Does Portugal Tax Retirement Income?
Portugal, known for its warm climate and beautiful landscapes, has become a popular destination for retirees from various parts of the world. One of the questions that often comes up when considering Portugal as a retirement destination is whether the country taxes retirement income. In this article, we will explore the tax regulations surrounding retirement income in Portugal.
Portugal does tax retirement income, but the good news is that the rates are generally quite favorable. According to the current tax laws, pensioners from countries that have a tax treaty with Portugal may be eligible for a tax exemption on their retirement income. This means that if you are a pensioner from a country that has a tax treaty with Portugal, you may not have to pay taxes on your retirement income.
However, for those who are not covered by a tax treaty, Portugal levies a progressive tax on retirement income. The tax rate varies depending on the amount of income received. The first 9,000 euros of retirement income are taxed at a rate of 10%, and any income above that threshold is taxed at rates ranging from 11% to 48%. It is important to note that these rates are subject to change, so it is always a good idea to consult with a tax professional or check the latest tax regulations before making any decisions.
In addition to the progressive tax on retirement income, Portugal also has a wealth tax on real estate properties owned by non-residents. This tax is levied at a rate of 0.7% on the property’s value, but it is only applicable if the property is located in Portugal and the owner is not a resident of the country.
Another important aspect to consider is that Portugal offers a tax refund for retirees who have paid taxes on their retirement income in their home country. This refund is known as the “rental income” or “non-habitual resident” (NHR) regime. Under this regime, retirees who have not lived in Portugal for the past ten years may be eligible for a refund of taxes paid on their retirement income. The NHR regime also provides a 10-year exemption from paying taxes on certain types of income, including salaries, professional fees, and dividends.
In conclusion, Portugal does tax retirement income, but the rates are generally quite favorable, especially for those who are covered by a tax treaty or fall under the NHR regime. It is crucial to consult with a tax professional to understand the specific tax implications for your situation, as the regulations may vary depending on your country of origin and other factors. With proper planning and understanding of the tax system, Portugal can be an attractive destination for retirees seeking a tax-efficient retirement.
