Portugal has become one of Europe’s most popular destinations for expats, offering sunny weather, a relaxed lifestyle, and relatively affordable living. But before settling into life by the ocean, it’s important to understand how the Portuguese tax system works.

This guide breaks down everything you need to know about taxes in Portugal for 2026, including how residency is defined, income tax rates, available deductions, and how to file your tax return.

The Basics of the Portuguese Tax System

Portugal’s tax system is progressive, meaning the more you earn, the higher your tax rate. Taxes are managed by the Portuguese Tax and Customs Authority (Autoridade Tributária e Aduaneira).

The tax year runs from January 1 to December 31, and income tax returns are generally filed between April 1 and June 30, 2027, for income earned in 2026.

Employees have income tax automatically deducted from their salaries each month. However, if you are self-employed, have multiple income sources, or qualify for specific exemptions (such as under the Non-Habitual Resident regime), you’ll need to file your own annual return.

Who Has to Pay Taxes in Portugal

Your tax liability in Portugal depends on your residency status.

You are considered a tax resident if you:

• Spend 183 days or more in Portugal during any 12-month period, or

• Have a permanent home in Portugal as your primary residence.

Residents pay tax on their worldwide income, while non-residents pay tax only on income earned in Portugal.

Example:
If you move to Lisbon in February 2025 and stay through 2026, you will be considered a resident and taxed on your global income. But if you live in the UK and only earn rental income from property in Portugal, you’ll be taxed only on that property income.

Income Tax Rates in Portugal for 2026

Portugal uses a progressive income tax system (IRS) with rates applied to different income brackets.

In addition to national rates, residents may also pay a solidarity tax of 2.5% to 5% on annual income above €80,000.

Municipal surtaxes (addicional municipal) may also apply, usually between 0% and 1.5%, depending on your place of residence.

The Non-Habitual Resident (NHR) Regime

Portugal offers a special tax regime for new residents, known as the Non-Habitual Resident (NHR) program.

It was created to attract skilled professionals, entrepreneurs, and retirees. If you qualify, you can enjoy reduced tax rates and certain exemptions for 10 years.

Key benefits of the NHR regime include:

• A flat 20% tax rate on qualifying Portuguese-sourced employment or self-employment income.

• Possible tax exemption on foreign income, including pensions, dividends, and royalties (depending on applicable tax treaties).
  To qualify, you must not have been a tax resident in Portugal in the previous five years and must register as a resident before applying.

Deductions and Tax Benefits

Portugal offers several deductions and credits that can reduce your overall tax liability. These typically depend on your income level, family situation, and type of expenses.

Common deductions include:

• Health expenses and medical insurance premiums.

• Education expenses for yourself or dependents.

• Housing costs such as rent or mortgage interest.

• General family expenses (a percentage of all receipts with your taxpayer number).

• Contributions to retirement or savings plans.

• Donations to recognized charities or institutions.

Example:
If you earn €40,000 per year and spend €2,500 on medical care and €1,200 on tuition, these costs can help reduce your taxable income or provide direct credits, lowering your overall tax bill.

Double Taxation Treaties

Portugal has double taxation treaties with more than 80 countries, including the United States, the United Kingdom, Canada, and most EU nations.

These agreements ensure you are not taxed twice on the same income and establish which country has the right to tax specific earnings, such as salaries, pensions, or dividends.

If you pay taxes abroad on the same income, you may claim a foreign tax credit in Portugal or be exempt from Portuguese taxation on that income, depending on the treaty terms.

Before filing, always check the relevant agreement between Portugal and your home country or consult a tax specialist.

How to File Taxes in Portugal

Filing taxes in Portugal is mostly done online through the Portal das Finanças.

Step 1: Gather your documents
You’ll need your Portuguese tax identification number (NIF), income statements, receipts for deductions, and bank information for refunds or payments.

Step 2: File your return
Access the Portal das Finanças website and complete your annual income declaration (Modelo 3) between April 1 and June 30, 2027. The system automatically calculates your owed tax or refund.

Step 3: Review your assessment
After submission, the Tax Authority will issue an assessment notice (liquidação). If you owe additional tax, you’ll be given a payment deadline. Refunds are usually processed within a few months.

Non-residents with Portuguese income, such as rental earnings, may need to file a simplified non-resident return.

Tax Tips for Expats in Portugal

• Register for your NIF (Número de Identificação Fiscal) as soon as you arrive, it’s essential for all financial transactions.

• Keep all expense receipts with your NIF on them to claim deductions later.

• Check if you qualify for the NHR regime before your first tax year.

• Use the Portal das Finanças regularly to monitor payments and correspondence from tax authorities.

• If you own property, be aware of additional taxes such as the Municipal Property Tax (IMI) and Wealth Tax (AIMI).

• Consider hiring a local tax consultant if you have income abroad or multiple properties.

Portugal’s tax system may seem detailed, but it’s logical once you understand the structure. With online tools and a supportive expat network, filing taxes here is straightforward and transparent.