A guide to taxes in Lisbon: rates, changes

Welcome to our tax in Lisbon guide, in which we share the most important information you need to know about paying taxes in the Portuguese capital, including Lisbon tax rate, Lisbon income tax, and more.

Disclaimer: The legal information published on Flatio is for informational purposes only and does not constitute legal advice.

Lisbon tax system
Portugal tax system
NIF
Federal taxes
Local taxes
VAT
VAT rate
VAT returns
Tax refund
Who pays taxes
NHR
Income tax rates
Filing income tax return
Self-employed income tax
Property and wealth tax
Rental income tax
Inheritance tax
Company taxes
Tax reliefs
Tax evasion
Crypto tax
Tax advice
Useful apps
Visa-friendly leases in Lisbon

Lisbon tax system

Lisbon, being the capital city of Portugal, operates within the broader tax framework set by the Portuguese government. However, like many major municipalities worldwide, Lisbon has its own set of local taxes and regulations for city tax and property taxes.

In this guide, we explain the most important taxes in Portugal and advise you to consult legal and financial experts for specific local taxes in Lisbon.

Portugal tax system

In Portugal, there are state and local taxes which depend on things like how much you earn, spend, and own. If you're a foreigner living in Portugal and want to earn money, you have to register as a taxpayer first.

You can do this online through the website of the Portuguese tax authority (Portal das Finanças). If you find it hard to register, there are services to help you. Also, remember that the tax year in Portugal goes from January 1 to December 31.

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Tax identification number Portugal: What is NIF in Portugal?

In Portugal, your taxpayer ID number, known as Portugal NIF number (Número de Identificação Fiscal), is crucial for various tasks like banking, phone plans and health insurance. Portuguese citizens with a Citizen’s Card already have one. If you don't, you can learn how to apply for it on the government portal, ePortugal.

To apply for a NIF in Portugal, you'll need proof of address. If you're seeking a visa-friendly lease agreement for this, check out Flatio’s apartments for rent in Lisbon and other Portuguese destinations such as:

Federal taxes

Federal taxes in Lisbon, Portugal

In Portugal, federal taxes include:

Income tax: Applied to earnings of both employees and self-employed individuals.
Corporate tax: Imposed on business profits.
VAT (Value Added Tax): Levied on added value of goods and services at each production and distribution stage.
Capital gains tax: Applicable when selling property or assets.
Inheritance taxes: Estates taxed on inherited assets.

Local taxes

In Portugal, local taxes, like IMI (Imposto Municipal sobre Imóveis), are similar to council tax elsewhere. IMI is calculated by your municipality based on your property's value and your area's wealth. It's only for homeowners, tenants don't pay it. IMI funds help maintain the local area, including services like waste collection. Homeowners with properties valued over €600,000 might face AIMI, akin to a wealth tax.

Who pays VAT?

In Portugal, if your sales of taxable goods and services surpass €14,500, you must pay VAT. This threshold will rise to €15,000 in 2025.

VAT rate

In Portugal, VAT, known as Imposto Sobre o Valor Agregado (IVA), was introduced in 1986 and has three main rates:

General rate: 23% on taxable goods and services.
Intermediate rate: 13% on food and drink items.
Reduced rate: 6% on essential items like certain foods, books, medicines, transport, and hotel stays.
Different VAT rates apply in the Madeira islands (22% / 12% / 5%) and the Azores (16% / 9% / 4%).

Monthly and quarterly VAT returns

Portugal has updated the deadlines for filing and paying VAT returns. Here are the key changes:

Monthly VAT returns can now be filed by the 20th day of the second month following the relevant month, with payment due by the 25th of that month.
Quarterly VAT returns are now due by the 20th day of the second month following the quarter, with payment due by the 25th of that month.
Certain eligible taxpayers, like cooperatives and small to medium-sized companies, may pay VAT in three monthly installments without penalties. They must request this option in advance and receive authorization from the tax authorities. The first installment is due on the standard deadline for VAT payment, with the remaining installments due in the following two months.

Tax refund

A self-employed individual or company in Portugal can request a VAT refund if they meet these conditions:

Their refund claim for 12 consecutive months is over EUR 250.
The total claim exceeds EUR 3,000.
If there's a scheme termination or change, the claim must be over EUR 25.

