Do You Need To Report Your Foreign Income In Portugal?

Do You Need To Report Your Foreign Income In Portugal?

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For residents of Portugal, navigating the complexities of foreign income reporting can be daunting, especially when it comes to compliance with the IRS.

The finance portal Portugal (portal das finanças) is an online platform that provides access to various tax and financial services for individuals and businesses as well as   guidance and latest information.

Becoming a Tax Resident In Portugal

Becoming a tax resident in Portugal brings certain obligations, including understanding the income tax rates and tax brackets applicable to your situation. If you are or plan to become a tax resident of Portugal, it’s essential to understand how this affects your financial reporting, particularly with the Portuguese IRS (Personal Income Tax) and the finance portal, Portal das Finanças. This process is crucial to ensure compliance with both Portuguese tax laws and the requirements set forth by the IRS for reporting foreign income earned, which affects your tax residency and tax treatment.

Understanding Taxes In Portugal For Expats: Are You a Portuguese Tax Resident?

If you spend 183 days or more per year in Portugal, you are recognised as a Portuguese tax resident, which influences your tax treatment. This status comes with various tax obligations, including the requirement to report your global income, including any foreign income earned, to ensure proper tax payment. There may be additional criteria specific to your situation, such as if you are part of a crew on international vessels or aircraft, or if you have a permanent residence in Portugal. It’s essential to understand these stipulations to ensure compliance with local Portuguese tax laws.

Taxes For Expats In Portugal: Reporting Your Foreign Income To The IRS

Accessing The Financial Portal Portugal 


If you consider yourself a Portuguese tax resident, we advise you to gain full access to your private page at Portal das Finanças by having your NIF (tax identification number) and working password ready. Financial portal has now implemented a two-factor authentication. It means that when you want to log in, except NIf and valid password, you need to provide a code that will be send as an sms on your phone number.

Know more about financial portal Portugal in our article ➡️ here . 

Obligations For Yearly IRS Reporting In The Portuguese Tax System

Once you become a tax resident in Portugal, you are required to file an annual tax return, which applies to all sources of income, including any capital gains tax, regardless of their origin.

For the tax year 2025, the deadline for submitting your tax return is set between 1 April and 30 June 2025.

During this period, you have the option to report your income either by yourself or by hiring a qualified accountant to assist you. However, it is important to note that all tax-related procedures must be completed through the Portal das Finanças, the official finance portal in Portugal.

Finance Portal Portugal: Types Of Income To Be Declared

The IRS in Portugal categorises various types of income earned to streamline the reporting process for residents and foreign earners alike. These categories include Category A, which pertains to earned income from dependent employment for those who live in Portugal. Category B covers business and professional income, allowing individuals to report earnings from self-employment or freelance work as part of their annual income in Portugal. Additionally, Category E is designated for capital income, encompassing profits from investments and financial assets, which may include income from property in Portugal. Real estate income falls under Category F, which is associated with a specific tax rate applicable to property earnings. Furthermore, Category G relates to increases in wealth, capturing any appreciation in assets, while Category H is reserved for pensions, ensuring that retirees can report their taxable income accurately. For detailed information on these categories and guidance on reporting your foreign income, it is advisable to visit the Portal das Finanças or consult your accountant for personalised assistance.

Failing To Report?

Failing to report your income may lead to an irregular tax position, which can complicate your residency status under the newly formed AIMA.
If you do not address this issue, attempts to regularise your tax situation could result in back taxes that you owe, compounded interest on those amounts and potential fines.
While it is not common, there is a possibility that you may be flagged by the Portuguese tax authorities, which could further complicate your financial and legal standing in the country, especially if you are an expat in Portugal.
Foreigners living in Portugal must understand the tax system in Portugal to avoid penalties and ensure compliance with the marginal tax rates applicable to their income.

Looking for a professional accountant or other highly qulified professional in Portugal? Use our network ➡️ here.

Case Study: Mr. Johns From The UK, His Tax Situation And Residency Renewal

Mr. Johns moved to Portugal before Brexit and was granted automatic residency for five years. He believed that, since all his income was from abroad, he was not required to file taxes in Portugal. However,  he must comply with Portuguese tax laws and report his worldwide income — including any rental income from property in Portugal — as part of his tax obligations.

