Individual - Income determination

Last reviewed - 19 February 2024

Employment income

Employment income/remuneration is specifically defined in the Personal Income Tax (PIT) Code and covers all payments made by the employer, such as salary, bonuses, commissions, tax reimbursements, redundancy payments, pensions, allowances (e.g. cost-of-living and housing allowances), and benefits in kind (e.g. company cars), regardless of where the payment originates.

Domestic and foreign travel allowances, as well as mileage and lunch allowances in excess of those permitted to employees of state departments, are also taxable as employment income.

Benefits in kind

In general, benefits in kind provided by an employer are subject to income tax at the employee level. There are specific provisions on taxation of employer-provided housing or housing allowances, use and acquisition of company cars, and share plans.

For PIT purposes, the taxable benefit from the use of a company car is taxable at the employee level if there is a written agreement between the employer and the employee regarding the allocation of a specific car to the last. In these circumstances, the benefit corresponds to 0.75% of the market value of the car, multiplied by the number of months of use of the car. If the company car is then acquired by the employee, a further benefit in kind will correspond to the positive difference between the market price of the car and the total amount already taxed as a benefit in kind to the employee as a result of using the car plus the acquisition price. The market price corresponds to the difference between the acquisition price and the balance derived from that value considering a depreciation factor published by the relevant authorities.

As a temporary measure, there is an exemption from PIT and social security contributions on the benefit in kind derived by employees (allowances excluded) resulting from the use of permanent housing in the Portuguese territory made available by the employer. This shall apply from 1 January 2024 to 31 December 2026. The exemptions are capped at the limit of the value of the rents foreseen in the Programme to Support Rental (“Programa de Apoio ao Arrendamento”). 

The exemption shall not apply to taxpayers that hold directly or indirectly 10% or more of the share capital or of the voting rights of the employer. 

Termination of employment

Redundancy payments are taxable on the portion that exceeds the average remuneration paid during the last 12 months of employment, multiplied by the number of years of employment, unless a new employment contract or service contract is concluded with the employer or a related person within 24 months from the date of termination of the employment contract.

However, in case of a manager or administrator, the redundancy payments are fully liable to taxation. This measure is also applicable for public sector managers and PE representatives.


EUR 4,104 of pension income is tax exempt.

Business and professional income

Income from a commercial, industrial, or agricultural activity and income from a sole trader (including scientific, artistic, or technical services) or from intellectual rights (when earned by the original owner) may be taxed either in accordance with a simplified regime or based on the taxpayer’s accounts. The simplified regime will apply only to taxpayers who, not having opted for organised accounts, have a turnover or a gross business and professional income lower than EUR 200,000 (for 2024) in the previous year. Under this simplified regime, the above income is taxed on 0.15% of sales of products or 0.75% of income arising from business and professional services listed in the table referred to in Article 151 of the PIT Code.

A coefficient of 0.35 is applicable to services not expressly foreseen in the table referred to in Article 151 of the PIT Code.

The income 'deduction' arising from the application of the coefficients of 0.75 and 0.35 (i.e. the generality of the service-rendering activities) is partially conditioned by the verification of expenses and charges effectively incurred and related to the activity. Therefore, to the taxable income determined by applying the coefficients will be added the positive difference between 15% of the gross income and the sum of the following amounts:

  • EUR 4,104 or, when higher, the total amount of mandatory social security contributions (in the part not exceeding 10% of the gross income received).
  • Staff expenses, wages, or salaries communicated to the Portuguese tax authorities.
  • Property rentals allocated to the professional activity communicated through the issue of an electronic receipt or a specific statement, whose invoices and other documents are communicated to the Portuguese tax authorities (if only partially assigned to the professional activity, it is considered only 25% of the total amount).
  • 1.5% of the tax registration value of the properties assigned to the business or professional activity or 4% of the tax registration value of properties assigned to hotel or letting activities (if only partially assigned to the professional activity, it is considered only 25% of the total amount).
  • Other expenses with the acquisition of goods and services related to the activity, duly communicated to Portuguese tax authorities, namely expenses with current consumption materials, electricity, water, transports and communications, rents, litigation, insurance, leasing rents, mandatory fees paid to professional associations and other organisations representing professional activities to which the taxpayer belongs, travels and stays of the taxpayer and one's employees (if only partially assigned to the activity, it is considered only 25% of the total amount).
  • Imports and intra-Community acquisitions of goods and services related to the activity.