To qualify for the refund, they must:

Report all previous invoices issued.
Provide valid bank account details.
Not have any overdue VAT returns or payments.
Ensure reported values match declared values of paid and deductible tax.
Exclude customers or suppliers with invalid Tax Identification Numbers (TIN) or those who have stopped trading.
For more details, visit the Portuguese tax authority's website.

Who should pay taxes?

Whether you have to pay taxes in Portugal as an expat hinges on your residency status, which depends on how long you live and work in the country.

If you stay in Portugal for 183 days or more in a calendar year, you'll be seen as a resident and need to pay income tax on all your worldwide income.

For those staying fewer than 183 days, income tax applies only to earnings within Portugal.

Income tax rates for residents in Portugal follow a progressive scale, meaning higher incomes are taxed more. Non-residents, however, face a flat tax rate of 25% on their income.

Tax system for expats (NHR program)

The Portugal expat tax system has a special rule called Non-Habitual Residency (NHR). This allows certain expats to avoid taxes for the first 10 years of living there.

NHR is for people in specific jobs and has two main benefits:

You can live in Portugal but not pay tax on money you earn outside the country, like from work or investments. This means you're like a non-resident for tax purposes.
Money you make in Portugal gets taxed at a flat rate of 20%, instead of higher rates that could be up to 48%.

Remember, the NHR program ends in 2024. Also, in 2020, Portugal started taxing foreign pension income at 10%, instead of 0%.

Income tax rates

In Portugal, residents must pay income tax on their earnings. For most workers, taxes are taken out of their pay each month.

Everyone still needs to do a tax return every year. If you're married, you and your spouse file taxes together. Your total income is split in half to decide the tax rate.

Portuguese income taxes cover six main types of earnings:

Salary from work
Money from being self-employed
Returns from investments
Rent from properties you own in Portugal
Profits from selling properties, assets, or stocks
Pensions received in Portugal, including private pensions

Also, an extra solidarity tax, ranging from 2.5% to 5%, is added for people earning over €80,000 a year.

You can find more about tax rates in Portugal on the official website of the Portuguese tax authority.

How to file your income tax return

Here's how to do your income tax return in Portugal:

The tax year runs from January 1 to December 31, and you need to submit your returns in spring.

You can do your tax return online or with a paper form.
Late submissions can mean fines from €200 to €2,500.
You have from April 1st to June 30th to finish your tax return.
If you owe taxes on income not taken from your pay, you can pay in July, September, and December.

Remember: You can learn more about paying taxes in Portugal on the official website of the Portuguese tax authority.

Self-employed income tax

If you're self-employed in Portugal, such as a freelancer or sole trader, your earnings count as personal income. You pay Portuguese income tax instead of corporate tax.

Tax on property and wealth tax in Lisbon, Portugal

Tax on property and wealth tax

In Portugal, when you sell property or assets, you'll owe capital gains tax. Individuals pay 28%, while companies and non-residents pay 25%. However, residents only pay taxes on half of their gains. There are exemptions for residents selling their main home and buying another property in Portugal or elsewhere in the EU, and for those selling a property bought before 1989.

Property tax (IMI)

As a property owner in Portugal, you have to pay IMI, similar to council tax in other places.

The rate of property taxes in Portugal is set by each municipality, decided by the municipal assembly.
In urban areas, IMI typically ranges from about 0.3% to 0.45% of the home's value. In rural areas, it's around 0.8%.
Urban homeowners with properties valued under €125,000 can get a three-year exemption from IMI if they live there.
Additionally, there's a deduction of around €20 for each dependent, and exemptions for low-income earners or those with energy-efficient homes.

Property wealth tax

Introduced in 2017, the Adicional Imposto Municipal Sobre Imóveis (AIMI), also known as Property Wealth Tax, affects property owners in Portugal whose property is valued over €600,000. If jointly owned with a partner, AIMI applies only if the property value exceeds €1.2 million.

For both residents and non-residents, the rates are as follows:

0.4% for properties held by companies
0.7% for individuals
1% for those owning property valued over €1 million

Tax on rental income

If you decide to rent out your property after purchasing it, you'll pay taxes on the rental income you earn. The profit you make, called net rental income, gets taxed at a flat rate of 15%.

