From Portugal: Expats Living in Portugal Grow 44% and It’s Only Because of Taxation

Nuno de Oliveira Garcia - Andersen Tax & Legal in Portugal, a member firm of Andersen Global

This special Portuguese Expat framework (aka non-habitual residency) allows high net worth individuals, as well as investors and retirees, to pay a reduced tax rate of 20% for personal income tax (PIT) purposes on their Portuguese source income, and still benefit from a full exemption on foreign source income, for a period up to 10 years. Moreover, the framework has been recently simplified and less documentation is now required.

Regarding retirees in particular, a recent change in the framework clarifies that there is a full exemption for PIT purposes when pension income is not paid by the Portuguese State or when is taxed in the other State (in accordance with the provisions of the double tax treaty applicable). As a general rule, double tax treaties grant the country of residence the right to tax pension income, in this case, Portugal. This means that under the Portuguese Expat rules together with some tax treaties, the source country will not be able to levy any tax on the pension income and, at the same time, the Expat may be exempt in Portugal.