Don’t leave your assets to fate; this guide explains Portuguese inheritance law and inheritance tax in Portugal to help expats draw up a will in Portugal.
If you’ve relocated or retired to Portugal, it’s important to be aware of Portuguese inheritance law and inheritance tax. What if you buy property in Portugal, for example, and also have assets in your home country? Do you need to draw up a Portuguese will to protect your assets?
This guide explains the process of Portuguese succession law for expats, including details on Portuguese inheritance law, inheritance tax in Portugal, the effects of non-habitual residency (NHR) on your inheritance or property, how to draw up wills in Portugal, and issues of unclaimed inheritance.
Portuguese inheritance law
The Portuguese civic code sets out the country’s inheritance laws. It dictates that the inheritance process should be governed by the laws of the home country of the deceased. This means that, unless you state otherwise, your home country taxes your estate.
In cases where the spouse is of a different nationality than the deceased, Portuguese inheritance law allows that the laws of the country of residence are applicable. Thus, if you have relocated to Portugal as a foreigner or retired in Portugal, Portuguese inheritance law can be applicable.
If your estate is dealt with according to inheritance law in Portugal, there are certain restrictions on how it can be distributed. Portuguese inheritance law follows a system of forced heirship. This means that certain relatives are entitled to a portion of your estate, despite what your Portuguese will states. This is different from the testamentary freedom that exists in some other countries.
Forced heirship in Portugal
Under forced heirship, legitimate heirs (including the spouse, biological and adopted descendants, and ascendants) of the deceased are entitled to a minimum of 50% of the whole estate. If there is more than one legitimate heir, then it is usually 60%. The only way that forced heirship can be negated is if the deceased states that a particular beneficiary should be excluded on the grounds of unworthy behavior. The courts can challenge this, however.
Beyond the portion of the estate distributed to legitimate heirs, Portuguese inheritance law allows you to distribute the remainder of your assets however you want in your will.
If no will in Portugal has been left behind, and there are no legitimate heirs to inherit the estate, then it passes to the Portuguese state.
Certain individuals are deemed ineligible to inherit all or parts of the deceased’s estate under Portugal inheritance law. These include the deceased’s last doctor, the priest of a religious establishment attended, or a personal administrator.
Property owned in Portugal needs to be registered with the local land registry or Portal do Cidadão office in order to be part of the estate. Information on how to do that is available from the Portuguese government.
If you qualify for a pension in Portugal, it may be possible for your surviving spouse or dependent children to claim up to 60% of your Portuguese pension and a funeral allowance. Read more in our guide to the Portuguese pension system.
Although inheritance laws in Portugal are more tightly regulated than in some other countries, inheritance tax rates in Portugal are extremely low. Portuguese inheritance tax was officially abolished in 2004, although there are some other succession fees that apply.
Portuguese inheritance tax and fees
If you’re subject to Portuguese inheritance law, you won’t have to pay inheritance tax on any part of your estate. A stamp duty (Imposto do Selo) replaced the inheritance tax. This Imposto do Selo is a flat rate of 10%; it’s only levied on Portuguese assets and is exempt where legitimate heirs are concerned.
In addition to the Imposto do Selo, there are some other fees associated with inheritance in Portugal. Any property that is donated by the owner during their lifetime rather than bequeathed will also be subject to taxes. Taxes such as property tax or capital gains tax (if any of the estate is sold) needs to be paid. You can read more information in our guide to Portuguese taxes.
There may also also be administration fees, and occasionally prior debts, that can reduce the value of an estate. However, Portugal has laws in place to protect people from inheriting a debt.
In some cases, Portuguese inheritance tax rates could make it cheaper to handle your estate under Portuguese law. However, it’s worth considering that the restriction that a relevant portion must typically be distributed to legitimate heirs. In any case, seeking professional advice is always recommended.
Non-habitual residents (NHR) tax benefits
It is possible for foreign nationals to apply to become non-habitual residents (NHR) in Portugal. Those with NHR status receive a range of tax reductions and exemptions, including no tax on foreign income, a low flat-rate tax on income earned in Portugal, no wealth taxes, and no inheritance tax.
NHR status is available for 10 years. Applicants cannot have been a tax resident in Portugal within the last five years.
There’s no legal requirement to draw up a will in Portugal. This is regardless of whether Portuguese law or the laws of another country apply, or whether you have assets in Portugal or abroad. Portuguese inheritance law recognizes wills that have been drawn up abroad, even if they concern property and assets in Portugal.
If your assets are likely to be determined by the inheritance law of your country, then drawing up a Portuguese will is not really needed. However, if you have sizable assets in Portugal and your estate is likely to be dealt with under Portuguese inheritance law, it can be worth considering, even just to safeguard that your home country will deal with your assets in Portugal correctly.
It’s perfectly acceptable to have two wills – one in Portugal and one in your home country – as long as they don’t negate the other. It is advisable to consult a solicitor regarding this. Portugal’s Portal do Cidadão provides more information on writing and executing a will in Portugal.
There are two benefits to drawing up a will in Portugal if you have Portuguese assets. One is that the cost of translating a foreign will into Portuguese can sometimes be more expensive than writing an original one. The other benefit is that it could save time, as using a foreign will from some countries, such as the United Kingdom, means having to wait for the Grant of Probate to be issued.
However, everyone’s circumstances are different and it is wise to consult with a trusted legal professional before deciding the best option for you.
How to draw up a will in Portugal
If you choose to draw up a will in Portugal, it is important to note that Portuguese wills follow a specific style and format and are distinctly different from, for example, English wills. In Portugal, there is no legal requirement to appoint an executor to write a Portuguese will. Normal convention is that the closest legal heir will administer the estate. They are also drafted and signed in a specific way.
There are two types of Portuguese wills:
- Public wills: these involve a notary who oversees the process, checks your identification, and makes sure you understand the process. Two witnesses sign the will. This is the most common type of will in Portugal.
- Closed wills: you write up and sign this will in private. A notary checks and confirms the document for you.
Before preparing your will, you can calculate the value of your estate in Portugal by using this simple equation:
Total value of existing assets + Value of any assets donated – Expenses related to the administration of the estate – Estate debts
The cost of drawing up a will in Portugal is around €230, plus VAT and fees.
You can find English-speaking lawyers with good knowledge of both English and Portuguese inheritance law. See Expatica’s listing of lawyers and legal services in Portugal.