Part of planning your financial future is ensuring that the inheritance process for your heirs is a smooth one. Find out how inheritance tax in Portugal can differ from the laws in your home country, and how it could affect your estate and heirs.
Expats should make sure they understand how inheritance tax in Portugal works, and how it differs to their home country, to make sure their assets are taken care of. This guide explains the ins and outs of Portuguese inheritance tax, including what happens if you buy a property in Portugal.
This comprehensive inheritance tax guide covers the following topics:
- Portuguese inheritance law and succession rules
- Portuguese inheritance tax
- Paying inheritance tax in Portugal
- Reducing your inheritance tax in Portugal
- Useful resources
Portuguese inheritance law and succession rules
Inheritance tax rules in Portugal state that the process should be governed by the home country of the deceased. This is laid out in law within the Portuguese civic code (in Portuguese).
In practice, this means that, unless otherwise stipulated in a will, your estate is dealt with and taxed according to inheritance laws in your home country.
If the spouse of the deceased is of a different nationality to them, Portuguese inheritance law allows the country of residence to apply. So, if you’ve retired in Portugal, then Portuguese inheritance law could apply.
If Portuguese inheritance law applies to your estate, this uses a system of forced heirship. This means certain relatives, such as spouses and children, have claims to a certain portion of your estate, regardless of what’s in your will.
Inheritance law on pensions in Portugal
Spouses or children under 18-years-old (or 27 if they’re studying; there is no limit if they are disabled), may receive the deceased’s pension payments. The deceased must have been receiving, or been entitled to receive, a contribution-based, old-age, or disability Portuguese pension.
This can be paid out to spouses and former spouses and children. If there are none, parents or grandparents can be paid if the deceased had been responsible for them.
The survivor’s pension pays out up to 60% of the deceased’s pension.
Portuguese inheritance tax
Strictly speaking, the Portuguese government abolished inheritance tax several years ago, but a stamp duty (Imposto do Selo) may apply instead. This applies at a flat rate of 10%.
The tax only applies to Portuguese assets rather than assets held in other countries. Legitimate heirs are exempt from paying the inheritance tax in Portugal. These heirs include a spouse, children, grandchildren, parents, and grandparents.
Some people may have to pay administration fees, particularly if the heirs are not Portuguese. That’s because you must translate and stamp many of your non-Portuguese documents.
Occasionally, prior debts may reduce the overall value of the estate. However, Portugal has laws in place that protect people from inheriting debts left by the deceased.
There are several tax exemptions for those collecting an inheritance in Portugal. If you inherit stock dividends, social security allowances, personal goods, or credit from life insurance, they are all tax-free.
Estate tax in Portugal
Just as with other assets, Imposto do Selo might apply if you inherit a property. However, in order for it to qualify as part of an estate, you must register any Portuguese property with the local land registry office (Portal do Cidadão). Information on how to apply for a land registry certificate is available from Portugal’s e-government portal.
In cases where the deceased donated property during their lifetime instead of bequeathing it, additional taxes may apply.
If you sell part of your estate, you may also need to pay property tax or capital gains tax. The tax rate for capital gains is 28%, which covers investment income. Property tax, however, is an annual tax of 0.3%, payable on Portuguese properties worth more than €600,000.
Paying inheritance tax in Portugal
If you have to pay tax on inheritance in Portugal, you must do so within three months from the date of death. This is a strict deadline; if you’re late, you may have to pay a fine and daily interest.
To help reduce tax paid by expats, Portugal has double taxation treaties with more than 60 countries, including Germany, Hong Kong, and the United Kingdom. This means you can offset the tax paid in Portugal against any tax you might owe in your home country.
Reducing your inheritance tax in Portugal
Expats living in Portugal can reduce their tax liabilities by applying to become non-habitual residents (NHR) in Portugal.
Those with NHR status can get a range of tax reductions and exemptions. Benefits include low tax on income earned in Portugal, and no wealth taxes, inheritance tax or foreign income tax.
NHR status is available for 10 years. However, anyone who has been a tax resident of Portugal within the last five years is ineligible for NHR status.