Inheritance tax

In Portugal, inheritance tax was abolished some years ago. However, a stamp duty called Imposto do Selo may apply at a rate of 10% on certain inheritances. If you have to pay this tax, you must do so within three months from the date of death.

It's a strict deadline, and being late may result in a fine.

To ease the burden for expats, Portugal has double taxation treaties with over 60 countries, such as Germany and the United Kingdom. This means you can subtract the tax paid in Portugal from any tax you might owe in your country of residence.

Company taxes

Businesses in Portugal must pay corporate tax at a fixed rate of 21% on their taxable profits. There may also be additional local municipality surcharges of up to 1.5%, and extra charges on profits over €1.5 million.

Small- and medium-sized companies benefit from a reduced corporate tax rate of 17% on their first €50,000 of taxable profit.

Small businesses and sole traders with an annual turnover under €200,000 can choose to pay taxes through a simplified regime. Here, they pay tax based on turnover rather than profit.

Portuguese corporate tax returns must be filed by the last day of the fifth month after the tax year ends. For example, if the tax year runs from January to December, the deadline is the end of May the following year.

Would you like to find out more about Portugal?

On our website, you can explore a range of subjects concerning Portugal, including:

Tax reliefs

Individual taxpayers in Portugal have access to different allowances to lower their taxable income. These include a general allowance of €4,104 and deductions for dependents.

Tax avoidance and evasion

The Portuguese government is tightening its stance on tax evasion. As of 2023, companies must report their full inventory when filing taxes, not just raw materials and products for sale.

Penalties

If you fail to file your tax return, you'll face penalties. For individuals, late or incomplete returns can lead to fines ranging from €200 to €2,500. Late payments incur interest ranging from 10% to double the outstanding tax, up to a maximum of €55,000.

Corporate tax penalties are more severe. Late filing incurs daily interest charges of 4% of the tax due, with penalties capped at €45,000 for negligence or €165,000 for intentional delay. Late payments are charged between 30% and 100% of the tax due, capped at €45,000.

Crypto tax

In recent years, Portugal has become a leading country in economic innovation in Europe, and its approach to cryptocurrency reflects this trend.

With the growing popularity of blockchain technology and cryptocurrencies like Bitcoin, traders are seeking favorable environments, and Portugal is attracting attention.

Recognizing this trend, the Portuguese government has started to create regulations around cryptocurrency. Blockchain technology is being used in various projects across Portugal, and banks are implementing measures to regulate crypto assets.

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You might wonder: Is crypto tax-free in Portugal?

As of January 1, 2023, Portugal has introduced new tax rules for cryptocurrencies. According to these rules, profits from digital assets held for less than one year will be taxed at a rate of 28%.

However, cryptocurrencies held for more than a year will be exempt from taxation. Additionally, authorities will consider capital gains from cryptocurrency issuance and mining operations as taxable income.

Tax advice

Filing taxes can be tricky, especially for self-employed people or business owners. To handle this well, it's smart to talk to an accountant or tax expert.

You can also use tools like "Portugal tax calculator" or "Portugal income tax calculator."

For help with taxes and social security, especially for expats in Portugal, consider consulting with an English-speaking chartered accountant.

Useful finance apps

The Portuguese finance authority (Portal das Finanças) has created several official apps to make tax filing and payment easier. You can find them on their website.

Flatio: Visa-friendly leases in Lisbon

If you're planning to live in Lisbon for a long-term, you probably know that a legally binding rental contract is required for most of your daily activities. On Flatio, you can find listings in Lisbon with lease agreements that are visa-friendly and can be used as proof of address.

But why choose Flatio?

Below are some features that distinguish us:

Flexible, reasonably priced stays (from 5 days)
Wide range of accommodation options
Utilities and Wi-Fi included
No deposit required for stays under 180 days
Balanced, legally binding lease agreement, translated into multiple languages
Very attractive cancelation policy
Online signing of lease agreement
StayProtection for Tenants: assistance with emergencies and accidental property damage
Move-in Guarantee with a 24/7 emergency line
100% money protection
Customer support available every day of the week
No hidden fees
Secure and simple payment system, including Bitcoin option

A guide to taxes in Lisbon, Portugal (tax system, tax rates, and more)