Moving to Portugal proves very rewarding for many people, for a whole variety of reasons. While quality of life is the most important, Portugal can offer attractive tax benefits too.
While it is never too late to review and adjust your financial planning for living in Portugal, if you are still planning your move it pays to do your research and take advice before you do. With early and careful planning, you can make the most of tax-efficient opportunities when moving to Portugal.
Tax residence in Portugal
You will be considered a tax resident if you meet either of these criteria:
- You spend more than 183 days in Portugal in a 12-month period. Since Portugal offers split year treatment for tax purposes, if you arrive part way through the year, the 183 days count from the day you arrive for the following twelve months.
- If you have a ‘permanent home’ available in Portugal, you may be deemed to be tax resident if it appears that you intend to occupy it as your permanent home at any point in the year. This applies even if you have not spent 183 days in Portugal.
Spouses can have different tax residence statuses, if one of you can prove the majority of your economic activities is outside Portugal.
Portuguese income tax
Tax residents are liable to Portuguese tax on worldwide income. Certain capital gains are added to income whereas others are exempt or taxed at a fixed rate.
The 2025 income tax scale rates for mainland Portugal range from 13% for income under €8,059 to 48% for income over €83,696. In Madeira tax rates rise from 9.1% to 47.52%. In both cases, a 2.5% or 5% solidarity tax is currently levied on income over €80,000 and €250,000 respectively.
Investment income (interest, shares, securities, bonds etc) is taxed at a flat rate of 28% (35% if held within a ‘tax haven’). You can opt for the scale rates if cheaper.
Portugal’s NHR and IFICI regimes
Portugal’s original Non-Habitual Residence regime has now closed to new applicants. Those with a few years left of their NHR status continue to benefit from exemptions or reduced rates on certain overseas income. In this case, review your savings and investments sooner rather than later so you can take full advantage of the tax planning advantages you currently have.
The new Incentive for Scientific Research and Innovation (IFICI) is limited to qualified professionals employed in high-value sectors. It offers a flat 20% income tax rate for up to 10 years and possible exemptions on certain foreign income and capital gains.
Tax on UK pension income
Once you are tax resident in Portugal, your UK state and occupational pensions will only be liable for Portuguese income tax. UK government service pensions, however, remained taxed in the UK.
The taxation of personal pensions in Portugal gets complicated, so you need personalised, specialist advice.
There is no 25% tax free lump sum in Portugal, so you would be better off taking yours before you leave the UK.
That said, with careful planning Portugal can offer attractive tax options for residents in a position to encash their fund. Get in touch with our cross-border wealth management specialists to discover what options are available for your pension funds and which best suits your personal circumstances and objectives.
Portugal’s tax on high value property
If you’re thinking of buying a luxury property, bear in mind that Portugal currently imposes a ‘wealth tax’ of sorts – Adicional Imposto Municipal Sobre Imóveis (AIMI) – on high-value local property, regardless of where the owner is resident.
You are only liable if your stake in Portuguese properties is over €600,000 (couples could get a €1,200,000 allowance for jointly held property) and then only on the value above that. Rates are 0.7% for individuals and 0.4% for companies, in both cases rising to 1% and 1.5% for properties over €1 million and €2,000,000 respectively. Some companies are not eligible for the allowance.
Portugal’s limited inheritance tax
Portugal has a very benign inheritance tax regime. The Portuguese version, called ‘stamp duty’, is only charged on assets located in Portugal and the tax rate is just 10%. Furthermore, spouses and ascendants/descendants are exempt.
British expatriates also remain liable to UK inheritance tax on worldwide assets for up to 10 years after leaving the UK. Assets located in the UK always remain subject to this tax, and from 2027 this will include pension funds.
Timing your move to save tax
The Portuguese tax year runs from January to December, whereas the UK is April to April. The two countries apply different capital gains tax rules and rates.
It is therefore worth weighing up whether it is more tax efficient to sell your UK assets while still a UK resident, or wait till you are resident in Portugal, then time your move accordingly.
Minimising tax in Portugal
Don’t assume what was tax efficient in the UK is tax efficient elsewhere. UK ISAs, for example, are taxable in Portugal, but Portugal can provide its own tax planning opportunities, particularly on capital investments.
Many expatriates benefit from holding capital in a structure similar to an offshore life assurance policy or bond that acts as an investment wrapper to a conventional portfolio. No tax is payable on the underlying investment income until a withdrawal is made. Even then, only a proportion of the profit is taxable in Portugal and the effective rate of tax drops over time.
There may also be tax-efficient opportunities for your pension funds.
Portugal succession law
Portugal’s ‘forced heirship’ succession law dictates how assets are passed on. For Portuguese residents this means your spouse and direct family could automatically inherit at least half of your worldwide estate, even if you wish to pass wealth to other beneficiaries.
The Portuguese regime will apply by default, but you can opt for the EU ‘Brussels IV’ succession regulation to override it. Take expert advice first to establish what works best for your family and to achieve your wishes.
A helping hand
At Blevins Franks, we have decades of experience helping people move from the UK to Portugal and advising expatriates living there.
We can provide a strategic financial plan for the whole process, from your early planning stages in the UK, ensuring you do everything at the right time, through your retirement years in Portugal, and should you decide to return to the UK in the future. We’ll also be able to help your heirs through receiving their inheritance from you, should that time come.
We advise on how to apply for residence in Portugal and what all the tax implications will be. We review your savings and investments to ensure they’re suitable for you today and set up to be as tax efficient as possible, as well as effective from an estate planning point of view. We guide you through the local succession regime and help set up your estate to go to the right hands at the right time with as little tax as possible. And our regulated pensions specialists help you make the most of your retirement savings.
If you are thinking of moving to Portugal, get in touch with us today.
