Once you own property in Portugal, there are ongoing tax obligations to understand. The good news is that Portuguese property taxes are generally modest compared to the UK, France or the US — but they exist, and the rules differ depending on whether you are a resident or non-resident, and whether you let the property.
Here is a clear, practical guide to what you will owe.
IMI — Annual property tax
IMI (Imposto Municipal sobre Imóveis) is Portugal’s annual property tax, roughly equivalent to council tax in the UK or taxe foncière in France. It is charged by the municipal council and paid annually.
How it is calculated:
IMI is charged as a percentage of the Valor Patrimonial Tributário (VPT) — the government’s assessed rateable value of the property. This is almost always significantly lower than the market value. A €600,000 apartment in Chiado might have a VPT of €150,000–€200,000.
Rates for urban properties:
- 0.3% — minimum rate, set by most Lisbon and Porto municipalities
- 0.45% — maximum rate for urban properties (some municipalities charge this)
- Lisbon currently charges 0.3%
Worked example:
- Market value: €500,000
- VPT (rateable value): ~€150,000
- IMI at 0.3%: €450/year
Payment: IMI bills are issued between April and June each year and paid between April and November, depending on the amount owed. Small bills (under €100) are paid in a single instalment; larger bills are spread over two or three instalments.
Primary residence reduction: If the property is your primary residence, you can apply for an IMI reduction based on the number of dependants (children) in the household.
AIMI — Wealth surcharge on high-value properties
AIMI (Adicional ao IMI) is a surcharge that applies to individuals who own Portuguese property with a total VPT above certain thresholds.
Thresholds (2025):
- Individuals: AIMI applies to the portion of total VPT above €600,000
- Married couples / civil partners: threshold doubles to €1,200,000
- Companies: AIMI applies from the first euro (no threshold)
Rates:
- 0.4% on VPT between €600,000 and €1,000,000
- 0.7% on VPT above €1,000,000
- 1.5% on VPT above €2,000,000
For most buyers of a single property in Lisbon — where VPT is typically 25–35% of market value — AIMI will not apply.
Rental income tax
If you let your Portuguese property, the rental income is taxable in Portugal — regardless of whether you are a resident or not.
Non-resident landlords:
- Flat rate of 28% on gross rental income
- No deductions for expenses (as a rule, though some repairs may be deductible)
- Tax is declared annually via a Portuguese non-resident tax return (Modelo 3)
Portuguese tax residents:
- Rental income can be taxed at the flat 28% rate or added to other income and taxed at progressive rates (up to 48%)
- Various deductions are available (maintenance, insurance, depreciation, management fees)
- Most resident landlords opt for the 28% flat rate as it is usually more favourable
Short-let (Alojamento Local / AL): Short-term rentals (Airbnb-style) are treated differently — as business income rather than simple rental income. There are additional registration requirements, licensing obligations and different tax treatment. If you are considering short-lets, take specific advice from a tax adviser before you buy.
Capital gains tax
When you sell a Portuguese property, any gain is subject to capital gains tax.
For non-residents:
- Capital gains are taxed at a flat 28% on the full gain
- No inflation indexing
For Portuguese tax residents:
- 50% of the capital gain is included in your taxable income for the year and taxed at progressive rates
- If the proceeds are reinvested in another primary residence within 36 months, the gain may be exempt
- Inflation indexing applies to properties held for more than 2 years
How the gain is calculated: Gain = Sale price − (Purchase price + acquisition costs + improvement costs + selling costs)
Acquisition costs (IMT, stamp duty, legal fees) and eligible improvement works reduce your taxable gain. Keep all receipts.
Inheritance and gift tax
Portugal does not levy inheritance tax on direct family members (spouses, children, parents). However:
- Stamp duty at 10% applies on inheritances and gifts to anyone who is not a direct family member (siblings, cousins, friends)
- There is no inheritance tax between spouses, children and parents
This makes Portugal significantly more attractive for family wealth planning than many of its European neighbours.
What non-resident owners should do
If you are a non-resident property owner in Portugal, you are required to:
- File an annual Portuguese non-resident tax return (Modelo 3) if you have rental income or capital gains
- Pay IMI each year (bills are sent to your registered address — typically your fiscal representative’s address if you are non-resident)
- Declare Portuguese property income in your home country (Portugal has double taxation agreements with most countries, so you will not be taxed twice on the same income)
We recommend engaging a Portuguese accountant or tax adviser as soon as you purchase. The cost is modest; the peace of mind is not.
Book a free call if you would like recommendations for trusted tax advisers who work with international property owners in Portugal.