Rental Income:
For both non-tax and tax residents, rental income is taxed at a flat rate of 28%. This straightforward approach ensures clarity in your tax obligations when dealing with properties in Portugal. For residential rentals, any contracts signed or renewed from October 2023 onwards are taxed at 25%, although certain exceptions may influence the applicable date for this rate. Tax payer can also opted to have the rental income added to the total aggregated income in some situations, which is subject to the general progressive tax rates ranging from 13.25% to 48%, based on the total income earned throughout the year.
Capital Gains Taxation Changes:
Starting in 2023, only 50% of capital gains from the sale of real estate is taxable for both tax residents and non-tax residents. For non-tax residents, these gains are taxed at marginal rates between 13.25% and 48%, plus the solidarity rate if applicable. The determination of these rates considers the worldwide income of the taxpayer, even if this income is not taxed in Portugal.
For tax residents, capital gains may be wholly or partially exempt under certain conditions. For instance, if the property sold was the taxpayer’s primary residence for the last 24 months and the sale proceeds—reduced by any outstanding loans related to the property—are reinvested in buying, improving, or constructing another primary residence within the EU within 36 months before or after the sale. Other exemptions on capital gains from real estate sales may also apply.
Dividends and Interest Taxation:
Dividends and interest are generally taxed at a flat rate of 28%. However, you have the option to include these incomes in your overall taxable income, which may then be taxed at marginal rates ranging from 13.25% to 48%, plus an additional solidarity tax if applicable. This choice can offer significant tax savings depending on your other income and tax deductions available in 2024.
For non-resident,
Income Tax:
Tax residents in Portugal are taxed on their worldwide income at progressive rates varying from 13.25% to 48% for 2024. Those that have NHR status are tax-exempted on their worldwide income, except for pension (which is taxed at 10%), and 20% flat for certain type of employment income generated in Portugal.
Non-residents are liable to income tax only on Portuguese-source income, employment and pension income is taxed at a flat rate of 25% in 2024.
For non-habitual residents, they enjoy 10 years of tax exemption for global income (except for pension income which is taxed at 10%). Other incomes are taxed at a flat rate of 20% (except for employment income which is subject to the employment type).
*Please note this is a simple overview of the tax rate. Please talk to your tax expert on your individual case.
