How to file your income taxes in Portugal in 2024

Whether you work in Portugal or have retired, you’ll typically need to pay income tax on your earnings. Portugal’s income tax system is relatively straightforward, with residents taxed progressively and non-residents paying a flat tax rate.

Read on to learn about the basics of Portuguese income tax, including advice on the following:

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Get your new life off to the right start with Anchorless. Their online service helps internationals get an NIF (tax ID) in Portugal, and their expert team will help you set up a bank account and register with the tax authorities. Let Anchorless handle the admin for you so you can enjoy your new life in Portugal.

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Income tax in Portugal: overview and latest developments

The Tax and Customs Authority (Autoridade Tributária e Aduaneira) administers income tax in Portugal.

If you live and work in Portugal, you’ll typically need to pay Portuguese income tax on your earnings. Portugal operates a pay-as-you-earn (PAYE) tax system, where employees usually have their tax contributions deducted automatically from their salary.

Despite this, most tax residents must fill out an annual tax return, and married couples can opt for joint taxation. Income tax applies to six categories of earnings (categories A-H), as follows:

• A: income from employment, including salaries, commissions, and fringe benefits, taxed at 13.25% to 48%.
• B: income from self-employment, for example, if you’re a freelancer or run a business in Portugal.
• E: income from investments, including profits from investments and assets, bank deposits, bonds, and dividends. It is taxed at a flat rate of 28% after the allowed deductions.
• F: rental income from properties in Portugal. It is usually taxed at 25–28%, depending on when the contract was signed or renewed. Alternatively, you can choose to be taxed at progressive income tax rates.
• G: capital gains from selling Portuguese properties, assets, or shares. They pay 28% tax on 50% of the gain.
• H: pension income. 25% of employee contributions to private pensions in Portugal are tax-deductible.

Latest news about income taxes in Portugal in 2024

As part of its 2024 State Budget, the Portuguese government made a couple of important income tax changes. First, it raised the earnings thresholds on each income tax bracket by 3%. It also lowered the tax rates payable on the first five income tax brackets. This means workers in Portugal should benefit from a lower tax burden than before.

Finance

The tax system in Portugal

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Additionally, Portugal’s ‘Non Habitual Residence’ (NHR) tax system, which offered 10 years of tax breaks for qualifying expats, closed as of 31 December 2023. You’ll find more information on this later in the article.

Tax rates: how much tax will I pay in Portugal in 2024?

Income tax rates in Portugal are progressive, meaning you pay more tax the more you earn.

The table below shows Portugal’s income tax brackets for 2024 and 2023. In 2024, rates vary from 13.25% to 48%, with the top rate only payable on earnings above €81,200.

2024 income tax brackets and rates

2023 income tax brackets and rates

Solidarity tax

An additional solidarity tax ranging from 2.5% to 5% applies for taxpayers earning more than €80,000 a year.

Tax rates for non-residents and young people

Non-residents are taxed at a flat rate of 25% of their taxable Portuguese income.

Young people aged 18 to 26 (28 for those studying for a PhD) who aren’t considered dependents can benefit from the Youth PIT (IRS Jovem) program, which offers five years of preferential tax rates.

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Social security in Portugal

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The rules for 2024 allow a tax deduction of 100% of income for the first year, 75% for the second, 50% for the third and fourth, and 25% for the fifth year. Maximum earning caps apply, which are based on the Social Support Index.

Who pays income tax in Portugal?

Who needs to file a tax return in Portugal?

Regardless of your employment status in Portugal, you’ll usually need to fill out an annual tax return if you are a tax resident. Married couples in Portugal who are taxed jointly on their income should submit a joint return.

There are some exceptions. For example, if you are an individual taxpayer whose tax is fully withheld at source by their employer, you may not be required to submit a return.

Portuguese income tax for foreigners

Income tax rules in Portugal vary depending on whether you’re classified as a resident or non-resident. Residents must pay Portuguese income tax on their worldwide income, while non-residents only need to pay tax on Portuguese earnings.

Workers are considered tax residents in Portugal if either of the following rules applies:

• You have lived in Portugal for at least 183 days (consecutive or not) in total during a tax year.
• You have lived in Portugal for less than 183 days but had a permanent residence there on 31 December.

Internationals who have lived in Portugal for less than 183 days and don’t have permanent residence status are non-residents for tax purposes.