After the initial five-year residency period, Mr. Johns will need to attend an appointment with AIMA to renew his residency. During this appointment, he will be asked to provide details about his tax records and current tax situation.

If Mr. Johns is unable to demonstrate compliance with Portuguese tax requirements, his application for renewed residency may be at risk.

Conclusion

In conclusion, it is essential for tax residents in Portugal to report their income (including foreign income) every year to the Portuguese IRS.

Accessing the financial portal, the ‘portal das finanças’ is a crucial step in organising expats’ financial affairs.

Keeping up to date with Portuguese regulations can help expats to avoid further problems with renewing their visas/residency rights or the possibility of being flagged by financial authorities.

Ingenium Financial is an expert in Portuguese-compliant, tax-efficient savings and investments. Learn more ➡️ here

Frequently asked questions

Is foreign income taxable in Portugal?

Yes, foreign income is generally taxable in Portugal, and understanding the tax regime is crucial for determining your tax residency status and applicable tax treatment. Residents must declare their worldwide income, including foreign income and rental income on their annual tax return, which must include income from property in Portugal.

How to submit IRS in Portugal?

You can submit your IRS (Imposto sobre o Rendimento das Pessoas Singulares) tax return in Portugal online through the Portal das Finanças or in person at local tax offices to ensure you pay tax accurately. The submission typically occurs between April and June each year and refers to the previous tax ending 31st of December. The Portuguese tax year aligns with the calendar year.

Are you thinking of moving to Portugal but are unfamiliar with the tax system?

If you are considering moving to Portugal, it’s important to familiarise yourself with the local tax system, tax obligations on foreign income, Portuguese Compliant Investments (PCIB), and potential benefits such as the Non-Habitual Resident (NHR) regime that can offer tax incentives for new residents. Contact Ingenium Financial, EU- and UK-qualified Chartered Financial Adviser with cross-border experience.

NHR 2.0 Portugal: Non-Habitual Tax Residency Regime 2025 (IFICI)

NHR 2.0 Portugal: Non-Habitual Tax Residency Regime 2025 (IFICI)

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What is the latest NHR Tax Regime in Portugal?

The most recent NHR Portugal tax regime, also known as NHR 2.0, is a tax incentive program designed to attract foreigners to Portugal by offering significant tax benefits. Under this regime, tax residents in Portugal can benefit from a flat tax rate of 20 percent on income earned in Portugal, along with generous tax exemptions for certain types of income. To qualify for the NHR scheme, individuals must register as a tax resident in Portugal and meet specific criteria. The NHR status allows residents to enjoy reduced tax rates and exemptions, making it an appealing option for those considering moving to Portugal. As of March 2025, the new NHR tax regime will continue to provide opportunities for significant tax savings, especially for eligible professionals and those involved in scientific research. This program is a key component of Portugal’s strategy to enhance its appeal as a destination for expatriates and digital nomads looking to settle in Portugal, especially under the NHR 2.0 tax regime.

General Eligibility Requirements for the Non-Habitual Residence Regime in Portugal 2025

To qualify for the NHR status in Portugal, individuals must meet specific criteria.

·        applicants must not have been tax residents in Portugal in the five years preceding their application.

·        they must establish tax residency status in Portugal, which typically involves staying in the country for more than 183 days within a 12-month period and having a permanent residence available, owned or rented long-term (12 months contract).

·         individuals applying for NHR status must fall under eligible NHR professions

·         must request inclusion inthe regime by March 31 of the year following the one they became a tax resident in Portugal

Who can apply for the NHR Portugal tax regime in 2025: main categories

Here are the main categories of people who may qualify for the Portugal non-habitual regime 2025:

1. Scientific Researchers

Individuals conducting scientific research in Portugal, particularly in partnership with:

·        Public or private research institutions

·        Universities or polytechnic institutes

         ·        Postdoctoral researchers are explicitly eligible for the non-habitual tax benefits.

2. Tech Professionals and Innovators

Employees and entrepreneurs in startups, tech firms, and innovation hubs, especially in sectors like:

·        Artificial intelligence

·        Software development

·        Green tech

·        Biotechnology

Startups must be certified by the Portuguese Startup Ecosystem authorities to qualify for the tax incentive for scientific research.

