Tax Benefits for Foreigners Investing in Real Estate in Portugal

Why Portugal Attracts Foreign Investors

Portugal stands out for its affordable cost of living, legal stability, and strong property value appreciation. The country offers political stability, robust infrastructure, and direct flight connections to major European, American, and Middle Eastern cities. Additionally, Portuguese law features special tax regimes designed to attract international buyers—including for those planning to buy a home in Portugal as an investment opportunity.

Add to this Portugal's well-earned reputation as a secure, modern, and sustainable destination, and you have a business-friendly fiscal environment aligned with EU standards.

The Non-Habitual Resident (NHR) Regime

Established in 2009, the Non-Habitual Resident (NHR) regime is one of Portugal's most powerful tools for attracting foreign capital. It allows non-residents to benefit from a 20% fixed IRS tax rate on high-value professional incomes earned in Portugal.

Even more importantly for investors, this regime may exempt foreign-source income—like pensions, dividends, interest, and capital gains—from taxation in Portugal, provided those incomes are taxed abroad or exempt in their origin country.

The NHR regime is valid for 10 years and is widely used by European retirees, business owners, and professionals seeking to combine an improved quality of life with tax optimization.

Golden Visa and Tax Advantages

Until 2023, Portugal's Golden Visa was a major reason for foreign investment in real estate. It allowed residency rights through property acquisition, among other routes. However, recent rule changes removed urban residential property as a qualifying investment.

That said, eligible investment options—especially in low-density or tourist/commercial zones—are still available. Investors who previously secured a Golden Visa continue to enjoy their acquired rights, including potential NHR tax benefits.

Property Purchase Taxes: What You Need to Know

When you buy a home in Portugal, you’ll encounter three main taxes:

1. IMT (Property Transfer Tax) – Paid upon purchase; rates depend on property value and its intended use (primary residence or investment).

2. Stamp Duty – Paid at the deed signing, equal to 0.8% of the purchase price.

3. IMI (Municipal Property Tax) – Annual tax based on the property's tax-assessed value, ranging from 0.3% to 0.45% depending on location.

Foreign buyers are subject to the same tax treatment as Portuguese citizens—no additional fees apply.

Tax Incentives for Rental Income

Many investors purchase homes to generate rental income. In Portugal, rental revenue is taxed at a flat 28%, or can be aggregated with other income to utilize progressive IRS rates.

Long-term lease agreements offer decreasing tax rates:

• Over 2 years: 26%

• Over 5 years: 23%

• Over 10 years: 14%

• Over 20 years: 10%

These rates make the Portuguese rental market attractive for those seeking stable returns and tax efficiency.

Why Expert Support Matters

Understanding Portuguese tax law and identifying the best incentives can be complex without professional help. That’s why partnering with a team experienced in the real estate sector is essential—they provide both legal and tax expertise and help find properties with strong growth potential.

Engel & Völkers also has a wide network of real estate consultants specializing in assisting foreign investors. This team offers tailored support—from planning to management—and applies insights from a robust market study to guide investment decisions confidently.

Documentation & Fiscal Preparation

Before you finalize a property deal, it's essential to collect all documentation related to the purchase—including energy certificates, licenses, land registry documents, and tax cadastres.

A professional real estate agency like Engel & Völkers, with legal and financial advisors, ensures everything is in order, avoiding any mistakes that might affect tax benefits.

Ensuring Maximum Investment Return

For foreign buyers, Portugal presents a favourable tax and growth environment. With the NHR regime, favourable rental income taxation, steady capital appreciation, and robust legal protections, Portugal offers excellent value for money.

Navigating this landscape with Engel & Völkers guarantees access to expert support, strategic guidance, and solid investment insights. Whether you're planning long-term rentals, resale appreciation, or your own property, tax advantages can significantly enhance outcomes.

Your Next Steps for a Tax-Efficient Investment

Portugal offers strong tax incentives and high potential returns for international real estate investors. To make the most of these benefits, working with a professional partner is key.

Want to find out how much your property is worth or strategise selling your apartment in the future? Engel & Völkers is ready to support you with confidence, clarity, and global reach.