Moving To Portugal & Becoming Tax Resident: Latest Changes & Tax Benefits

Portugal continues to attract foreign investors, professionals, and retirees looking for a high-quality lifestyle with competitive tax advantages.

The latest Law No. 31/2024, introduced in June 2024, has brought significant changes to Portugal’s tax system, making it even more attractive for new residents. Understanding these updates is crucial for those planning to relocate and establish tax residency in Portugal.

Key changes 

1. Enhanced capital gains tax exemptions for reinvestment

One of the most impactful updates is the extension of tax exemptions on capital gains reinvestment. Individuals selling property used as their permanent residence can now reinvest the proceeds into a broader range of financial instruments, such as Pan-European Individual Savings Products (PEPP), without incurring personal income tax. This measure particularly benefits individuals over 65 years old, providing them with greater flexibility in managing their assets.

2. Tax benefits for capital market investments & Scientific Research and Innovation (new NHR)

2.1. To stimulate long-term investments, capital gains taxation on the sale of securities by tax residents is now partially exempt based on the duration of ownership:

- 2 to 5 years: 10% of the gain is tax exempted

- 5 to 8 years: 20% of the gain is tax exempted

- 8 years or more: 30% of the gain is tax exemption

These incentives encourage wealth preservation and long-term financial planning for new Portuguese tax residents.

2.2. In addition, newly residents who move to Portugal and render professional activity in the field of high education, scientific research and/or technological innovation may benefit of the so-called Tax Incentive on Scientific Research and Innovation (IFICI or “new NHR”), having their income (either as employees or company board members) taxed at 20% rate for 10 years, and other foreign (non-Portuguese) income tax free.

Tax residency and its benefits

Foreigners moving to Portugal must meet the 183-day rule (residing in Portugal for at least 183 days in a 12-month period) or demonstrate a permanent residence in the country to become a tax resident. Once tax residency is established, individuals benefit from Portugal’s increasing competitive tax environment, including:

- Potential access to tax-efficient investments 

- Low taxation for high-qualified workers

- Reduced capital gains taxation

- Exemption of inheritance tax for direct heirs

The impact on real estate investment

Beyond personal taxation, the new law also promotes investment in affordable housing initiatives, making Portugal even more attractive for property investors. The law encourages investment in Venture Capital Funds dedicated to affordable housing rental properties, with the view of tackling the current housing crisis in the country while offering tax advantages for investors.

Navigating the tax landscape with expert advice

While these new tax rules bring greater clarity and opportunities, proper legal guidance is essential to maximize the benefits of moving to Portugal. MATLAW, a leading firm in real estate and investment law, provides expert assistance in tax planning, residency applications, and structuring investments for optimal efficiency.

For those considering a move to Portugal, understanding these tax advantages can make the transition smoother and more financially rewarding. With the right legal support, investors and expatriates can take full advantage of Portugal’s evolving tax-friendly environment.

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Editorial provided by MATLAW.