3.Portugal NHR is  poular choice for many. Professors and Academic Staff are often attracted to the NHR, also known as the NHR 2.0.

Hired by public or private universities or recognized institutions of higher education, benefiting from the special tax under the residency in Portugal.

4. Highly Qualified Professionals

Working in high value-added sectors within Portugal identified by the government, such as those mentioned in frequently asked questions about the NHR.

·        Engineers

·        Architects

·        IT professionals

·        Specialised technicians

The “high value-added” roles is defined by Ordinance No. 12/2024. Such professions as; Engineers, Technical, Engineers, Pharmacists, Physiotherapists, Medical doctors, Dentists, Veterinarians, Public Notaries, Nutritionists, Psychologists, Certified Accountants, Solicitors and bailiffs have a clear and defined basis outlined as to whether they are qualified under their relevant qualification framework.

Other professions may make an application if their professional qualifications are recognised in a similar European qualification framework however the granting of NHR 2.0 tax status is less assured and may result in a lengthy approval process or be rejected.

If you are a business owner or qualified professional it may be possible to set up a ‘relevant company’ in Portugal and qualify for the NHR regime in Portugal. This program is a tax regime that allows eligible professionals to benefit from reduced income tax rates and even be exempt from taxation in Portugal on certain income types.

‘Relevant companies’ are enterprises whose activities the government has considered relevant to the national economy, for example, holding companies, certain fund-management institutions, advanced engineering companies, and hospitality operators, excluding short-term accommodation enterprises. Board members or ‘qualified jobs’ in these relevant companies can qualify for the IFICI (Incentivized Fiscal Status for International Companies in Portugal) if the employee is engaged in tasks that require at least post-secondary level qualifications (Level 5 of the European Qualifications Framework) or an equivalent standard. As a guide, this may be professionally qualified at Level 4 in the UK.

These companies are not mandated to make particular investments or create new jobs in order to qualify under the NHR regime in Portugal. Moreover, understanding the implications of tax residency in Portugal is crucial for those considering residence in Portugal under this scheme.

5. Workers in the Portuguese State or International Organisations

 Includes those hired by:

·        Portuguese public administration

·        European institutions

·        United Nations agencies, etc.

6. People Transferred Within Multinational Groups

Intra-group transferees under intra-corporate transfer arrangements, provided the role is in one of the eligible sectors under the incentivised tax status program.

For individuals who have spent 183 days in Portugal within a year, understanding the implications of tax under the non-habitual residence regime is essential. Those eligible for the NHR may also find benefits under the double taxation agreement with Portugal, which can help avoid paying tax on the same income in multiple jurisdictions, thus enhancing the attractiveness of the Portugal program for digital nomads and other expatriates.

What are the Tax Benefits of the New NHR Program in Details?

Individuals who qualify for the most recent NHR program can enjoy several advantages, including the right to reside in Portugal without facing the usual taxation burdens associated with personal income tax. This is particularly appealing for digital nomads looking to live and work in Portugal, as the Portugal digital nomad visa allows for a seamless transition into the resident regime in Portugal.

Tax Considerations in Detail

Income Type

Tax Treatment under IFICI is an important consideration for those applying for the NHR program.

Portuguese-sourced employment income

20% flat rate (vs. progressive rates up to 48%)

Self-employment in eligible activity

20% flat rate

Foreign-source pension income may be taxed at benefits under the NHR program.

May be taxed at benefits under the NHR 10% (subject to DTA*)

Foreign dividends, interest, royalties

Possibly exempt or taxed under DTA rules

Rental income (foreign or local)

Taxable under general rules (28%)

Capital gains

Subject to standard Portuguese CGT rules

*DTA: Double Taxation Agreement—Portugal has treaties with over 70 countries.

Step-by-Step Application Guide: Non-Habitual Resident Tax Regime in Portugal

1.      Move to Portugal and apply for the NHR program to become a tax resident.

          Typically by residing more than 183 days per year or establishing a habitual residence.

2.      Register with the Portuguese Tax Authority (AT)

Apply for a NIF (Número de Identificação Fiscal).

3.      Request to join the IFICI regime

Done via the Tax Portal (Portal das Finanças) by March 31 of the year following your move.

4.      Provide supporting documents

Proof of employment or activity in an eligible sector.

