English speaking accountants in Portugal

Income Tax (IRS)

Income Tax (IRS)

Income Tax Rates for 2026

In 2026, individuals resident for tax purposes in mainland Portugal are subject to the following general IRS rates on taxable income (rendimento coletável):

The rates above are marginal rates: only the portion of income falling within each band is taxed at that band's rate. They should therefore not be interpreted as a single percentage applied to the whole income.

The 2026 thresholds and rates reflect the amendments to Article 68 of the Portuguese IRS Code.

In addition, a solidarity surcharge applies to taxable income above €80,000:

• From €80,000 to €250,000: 2.5%
• Above €250,000: 5%

Where taxable income exceeds €250,000, the first €170,000 above €80,000 is subject to the 2.5% rate and the excess above €250,000 is subject to 5%.

For married couples and couples in a civil union who choose joint taxation, the applicable calculation uses the legally prescribed splitting mechanism rather than simply applying the rates to the couple's combined income as if it belonged to one individual.

These general rates apply principally to employment income (Category A) and self-employed/business income (Category B), although particular types of income may be subject to separate or autonomous taxation.

Self-employed income

Self-employed and business income is generally reported under Category B.

Where the taxpayer qualifies for the simplified regime, taxable income is calculated by applying the statutory coefficients to gross income rather than by simply taxing the taxpayer's actual accounting profit.

The simplified regime generally applies where annual gross Category B income does not exceed €200,000, provided the taxpayer has not opted for organised accounting. A taxpayer may instead opt for taxation based on organised accounting.

For professional activities, the commonly applicable coefficient is 0.75, meaning that, subject to the detailed rules of the regime, 75% of the relevant gross income is initially treated as taxable income. Other activities can be subject to different coefficients, including a 0.35 coefficient for certain service activities. The simplified regime also contains rules concerning documented expenses and the conditions required for the coefficients to apply in full.

The €200,000 threshold should therefore not be described as meaning that a taxpayer is automatically taxed under organised accounting immediately upon exceeding €200,000 in the current year; the rules governing the applicable regime and the preceding year's income must be considered.

Other types of income

Certain types of income can be taxed autonomously rather than being aggregated with employment and self-employed income.

For Portuguese tax residents, common examples include:

• Interest and other investment income — generally 28%
• Dividends — generally 28%
• Capital gains on shares and other securities — generally 28%, subject to specific rules and possible aggregation
• Residential rental income — generally 25%, rather than the former 28% rate
• Capital gains on Portuguese real estate — generally subject to the progressive IRS rates after application of the rules governing the taxable amount

Certain categories of income can be englobed (aggregated) by election, in which case the income is taxed according to the progressive IRS rates. The choice can be particularly relevant where the taxpayer has a relatively low overall taxable income.

Residential rental income is normally subject to a special autonomous rate of 25%. Long-term residential leases can qualify for substantially reduced effective rates where the statutory conditions are met.

In 2026, additional incentives also apply to certain qualifying residential rental arrangements, including arrangements falling within the new affordable-rental provisions.

Capital gains on property

There are several important rules that can reduce or eliminate the effective taxation of a property capital gain.

When calculating the gain, the acquisition cost can be adjusted for inflation where the statutory conditions are met. Certain costs associated with the acquisition and sale can also be taken into account, including qualifying taxes, obligatory costs and estate-agent fees. Qualifying documented expenditure on improvements to the property can also be deductible, subject to the applicable statutory time limits and conditions.

For a Portuguese tax resident selling their principal private residence (habitação própria e permanente), the gain can potentially be excluded from taxation where the proceeds, after repayment of qualifying mortgage debt, are reinvested in another qualifying principal residence.

The standard reinvestment rules generally allow the reinvestment to take place in the 36 months following the sale, or permit qualifying expenditure on the replacement property during the 24 months preceding the sale to be taken into account. The replacement property may be situated in Portugal or, subject to the statutory conditions, in another EU/EEA state. The property sold must generally have been the taxpayer's principal residence under the conditions specified by law.

For residents, in the normal case only 50% of the net real-estate capital gain is taken into account for IRS purposes. There are exceptions—for example, certain properties that received significant non-repayable public support can be subject to different treatment.

From 2026, there are also new rules allowing qualifying property gains to benefit from an exclusion where the proceeds are reinvested in qualifying residential rental property subject to the statutory affordable-rent conditions. These rules should be considered separately from the traditional principal-residence reinvestment exemption.