In addition to the amount of the above deduction, the amount of mandatory social security contributions paid, exceeding 10% of gross income and related to such professional activities, may also be deducted to the self-employment income if not deducted for other purposes.

Capital gains

As a general rule, capital gains will be subject to tax at a flat rate of 28%. Only 50% of capital gains arising on the sale of shares held on micro and small companies not listed in the stock exchange will be subject to taxation.

As of 1 January 2023, the positive balance between capital gains and capital losses arising from the transfer for consideration of shares and other securities is mandatorily aggregated if the following conditions are met:

  • The assets have been held for less than 365 days.
  • The taxable income of the taxpayer, including the balance of the capital gains and capital losses, amounts to or exceeds EUR 81,199.

These rules apply also to the balance between capital gains and capital losses subject to the aggravated 35% tax rate (country, territory, or region subject to a clearly more favourable regime).

Since 2023, similarly to the regime applicable to tax residents, in the case of non-residents, only 50% of capital gains arising from the sale of real estate is taxed. This income is taxed at the marginal rates varying between 13.25% and 48% (plus the solidarity rate, if applicable), for 2024. In the case of non-tax residents in order to determine the tax rate applicable to those capital gains, it is considered the worldwide income received (even if not taxed in Portugal). 

In the case of tax residents, there are some circumstances under which the gain may be wholly or partially exempt (provided certain requirements are met), such as in case the property being sold was the taxpayer's primary residence in the last 24 months and the sale proceeds, reduced by the value of any outstanding loans relating to the purchase of the property being sold, are reinvested in the acquisition, improvement, or construction of another primary residence in Portugal or within the European Union (EU) within 36 months from the sale or in the period of 24 months previous to the sale. Other exemptions may also apply on the capital gains arising from the sale of real estate.

Dividend and interest income

Dividends and interest are liable to taxation at a flat rate of 28%. However, the taxpayer may opt to be liable to tax on dividends and interest received at the marginal rates varying between 13.25% and 48%, plus the solidarity tax rate, if applicable (in 2024).

A credit against the Portuguese tax liability is available for the lower of the tax paid in the foreign country on those dividends and interest or the amount of tax payable in Portugal on that income. For dividends and interest paid by countries with which Portugal has signed a double taxation treaty (DTT), the tax credit should not exceed the percentage established in the treaty.

If the taxpayer opts to disclose the dividends on the tax return, only 50% will be liable to taxation at the marginal rates in force if the paying company is tax resident in an EU country.

Interest income arising from current or saving accounts on Portuguese banks is taxed at 28% for residents. Interest paid by non-resident entities to tax resident individuals is also taxed at a rate of 28%.

Investment income paid or made available to recipients resident in the Portuguese territory by non-resident entities that also do not have a PE in the Portuguese territory, but which are domiciled in a blacklisted jurisdiction, are liable to a tax rate of 35% (in 2024), either by WHT or by the application of a special rate.

Rental income

As a rule, rental income earned by tax residents and non-tax residents is liable to a special tax rate of 28%. Rental income from residential rentals is taxed at 25% for contracts signed/renewed from October 2023 onwards (some exceptions may apply, determining the date as from which this rate starts to be applicable). The taxpayers have the option for the inclusion of such income in the total aggregated income in some situations. Special reductions or exemptions may apply, provided certain conditions are met.

The rental income that results from a consistent practise of the lease of properties, by option of the taxpayer, may be taxable as income from business and professional activities (self-employment [Category B]). However, in order to determine the income subject to taxation, the same rules used for determination of the rental income in ‘Category F’ should be taken into account.