Do expats in Portugal pay taxes? If so, which taxes are expatriates liable to pay? You can find out all the details here!
Portugal is one of the most visited countries in the world. However, besides its amazing opportunities for a lovely vacation, it is a great country to live in. Thus, it is also one of the most populous countries by expats in terms of population density.
If you are planning to live in Portugal, spend some time in the country, or invest, then this guide is for you. Below, you can find everything about taxing expats in Portugal. We bet you may not want to miss your chance to learn more on this topic.
Do Expats Have to Pay Taxes in Portugal?
Just like every other country in the world, Portugal also taxes expats. However, it is relatively more affordable and favorable compared to other popular countries. You will not have to worry about the tax for short-term visits. On the other hand, if you are planning to reside in this beautiful country, then get ready for taxes.
First, you need to achieve resident status to pay taxes in Portugal. This offers numerous advantages for expats so you can easily accept the fact that you are going to pay some taxes. However, the Portuguese government only taxes you under certain conditions.
They do not tax you for the money you make in another country when you are not a resident. You will be only responsible for the income you earn in the country. It is worth noting that Portugal and the United States have a tax agreement too.
If you are an American, you do not have to pay two taxes. You can choose between one and pay your taxes once, which provides great convenience.
Income Tax for Expats Residents in Portugal
If you are a resident of Portugal, then you are going to pay taxes for your worldwide income. If not, you will only pay taxes for the income you earn in Portugal. An expat must live in the country for more than 183 days a year to be a resident.
Additionally, if you own real estate in Portugal and it is your main home, you can still be a resident of Portugal without staying more than 183 days. This is called abode and refers to owning a house in the country, which is not used as a vocational residency.
What Are Portugal’s Tax Rates?
If you are not a resident in Portugal, then you are going to be charged with a flat tax rate, which is 20%. On the other hand, the Portuguese government charges the expat residents between 5% and 35% tax. It has a progressive scale that depends on various factors.
Each Portugal tax year corresponds to one calendar year, and you need to pay your taxes until March 31 to avoid penalties or fines. Below, you can find six different categories for taxing in Portugal for expats:
- Increases in Net Worth
- Real Estate Income
- Investment Income
- Business & Professional Income
What Are Other Taxes that Expats Need to Pay in Portugal?
Besides the above-mentioned standard taxes, the government also charges the expats additional taxes. It is important to note that there is no wealth tax in the country too, at least not for expats.
Here are some of the other taxes that you may be charged as an expat living in Portugal:
- Inheritance and Gift Tax: 10% tax but additional 0.8% tax if the gift is a real estate in Portugal
- Stamp tax: Between 0.5% and 20% while transferring a real estate
- Capital Tax for Residents: This is calculated over the half value of your real estate and calculated based on your personal income.
- Capital Tax for Non-Residents: 20%
In short, Portugal offers affordable and favorable taxing for expats who are going to be a resident or not. It is also worth noting that Portugal offers one of the most affordable tax plans for expats in Europe.