Tax Law

Tax exemption

Tax exemption in Portugal for income from employed work should be applied to income from a foreign source effectively taxed at source (considered the country of source of the income under the Portuguese rules and double tax agreement rules), regardless of the rate and whether the country of origin is a country or territory subject to more favourable taxation arrangements, when considered obtained outside Portugal, under Portuguese law. It may be necessary to analyse the applicable Social Security rules, in particular when working remotely.

The tax exemption in Portugal for income from self-employment should apply to income considered to be from foreign sources in accordance with Portuguese legislation, provided that it is related to a high value added activity and provided that it can be taxed at source under a double taxation agreement or, in the absence of the latter, under the OECD model tax convention, namely because they are obtained through the fixed establishment of the natural person in the other country. When the country of origin is included on the Portuguese list of countries, territories or regions with privileged and more favourable tax arrangements, the NHR tax benefits may not be applicable.

When the conditions for exemption are not met, or when the income is considered earned in Portugal, under the terms of national law, income from employed and self-employed work may be taxed at a fixed rate of 20%, if derived from an eligible professional occupation.

Royalties, Dividends and Interest / Capital Gains on the Sale of Securities / Real Estate Income and Capital Gains

The tax exemption should apply to income deemed to be of foreign origin that may be taxed at source under a DTA or under the rules of the OECD model convention.

When the country of origin is included on the Portuguese list of countries, territories or regions with privileged and more favourable tax arrangements, the NHR tax benefits may not apply, and the income may be subject to an increased tax rate in Portugal.

Pension income

Taxation at a reduced tax rate of 10% shall apply to pension income that is not considered earned in Portugal, in accordance with national law. The same taxation rules may apply to pre-retirement income, income from pension funds and retirement savings funds, advance payments or principal repayments, and a case-by-case analysis is advisable.