If you’re thinking about moving to Portugal with an EU Blue Card, understanding the tax system is essential. Once you live in Portugal for more than 183 days in a year, you become a tax resident, meaning you’ll need to report and potentially pay taxes on your worldwide income, not just income earned in Portugal.
Here’s a breakdown of the key taxes you should be aware of:
1. Income Tax in Portugal
As a tax resident, Portugal taxes your global income, including salaries, pensions, rental income, dividends, and freelance earnings.
Portugal’s income tax rates for 2025 are:
- Income up to €7,479 – 14.5%
- €7,480 to €11,284 – 23%
- €11,285 to €15,992 – 26.5%
- €15,993 to €20,700 – 28.5%
- €20,701 to €26,355 – 35%
- €26,356 to €38,632 – 37%
- €38,633 to €50,483 – 43.5%
- €50,484 to €78,834 – 45%
- Over €78,835 – 48%
2. Taxes on Income (like Pensions or Investments)
Even if your income comes from the U.S. or your country of origin, Portugal requires you to report it if you are a tax resident. However, the U.S., UK, Canada or Australia have tax treaty with Portugal that helps avoid double taxation, meaning if you have already paid taxes on your main country income, you can offset that against your Portuguese tax bill.
3. Special Tax Programs (NHR is No Longer Available)
Portugal’s Non-Habitual Resident (NHR) tax regime ended in 2024, meaning new residents are now taxed under the standard Portuguese tax system. There are no longer flat tax benefits for retirees or foreign-sourced income, making tax planning even more important before moving.
4. Property Tax
If you buy property in Portugal, you’ll pay several property-related taxes:
- IMT (Property Transfer Tax) – One-time tax when buying a home, ranging from 0% to 8% depending on the value of the property.
- IMI (Annual Property Tax) – 0.3% to 0.8% of the property value, depending on location.
- Stamp Duty – A 0.8% tax applied when purchasing property.
5. Capital Gains Tax
If you sell property in Portugal, you’ll pay a 28% capital gains tax on any profit (unless reinvesting in another primary residence in Portugal). If you sell stocks or investments, capital gains tax may also apply, depending on your residency status.
6. Social Security Contributions
If you work in Portugal, whether for a Portuguese company or as a freelancer, you’ll need to pay into Portugal’s social security system (Segurança Social). Contributions are 21% to 25% of earnings for employees and 25% to 30% for self-employed individuals. This does not apply to passive income like pensions or rental income.
7. VAT (Sales Tax)
When you buy goods and services in Portugal, VAT (value-added tax) is included in the price.
- Standard VAT: 23% (applies to most goods and services).
- Reduced VAT: 13% (for food, restaurants, and some utilities).
- Super-reduced VAT: 6% (for essential goods like bread, medicine, and books).
8. Inheritance Tax
Portugal does not have an inheritance tax for direct family members (spouses, children, or parents). However, if you leave assets to non-family members, a 10% stamp duty tax applies.
9. U.S. Tax Obligations (Don’t Forget!)
Even after you move to Portugal, you must still file a U.S. tax return every year. However, the Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit can help you avoid or reduce double taxation. It’s highly recommended to work with a tax advisor familiar with both U.S. and Portuguese tax laws.
Bottom Line
If you’re an expat moving to Portugal, your tax obligations depend on:
- Whether you become a tax resident (live in Portugal for more than 183 days per year).
- Whether you work in Portugal, retire, or live off passive income.
- Whether you buy property or plan to sell investments.
- Whether you need to structure your taxes to avoid double taxation.
While Portugal offers a high quality of life at a lower cost, understanding the tax system is crucial. Planning ahead and seeking professional tax advice will help you optimize your finances and avoid unexpected tax burdens.