Certification by competent authorities (e.g., higher education institution, startup certification).

Duration of NHR Benefits

The NHR regime in Portugal offers significant tax advantages to eligible individuals for a period of 10 consecutive years. The duration of the NHR benefits can greatly influence financial planning, making it crucial for applicants to understand the implications of this regime as they consider their long-term residency in Portugal.

What to do at the end of NHR?

Exiting the NHR regime in Portugal requires careful planning, ideally several or as many as eight years in advance. As the NHR program is known for its incentivised tax status, understanding how to maintain or transition your tax resident status in Portugal is crucial. Engaging a qualified financial adviser with cross-border experience can help you to organise your finances effectively. By doing so, you may be able to pay as little as 11.2 % on eligible income, ensuring you don’t face hefty tax bills or need to leave the country.

 Understanding the implications of the OECD Model Tax Convention and the double tax agreements (DTA) with Portugal can provide additional insights into managing your taxation in Portugal.

As the NHR regime is no longer available after a specified period, it’s important to evaluate how to mitigate potentially punitive levels of taxation that may be due upon the expiry of the NHR regime before the end of your eligibility. If your habitual residence in Portugal is coming to an end, planning for your resulting tax postion is vital to avoid any surprises.

Frequently asked questions about NHR:

Is the NHR Status Still Available in 2025 in Portugal?

Yes, the non-habitual residence regime (NHR) in Portugal is still available for the first quarter of 2025, allowing qualifying individuals to benefit from tax advantages.

What Level of Income Tax Is Due Under the NHR Scheme in Portugal 2025?

The tax in Portugal under the NHR 2.0 scheme generally offers a flat rate of 20% on certain income types, while other foreign income may be tax-exempt.

What Happens After 10 Years of NHR Status in Portugal?

After 10 years of holding NHR status, individuals will revert to the standard tax residency rules in Portugal and the holder defaults to being taxed on the same basis as an ordinary resident. A qualified Financial Advisor can help you to arrange your financial affairs and it may then be possible to pay an effective rate of 11.2% tax for life.

Can I Apply for NHR Status if I Already Live in Portugal?

Yes, you can apply for NHR status while already living in Portugal, provided you meet the eligibility criteria.

Can US Citizens Apply for the New NHR Program?

Yes, US citizens can apply for the new NHR program in Portugal, benefiting from its tax advantages if they meet the necessary requirements.

Can a UK Citizen Apply for NHR Status in Portugal?

Yes, UK citizens can apply for NHR status in Portugal, enjoying the same benefits as other foreign residents under this incentivised tax status program.

Do I Need to Declare My Assets When Applying for the NHR Regime in Portugal?

No, generally, you do not need to declare foreign assets when applying for the NHR regime, but you must report income generated in Portugal.

How Long Can I Benefit from the NHR Regime in Portugal?

You can benefit from the NHR regime for a maximum of 10 consecutive years, enjoying the associated tax benefits during this period. Contact an EU qualified and licensed Financial Advisor ideally within 24 months of the granting of NHR to avoid significantly elevated taxation rates typically applicable upon the expiry.

Although it is recommended that professional advice is sought within the initial 24 month period of receiving NHR 2.0 status, it is essentially never too late to speak to a Contact an EU qualified and licensed Financial Advisor.

I have helped Clients achieve good financial outcomes even when they faced the imminent expiry of the NHR status.

British Expats: Hurry Up To Report Your Portugal Residency Now

British Expats: Hurry Up To Report Your Portugal Residency Now

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Why you should report your Portugal residency (& Portugal address) to the UK Authorities ASAP in order to potentially save your children a great deal of money?

Introduction: A Crucial Move for British Expats in Portugal

If you are a British expatriate living in Portugal, you can reduce your inheritance tax bill by hundreds of thousands of pounds (depending on the size of your estate).

Following UK budget changes announced last October being liable for UK inheritance tax became a great deal clearer and for those already overseas or thinking about moving away from the UK there is a significant upside but only if you make sure that you properly inform the UK that you are resident elsewhere.

Many UK citizens move and leave their financial affairs in the UK. They are in a familiar place, perhaps they work well. Other assets like pensions are there and it seems like a lot of work to find alternatives overseas. However this convenience and sometimes apathy now needs seriously considering and perhaps immediate change.