Non-Habitual Residency (NHR) tax code

The NHR tax code offers preferential tax rates and exemptions for 10 years to qualifying foreign residents of Portugal.

It works like this: the tax code allows expats in some professions to benefit from a tax exemption on all forms of income (employment, business, investment, rental, capital gains, and pension) from abroad. Further income from inside Portugal is taxed at a flat rate of 20%.

Since 31 December 2023, the NHR scheme has been closed to new applicants, though those who already have NHR status can still benefit from the regime, and people who were in the process of applying can follow through with their application.

The NHR scheme will be replaced with an employment-based scheme focusing on attracting international workers for specific jobs, such as teachers and scientific researchers. The new scheme will allow those who qualify to pay tax at a flat rate of 20%.

Double taxation treaties

Portugal has tax treaties with all EU countries and several countries outside the EU to prevent double taxation.

A 2003 European Union directive regarding taxation of interest on savings income moved from one member state to another can also help internationals ensure that they are taxed fairly. However, if you are filing any of the following, make sure you’re clued up on all the rules:

• UK tax from abroad
• Canadian taxes
• US taxes

Who is exempt from Portuguese income tax?

If you work and earn money in Portugal, you’ll almost always need to pay income tax. All residents have a general tax allowance of €4,104 a year, so if you earn less than this, you won’t need to pay.

How do you file your tax return in Portugal?

The Portuguese tax year runs from 1 January to 31 December. The window for completing your Portuguese tax return for 2023 earnings is from 1 April to 30 June 2024.

How to register for tax in Portugal?

Before engaging in employment or any other professional activity in Portugal, you must fill out a registration form and submit it to your local tax office. The office will then issue your Portuguese income tax number.

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How to apply for a NIF in Portugal

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Which forms do I need to fill out?

To complete the Portugal tax form, you must register on the government’s website and request a password. It is obligatory to file your tax return online via the Tax Portal.

Deductibles and tax relief

Portugal has a number of general allowances that residents can deduct from their taxable earnings or use as tax credits to reduce their income tax.

Below are some tax deductions and tax credits foreigners can consider when filing a Portuguese tax return.

Deductions

• A general allowance of €4,104
• 150% of the amount paid in union fees (limited to 1% of employment income)
• Employee social security contributions to mandatory schemes if higher than €4,104
• Maintenance and conservation expenses paid out on property yielding a rental income.
• A deduction of €600 per dependent. This figure increases by €126 for each dependent under three years old. An additional deduction of €150 for second and following dependents aged between four and six may also be allowed.

Credits

Portuguese residents are entitled to the following credits:

In addition to this, certain daily expenses also are exempt from Portuguese income tax, including the following areas:

• Meal allowance up to €6 in cash or €9.60 in lunch vouchers per day
• Daily allowance for business travel up to €62.75 within Portugal or €148.91 abroad
• Travel expenses, depending on means of transport and the number of employees traveling

How do I pay my Portuguese income tax?

If you owe tax on income that hasn’t been automatically deducted through Portugal’s PAYE system, you can pay in installments. Installments are generally due in July, September, and December.

You can pay online through the Finance Portal (Portal das Finanças) – they offer the following payment options:

• Direct debit
• MB WAY
• Multibanco (at an ATM)
• Via online banking

Income tax refunds

If you have paid too much income tax, you may be entitled to a refund. The tax authorities will inform you if this is the case after you have filed your tax return.

However, in the event of a dispute over your Portuguese income tax assessment, you may be able to appeal to the tax administration.

Read your tax assessment letter to find out which department you need to appeal to and the appeals process. If your appeal is rejected, you can then apply to have your case assessed by the tax courts.

What happens if I don’t pay my income tax on time?

Financial penalties for filing late or incomplete Portuguese tax returns, range from €200 to €2,500.

Late payments can be penalized from 10% of the outstanding tax to double its value up to a maximum of €55,000 (plus interest).

Income tax advice in Portugal

Doing your taxes in Portugal can be a complex matter. The information here provides a general overview, but you should always get professional advice from a financial expert regarding your individual situation.

There are also specialized companies that assist internationals with their tax affairs. These include:

• Anchorless – provides tax consultations
• Bordr – offers streamlined tax filing services for foreigners
• e-residence – count tax filing among their many offerings tailored to those living abroad

Useful resources

• Autoridade Tributária e Aduaneira – Portuguese tax authority
• Portugal income tax information and forms