Changes to tax rates and rules largely remained the same in the new budget adopted on 1 April 2020, and the changes introduced were largely anticipated. The most significant change was the introduction 10% Pension Income Tax for new NHR residents.
What is the tax scenario like in Portugal for foreign nationals living in the country or thinking of moving to Portugal?
Income tax
Since 2018, all seven income tax brackets have remained unchanged. However, the income thresholds were increased after remaining unchanged for three years.
The lowest tax rate of 14.5% now applies to income up to €7,112 (previously €7,091), whilst the highest rate of 48% applies to income exceeding €80,822 (previously €80,641).
Investment income
As before, interest and income from investments in shares, securities and bonds are taxed at a rate of 28%.
Portugal remains attractive
Although this is less favourable than a zero tax rate, the 10% tax on foreign pension income is still lower than in many other countries, such as the UK.
And, of course, during the first ten years of residence in Portugal, the NHR still offers the opportunity to receive tax-free foreign income.
Property tax
Additional Municipal Property Tax AIMI in Portugal continues to levy a tax on high-value Portuguese property, regardless of where the owner resides. The rates for 2020 for property owned by companies remain at 0.4%, for individuals at 0.7% and 1% for those who own property worth more than 1 million euros.
Capital gains tax
Residents are subject to a progressive income tax rate, whilst non-residents are taxed at 28%. For residents of Portugal, only 50% of worldwide income remains taxable. Since 2019, pensioners or residents aged 65 or over may also be exempt from tax if they reinvest income from their principal assets into a qualifying insurance policy or pension fund.