 Looking for a cross-border financial advice? Chartered Financial Adviser in Portugal here. 

How the UK Budget of October 2024 Changed Inheritance Tax for British Expats in Portugal

Previously it was very hard to escape UK Inheritance Tax (IHT), even if you spent a long time living abroad. Everything changed with the recent UK budget (Oct. 2024). Some significant changes were implemented as to how UK inheritance tax was assessed. That’s where your Portugal residency declaration becomes important.

Put simply, there is no inheritance tax in Portugal. The UK levies a 40% tax on assets (now including private pensions) over and above some allowances.

Even if you make clear your residency overseas, UK based assets remain within the scope of UK IHT assessments.

Once more, even if an investment portfolio is based ‘off-shore’, any investments within it that are based in the UK (e.g. A FTSE 100 company share) would be subject to assessment.

 

Real Example: A British Couple in Portugal Unknowingly at Risk

Let’s imagine a situation, a British couple retired to Portugal 10 years ago. They are living abroad, receiving UK pensions, and paying UK tax on them but not too much to be bothered about. They use their child’s or relative’s UK address as a correspondence address with HMRC. Pension Trustees pay taxes on your behalf, deducting them at source form your income.

They do not report their Portugal residency or Portugal address to the UK (HRMC), as they want to avoid extra paperwork and the associated hassle. They may have informed their bank about their new Portuguese address considering it was enough.

Although this may seem harmless, it’s a critical oversight. Without formally notifying HMRC of their Portuguese residency, the couple risk being deemed UK resident and having 100% of their assets assessed for UK IHT – that includes their house in Portugal.

Their heirs could face a hefty inheritance tax bill in the UK unnecessarily.

Looking for tax efficient solutions to securely house your assets without being overcharged? We have a solution!

Why Declaring Your Portugal Residency and Address Matters Now

Now starting from the 6 April 2025 , if you’ve been resident outside the UK for 10 years or more when you die, your non-UK assets will not form part of your estate for IHT assessment.

Sounds good? Yes, if your Portugal residency and address was correctly reported in advance and you have not fallen foul of any ties assessed by the UK’s Standard Residency Test’

For some additional explanation see the section called ‘Long-term Resident’ from Accountants KPMG here;

Budget: The new look inheritance tax | KPMG UK

The scope of inheritance tax (IHT) in the UK is fundamentally changing from a domicile-based system to a system based on residence. From 6 April 2025, the test for whether non-UK assets owned by individuals and trustees are within the scope of IHT will be whether the individual, or very broadly for trusts the individual settlor of the trust, is a ‘long-term resident’.
kpmg.com

Portugal’s Inheritance Rules: 0% Tax on Direct Heirs

Unlike UK, Portugal does not levy inheritance tax on direct ascendancy, be it property or other assets. Put another way, 0 % Inheritance tax.

British Expats in Portugal: How to Declare Your Portugal Address and Residency to HMRC

Your residence in Portugal and Portuguese address should made clear and reported to the UK as soon as possible. You should avoid paying tax in the UK and make clear to all authorities that you are not resident in the UK.

Complete online or paper DT -individual form here;

Inform your pension provider, financial institutions, and any UK-based service providers of your Portuguese address to maintain consistency.

Still in process of getting Portugal residency? It’s better to start planning ahead. Contact Ingenium Financial to ensure a smooth transition.

Conclusion

If you’re a British expat living in Portugal, properly declaring your residency and address to HMRC can mean the difference between your children inheriting the full value of your estate or facing a significant tax bill.

With Portugal offering 0% inheritance tax to direct heirs, and the UK no longer taxing non-UK assets for long-term non-residents, the opportunity to protect your legacy is real — but only if you act.

Complete your DT-Individual form today, notify HMRC of your Portuguese address, and ensure your estate stays in your family, not in the hands of the tax office.

This is a complex subject and some aspects of the new rule changes have been simplified as they fall outside the scope of this general article and its length. You are urged to seek professional advice from a Chartered Financial Adviser.

Looking for a professional opinion on your situation? Get in touch for an in-depth complementary review.

British Nationals In Portugal And The 90-day Rule: Fundamentals

British Nationals In Portugal And The 90-day Rule: Fundamentals

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Following Brexit, British nationals visiting Portugal are now subject to the Schengen 90/180-day rule—just like other non-EU citizens. If you’re planning to travel to Portugal, it’s important to understand how this rule works and how to stay compliant.

