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Portugal Income Tax Guide 2026

By Taxpert Editorial · Last reviewed: 26 April 2026

Portugal's personal income tax — Imposto sobre o Rendimento das Pessoas Singulares (IRS) — is a progressive tax on worldwide income for tax residents. This guide explains how it works, what categories your income falls into, and what the 2026 rates are.

Tax residency

You are a Portuguese tax resident if you spend 183 or more days in Portugal in a calendar year, or if your habitual residence (principal home) is in Portugal on 31 December. Tax residents pay IRS on their worldwide income. Non-residents pay only on Portuguese-source income, generally at flat withholding rates.

Income categories (A through H)

IRS is structured around income categories. Each category has its own rules for what counts as income, what deductions apply, and sometimes what rate is used.

Category A — Employment income

Salaries, wages, directors' remuneration, and most employee benefits. Subject to withholding tax (retenção na fonte) by the employer. The most common category for most taxpayers.

Category B — Self-employment and business income

Freelance and sole-trader income. Taxed under the simplified regime (fixed coefficients applied to gross) or organized accounting (actual expenses deducted). See the Freelancer Tax Guide for details.

Category E — Capital and investment income

Interest, dividends, and profit distributions. Usually taxed at a flat 28% autonomous rate, though you can opt for inclusion in general income if the progressive rate would be lower.

Category F — Rental income

Income from renting real estate. Taxed at a flat 28% by default. Long-term leases (2+ years) qualify for reduced rates down to 10% for leases of 20+ years.

Category G — Capital gains

Gains from selling property, shares, and crypto. Property gains are included in general income at 50%. Share and crypto gains are taxed at 28% flat. Crypto held for 365+ days is exempt.

Category H — Pensions

Pension income, including foreign pensions. Subject to a specific deduction and progressive rates. NHR Legacy holders receive a 10% flat rate on foreign pensions; IFICI holders do not.

2026 tax brackets

The standard IRS rates are progressive — you only pay the higher rate on income within each bracket, not on your total income. See the Tax Brackets 2026 guide for the full table and worked examples.

At the top, income above €86,634 is taxed at 48%. A solidarity surcharge of 2.5% applies between €80,000 and €250,000, and 5% above €250,000. A municipal surcharge (up to 1.5%) is also levied by most municipalities.

Special regimes

Portugal offers several regimes that replace the standard brackets with reduced or flat rates:

• IFICI (NHR 2.0) — 20% flat rate for qualifying professionals and researchers. Open to new applicants from 2024. Requires AT approval.
• NHR Legacy — 20% flat rate for existing holders (closed to new applications since January 2024). Includes 10% on foreign pensions.
• IRS Jovem — reduced rates for workers under 35 in their first years of employment.

Key deductions

Several deductions reduce your taxable base before rates are applied:

• Health expenses: 15% of qualifying expenses (capped at €1,000 or more depending on income).
• Education: 30% of tuition fees, capped at €800 (or more in low-density areas).
• Housing: 15% of rent paid, capped at €502.
• PPR pension contributions: 20% of contributions, up to €400 per person.
• Charitable donations: 25% of qualifying donations to public entities.
• General family deduction: €600 per taxpayer, plus €150 per dependent.

Filing

The annual IRS return (Modelo 3) is filed electronically via the AT portal (Portal das Finanças). The filing window is 1 April to 30 June of the year following the tax year. Most withholding tax paid during the year is credited against the final liability. If you owe more, you pay a top-up in August; if you overpaid, AT refunds the excess.