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 have relocated or retired to Portugal, it’s important to be aware of the situation regarding Portuguese inheritance law and Portugal 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 Portuguse 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
Portugal’s inheritance law is derived from the Portuguese Civic Code and dictates that the inheritance process should be governed by the laws of the home country of the deceased. This means that, unless you have stipulated otherwise in your will, your estate will be dealt with and taxed according to the inheritance laws in your home country rather than those in Portugal.
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 what is called ‘forced heirship’. This means that certain relatives are entitled to a portion of your estate, despite what is stipulated in your Portuguese will. This is different from the ‘testamentary freedom’ that exists in some other countries.
Under ‘forced heirship’, legitimate heirs including the spouse, biological and adopted descendants, and ascendants of the deceased are entitled to a minimum of 50 percent of the whole estate. If there is more than one legitimate heir, then it is usually 60 percent. The only way that this ‘forced heirship’ can be negated is if the deceased has stated that a particular beneficiary should be excluded on the grounds of unworthy behaviour, although this can be challenged by the courts.
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 or other family 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 are 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 qualify as part of the estate. Information on how to do that is available in the government’s website here.
If you qualify for a pension in Portugal, in the event of your death it may be possible for your surviving spouse or dependent children to claim up to 60 percent 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 are subject to Portuguese inheritance law, you won’t have to pay inheritance tax on any part of your estate. Inheritance tax in Portugal has been replaced with a stamp duty known as Imposto do Selo. This Imposto do Selo is a flat rate of 10 percent, which is 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, will need 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, the rates of inheritance tax in Portugal could make it cheaper to have your estate dealt with under Portuguese inheritance laws, although taking into consideration 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 are granted 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 and can be applied for as long as you haven’t been a tax resident in Portugal within the last five years. The government outlines more information about the NHR program and how to apply in this brochure.
Filing US taxes from Portugal
Despite the fact that every US citizen and green card holder is required to file a tax return with the IRS even when living abroad, many expatriates still fail to do so. Many are unaware of these obligations, thinking that as an expat they do not need to pay or file tax returns in the US. You do! For more information and help filing your US tax returns from Portugal, contact Taxes for Expats and see our Guide to taxes for American expats.
There is no legal requirement to draw up a will in Portugal, regardless of whether Portuguese law or the laws of another country apply, or whether you have assets in Portugal or abroad. Portuguese inheritance law recognises 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 sizeable 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 is perfectly acceptable to have two wills – one in Portugal and one in your home country – as long as they are drafted correctly to ensure one doesn’t accidentally negate or revoke the other. It is advisable to consult a solicitor regarding this. You can also read Portugal’s Portal do Cidadão website for information on the process of 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 Portuguese will. The other benefit is that it could save time, as using a foreign will from some countries, such as the UK, means having to wait for the Grant of Probate to be issued.
However, everyone’s circumstances are different and it’s 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 – this is done publicly and involves a notary who oversees the process, checks your identification and makes sure you understand the process. The will is signed by two witnesses. This is the most common type of will in Portugal.
- Closed wills – you write up and sign this will in private and it will be checked and confirmed by the notary.
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 EUR 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.
Click to the top of our guide on Portuguese inheritance law and inheritance tax in Portugal.