What Is the 90/180-Day Rule?

The Schengen 90/180-day rule allows you to spend up to 90 days within any 180-day period in the Schengen Area—including Portugal—without needing a visa. These 90 days can be taken in one stretch or split over multiple visits. This applies to holidays, house-hunting trips, or short stays before settling in more permanently.

Why It Matters to British Nationals in Portugal

Portugal remains a top destination for British nationals moving abroad, thanks to its beautiful climate, relaxed pace of life and attractive tax advantages. So if you’re not yet a resident, you’ll need to manage your visits carefully.

Overstaying—even unintentionally—can result in serious consequences, such as:

  • Monetary fines

  • Deportation

  • Temporary bans from the Schengen Zone (up to 3 years)

Example: How the Rule Works in Real Life

Imagine you arrive in Portugal on 1st January. That date begins your personal 180-day period. You’re allowed 90 days within that timeframe—either consecutively or split over a few trips. Once you’ve used up your 90 days, you must leave the Schengen Area and wait until your 180-day window resets before returning.

Need help tracking your days? Use a Schengen calculator (https://www.visa-calculator.com/, https://schengensimple.com/ etc.) or a travel diary app ( Day One , Polarsteps, Travel Diaries or any other)  to stay on top of your timeline.

How to Count Backwards from Your Current Date

A helpful way to calculate how many Schengen days you’ve used is to count backwards 180 days from the date you intend to travel (or are already travelling). Then:

  • Add up all the days you’ve spent in the Schengen Area (including Portugal) during that 180-day window.

  • If the total is under 90 days, you’re still within the rules.

  • If you’re at or close to 90, plan carefully—your next trip may need to wait.

🧮 Example: If you want to enter Portugal on 1 September, look back 180 days (to 5 March) and count every day spent in the Schengen Area during that time. That’s your total.

This rolling calculation ensures that your 90 days don’t need to be consecutive, but they must stay within any given 180-day slice of time.

British Nationals in Portugal: Can You Stay Longer?

Yes, but you’ll need to apply for the correct visa or residence permit depending on your intentions. Common reasons for extended stays or relocation include: retirement, working, family reunification or living off passive income (e.g. pensions or investments) etc.

Most British nationals apply for residency before they move, so forward planning is key.

👉 Interested in long-term solutions? Discover tax-efficient strategies and Portuguese-compliant investment options → here.

Learn more about visas and residency in Portugal for British nationals from the UK government.  

British Nationals in Portugal:

What If You Overstay Due to a Medical Emergency?

Life happens, and sometimes plans change due to health-related reasons. If you’re forced to overstay because of a serious illness or medical emergency:

  • Gather evidence: hospital discharge letters, medical certificates, or cancelled flights

  • Notify the British Embassy without delay

  • Cooperate fully—each case is reviewed on its individual merits

Seeking advice from a relocation expert or legal advisor is also highly recommended.

Entry Rules for UK Citizens

When entering Portugal (or any Schengen country), your UK passport must:

  • Be less than 10 years old

  • Remain valid for at least 3 months beyond your intended departure date

Make sure your passport is stamped when entering and exiting. If a stamp is missing, be ready to show travel receipts (e.g. boarding passes) and request that border officials manually log your entry or exit.

You May Also Be Asked For:

  • Evidence of return or onward travel

  • Proof of your accommodation (booking or ownership)

  • Financial means (e.g. recent bank statements)

Schengen vs. the EU: What’s the Difference?

Not all EU countries are part of the Schengen Zone, and vice versa. For example:

  • Ireland is an EU member, but not in the Schengen Zone

  • Switzerland, Norway, Iceland, and Liechtenstein are Schengen members, but not in the EU

Portugal is part of both, making it a strategic and appealing destination for UK citizens.

What’s Coming Next? The EU Entry/Exit System (EES)

The European Union plans to launch the Entry/Exit System (EES) in October 2025. This digital system will automatically record the movements of third-country travellers, including British nationals, into and out of the Schengen Area.

Keep up to date to avoid any surprises at the border.

