NHR Tax Regime for Foreign Property Owners in Portugal: What Changed and What's Left

Portugal's Non-Habitual Resident (NHR) tax regime is closed. If you did not register before December 31, 2024, you cannot access it. The regime that attracted thousands of foreign retirees and professionals with its 10-year tax holiday on foreign income is gone for new applicants.

What replaced it, what still exists for property owners, and how Portugal taxes foreign property investors in 2026: that is what this article covers.

What the NHR Was and Why It Ended

The NHR regime was introduced in 2009 under Decree-Law 249/2009 and offered new Portuguese tax residents a flat 20% rate on qualifying Portuguese employment income and broad exemptions on foreign-sourced income for 10 years. For retirees, it meant pension income from abroad was taxed at just 10% (following a 2020 amendment) or was fully exempt under earlier rules.

The regime ended for new applicants as part of the 2024 State Budget (Law 82/2023). The political pressure was straightforward: Portuguese citizens were watching foreigners pay minimal tax on large incomes while domestic taxpayers faced progressive rates up to 48%. The housing crisis amplified the resentment, as NHR-attracted wealth was seen as driving up property prices.

If you registered for NHR before the deadline: Your 10-year benefit period continues as originally granted. Nothing changes for existing NHR holders.

IFICI: The Replacement Regime

The government replaced NHR with the IFICI (Incentivo Fiscal à Investigação Científica e Inovação), introduced under Law 82/2023 and detailed in subsequent regulatory orders. It is sometimes called "NHR 2.0," but that label is misleading. IFICI is a fundamentally different program.

Who qualifies for IFICI:

You must become a Portuguese tax resident and not have been a tax resident in Portugal during the previous 5 years. Additionally, you must work in a qualifying activity. The qualifying activities are narrowly defined and include scientific research and innovation roles, teaching in higher education, jobs in technology companies certified by IAPMEI or ANI, roles in industrial property management, qualified professionals in startups certified under Startup Portugal framework, and certain roles in investment fund management (regulated by CMVM).

What IFICI offers:

A flat 20% tax rate on qualifying Portuguese-source income for 10 consecutive years. Tax exemptions on certain foreign-source income (employment, self-employment, royalties, rental income) if it can be taxed in the source country under a double taxation treaty.

What IFICI does not cover:

Passive income from pensions. General freelance or consulting work not tied to qualifying sectors. Rental income from Portuguese property (this is taxed under standard rules). Retirees, lifestyle migrants, and non-tech remote workers. Capital gains on Portuguese property.

The bottom line: if you are a scientist, tech worker, startup founder, or academic, IFICI may be relevant. If you are a retiree or property investor, it almost certainly is not.

Property Tax Framework for Foreign Owners in 2026

Whether or not you qualify for any special tax regime, Portuguese property ownership comes with a defined set of taxes.

IMI (Imposto Municipal sobre Imóveis) - Annual Property Tax

IMI is Portugal's annual property tax, payable by whoever owns the property on December 31 of each year. Rates are set by each municipality within legally defined ranges:

Urban properties: 0.3% to 0.45% of the property's VPT (valor patrimonial tributário, the tax-assessed value). Rural properties: 0.8% of VPT.

The VPT is not the market value. It is calculated by the Finanças based on a formula that considers the property's age, size, quality, location, and intended use. VPTs are typically 20% to 60% below market value, though recent reassessments have narrowed the gap.

IMI is paid annually. Properties valued under €100 are charged in a single payment in May. Above that, payments split into April, July, and November installments.

Example: A Lisbon apartment with a VPT of €200,000 and a municipal rate of 0.3% = €600/year in IMI.

AIMI (Adicional ao IMI) - Wealth Surcharge

AIMI is an additional tax on Portuguese real estate holdings, introduced in 2017 under Law 42/2016. It applies to the sum of all VPTs of urban properties owned by one taxpayer.

For individuals:

The first €600,000 in total VPT is exempt. Between €600,000 and €1,000,000: 0.7%. Above €1,000,000: 1.0%.

Married couples filing jointly get double thresholds (€1,200,000 exempt, etc.).

For companies: 0.4% on total VPT. If the company is registered in a blacklisted jurisdiction, the rate rises to 7.5%.

Properties held through offshore structures face the harshest AIMI treatment. Portugal maintains a list of blacklisted jurisdictions (Portaria 150/2004, updated periodically) that triggers punitive rates.

Capital Gains Tax on Property Sales

When you sell Portuguese property at a profit, capital gains tax applies.

For tax residents: 50% of the gain is added to your taxable income and taxed at progressive rates (14.5% to 48%). This means the effective rate on the gain ranges from roughly 7.25% to 24%. Reinvestment relief is available: if you reinvest the proceeds in another primary residence in Portugal (or the EU/EEA) within 36 months before or 24 months after the sale, the gain can be partially or fully exempt.

For non-residents: A flat 28% rate on the full capital gain applies. Since January 2023, non-resident EU/EEA citizens can elect to be taxed as residents (the 50% inclusion method) under Article 72 of the CIRS (Código do IRS). Non-EU residents do not have this option and pay 28% on the full gain.

Calculating the gain: Purchase price (adjusted for documented improvement costs and inflation coefficients published annually by the government) is subtracted from the sale price. The inflation coefficient adjusts the original purchase price for monetary depreciation, reducing the taxable gain.

Rental Income Taxation

Residents: Rental income from Portuguese property is included in your overall taxable income at progressive rates (14.5% to 48%), or you can opt for a 28% flat rate (the autonomous taxation option). Long-term rental contracts receive a reduction: 10% reduction for contracts of 2-5 years, 15% for 5-10 years, 20% for 10-20 years, and 25% for contracts over 20 years.

Non-residents: Rental income is taxed at a flat 28% rate, withheld at source if paid through a Portuguese management company, or declared in your annual IRS return. The long-term contract reductions also apply to non-residents.

Short-term rental (AL) income: Treated as Category B (self-employment) income. You can use the simplified regime (with a 35% deemed expense coefficient, meaning only 65% of gross income is taxable) or full accounting. Non-residents must appoint a fiscal representative and file annual returns.

Double Taxation Treaties

Portugal has an extensive network of double taxation agreements (DTAs) covering over 80 countries. The full list is maintained by the Portal das Finanças.

Key treaties for common origin countries of foreign property buyers:

United States: The US-Portugal DTA generally gives taxing rights on property income (rental and capital gains) to the country where the property is located (Portugal). US citizens can claim a foreign tax credit on their US return for Portuguese taxes paid.

United Kingdom: The UK-Portugal DTA follows the OECD model. Property income is taxable in Portugal, with credit relief available in the UK.

France, Germany, Netherlands, Sweden: Similar OECD-model treaties. Property income taxed in Portugal, credit relief in the home country.

Brazil: The Brazil-Portugal DTA has special provisions reflecting the historical relationship. Portuguese residents from Brazil may benefit from specific exemptions.

The critical point: having a DTA does not mean you pay no tax. It means you avoid paying tax twice on the same income. You will still owe tax in Portugal on Portuguese property income, and you may owe residual tax in your home country depending on the treaty terms.

Practical Recommendations

If you are buying Portuguese property purely as an investment and not relocating: plan for the flat 28% non-resident rate on rental income and capital gains, plus the 7.5% flat IMT on purchase. Build these into your yield calculations from the start.

If you are relocating to Portugal: evaluate whether IFICI applies to your professional profile. If it does not, you will be on the standard progressive tax scale. Consult a Portuguese tax advisor (TOC or ROC) registered with the Ordem dos Contabilistas Certificados before making the move.

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