheritance Tax in Portugal

Portugal’s inheritance tax is relatively mild. Only Portuguese-based assets are taxed, and the rate is 10% in the form of stamp duty. Immediate family members—such as spouses and children—are exempt.

However, Portugal applies forced heirship laws. This means that your spouse and children may automatically inherit a substantial portion of your estate, regardless of your will. You can override this by electing to apply the inheritance law of your nationality via the EU Brussels IV regulation—but proper legal planning is essential.

6. Timing Matters

Portugal's tax year runs from January to December, whereas the UK tax year runs April to April. This difference can affect your tax exposure. For example, selling UK assets before or after changing tax residency can have significant implications.

It's also important to note that UK ISAs are not tax-exempt in Portugal. Many expats benefit from placing their capital in a compliant investment structure—such as a life assurance bond—that defers or reduces taxation efficiently.

Expert Guidance Makes the Difference

At Premium Houses Algarve, we believe your property journey should come with complete peace of mind. That’s why we work closely with trusted financial advisors who understand cross-border wealth management—from structuring your assets efficiently to navigating Portuguese inheritance law.

Whether you're still in the planning phase or ready to move, get in touch for a confidential consultation. Let’s make your transition to Portugal seamless, secure, and fully optimised.

📩 Contact us today to start planning your new life in the Algarve.