Final Thoughts: Stay Smart, Stay Within the Rules

If you’re among the many British nationals in Portugal—whether visiting, investing, or preparing for residency—respecting the 90-day rule is absolutely essential. With the right planning, you can enjoy a smooth and stress-free transition.

Moving to Portugal? Let’s Make It Financially Smart

Planning your move to Portugal? Ensure your assets travel just as smoothly as you do. With support from a Chartered Financial Adviser who operates on a lean, transparent fee structure, you can benefit from tailored, cross-border advice that considers both UK and Portuguese systems. From tax optimisation to wealth planning, we help British nationals navigate the financial landscape with confidence and clarity. Get in touch→ here. 

Your UK Pensions Taxes In Portugal Easily Explained

Your UK Pensions Taxes In Portugal Easily Explained

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Thinking of retiring to Portugal? It’s a dream for many Britons, but don’t overlook the tax side of things.

If you receive UK pensions, understanding how they’re taxed in Portugal is essential. This guide explains what to expect, how to plan, and where to seek help.

UK Pensions Taxes: What Changes When You Retire to Portugal?

When you become a Portuguese tax resident, your UK pensions may no longer be taxed in the UK (with some exceptions).

Most types of pension income are instead taxed in Portugal. The way this works depends on the kind of pension you have.

1. UK Pensions Taxes: Government Service Pensions

If you worked in the UK civil service or for a local authority, your pension will remain taxable in the UK.

These pensions are exempt from Portuguese tax, even if you’re a resident in Portugal.

Important: NHS pensions do not fall under this category. They are taxed in Portugal like private pensions.

2. UK Pensions Taxes: State Pension

Once you retire to Portugal, your UK State Pension is taxed only in Portugal.

It is taxed at Portuguese income tax rates, which range from 13% to 48% depending on your total income.

If you’re married or in a de facto relationship, you may opt for joint taxation to reduce the rate.

Credit PWC.

3. UK Pensions Taxes: Occupational Pensions

Employer pensions (occupational pensions) are considered regular income in Portugal.

They are taxed at progressive income tax rates, just like employment income.

4. UK Pensions Taxes: Personal Pensions (SIPPs and SSAS)

If your personal pension includes employer contributions, it is taxed as deferred employment income.

If fully funded by personal contributions, treatment may be more favourable:

  • Your original contributions may be tax-free.
  • Growth or investment income is taxed at 28%.

If it’s not possible to identify the contribution split, tax may follow life insurance rules:

  • Years 0–5: 28%
  • Years 6–7: 22.4%
  • Year 8 onward: 11.2%

5. Pension Lump Sums

In the UK, you can usually take 25% of your pension tax-free.

In Portugal, this does not apply. Pension lump sums are taxed as regular income.

If you’re planning to take a lump sum, consider doing so before becoming a Portuguese tax resident.

6. The NHR Scheme and UK Pensions

Portugal’s Non-Habitual Residence (NHR) scheme offers tax benefits for new residents:

  • Registered before 31 March 2020: most foreign pensions may be tax-free.
  • Registered after April 2020 (before closure): UK pensions taxed at a flat 10%.

Note: Government pensions are always taxed in the UK, even under NHR.

7. Tax on Investment Income

Other retirement savings and investments may also be taxed:

  • Dividends, interest, and capital gains: taxed at 28% flat rate.
  • Option to apply progressive income tax rates if more favourable.

Some investment wrappers and life insurance products may reduce your tax exposure under Portuguese law.

Explore more on our page: Portuguese Compliant Investments

Why Reviewing Your Pension Matters

Retirement planning doesn’t end when you move abroad.

Tax laws change. Markets shift. Your goals evolve.

Regular reviews with a qualified financial adviser help keep your plans compliant and tax-efficient.

Final Thoughts

Retiring to Portugal offers sunshine, outdoor living, and a slower pace of life at lower cost.

But your UK pension tax obligations change when you relocate.

Get advice, plan ahead, and stay informed for a secure retirement abroad.

Key Takeaways:

  • Government service pensions are taxed in the UK only.
  • State and personal pensions are taxed in Portugal.
  • NHR may reduce your tax on foreign pensions.
  • Lump sums are not tax-free in Portugal.
  • Investment income is taxed at 28%, with flexible options.

Speak to a qualified cross-border financial adviser for tailored guidance.