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
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 – as outlined in the Portuguese civic code (link in Portuguese).
In practice, this means that unless otherwise stipulated in a will, your estate will be 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 to Portugal then Portuguese inheritance law could apply.
If Portuguese inheritance law applies to your estate, this will include 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, or no limit if disabled), may receive the deceased’s pension payments.
The deceased must have been receiving, or been entitled to receive, a contributory-based, old-age or disability Portuguese pension.
This can be paid out to spouses and former spouses and children. If there are none, parents/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 known as Imposto do Selo may apply instead. This applies at a flat rate of 10%.
The tax is only levied on Portuguese assets – rather than assets held in other countries – and is exempt when they are inherited by legitimate heirs. These 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 will need to translate and stamp pretty much all documents.
Occasionally prior debts may reduce the overall value of the estate, but Portugal has laws in place that protect people from inheriting debts left by the deceased.
There are several tax exemptions; if you inherit stock dividends, social security allowances, personal goods or credit from life insurance they will be 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 the Portuguese government.
In cases where the deceased donated a property during their lifetime, rather than bequeathed 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 an 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 UK.
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, to be eligible you can’t have been a tax resident in Portugal within the last five years.