Planning to move to Portugal, buy property or return after years abroad? The proposed 2027 State Budget could change your tax calculations, but the rules are not final yet.
On 8 October 2026, the Portuguese Government submitted its proposed State Budget for 2027 (Orçamento do Estado 2027, or OE2027) to Parliament.
The proposal includes further reductions in personal income tax, adjustments to tax brackets and an extension of benefits for former residents returning to Portugal. Separately, housing measures proposed in 2026 could also affect the taxation of residential rental income.
For anyone planning a move, investment or return to Portugal in 2026 or 2027, these developments are worth understanding before making financial decisions.
Importantly, the 2027 State Budget is still a draft. Parliament will debate and vote on it in stages, and individual measures may be amended before the final legislation is approved.
Here is what is currently proposed, who could be affected and what to consider before making plans based on these changes.
1. Portugal's Income Tax Rates Could Fall Again in 2027
One of the main measures in the proposed budget is another reduction in personal income tax, known in Portugal as IRS (Imposto sobre o Rendimento das Pessoas Singulares).
The proposal would continue a series of income tax reductions introduced over recent years.
Under the proposed changes:
- The thresholds for all nine income tax brackets would increase by approximately 3.88%.
- The lowest marginal income tax rate would decrease to 12.2%.
- Several intermediate income tax rates would also decrease.
- The highest marginal income tax rate would remain at 48%.
Proposed Income Tax Brackets for 2027
|
Annual Taxable Income |
Proposed Tax Rate |
|
Up to €8,666 |
12.2% |
|
€8,666 to €13,075 |
15.2% |
|
€13,075 to €18,530 |
20.7% |
|
€18,530 to €23,985 |
23.6% |
|
€23,985 to €30,538 |
30.6% |
|
€30,538 to €44,762 |
34.6% |
|
€44,762 to €48,373 |
43.1% |
|
€48,373 to €89,995 |
44.6% |
|
Above €89,995 |
48% |
These rates are taken from the October 2026 budget proposal and are subject to parliamentary approval.
Portugal uses a progressive income tax system. This means that different portions of taxable income are taxed at different rates.
For example, someone earning €50,000 in taxable income would not pay 44.6% on the entire amount. Only the portion falling within that bracket would be subject to that marginal rate.
What Does This Mean for People Moving to Portugal?
If you become a Portuguese tax resident in 2027, the proposed changes could reduce your income tax liability under the standard progressive system.
However, the impact will depend on your income, deductions, family situation and the types of income you receive.
For international professionals, entrepreneurs and remote workers, another important consideration is when Portuguese tax residency begins.
Portugal generally taxes its tax residents on worldwide income, subject to applicable exemptions, special regimes and international tax treaties.
This means that income from foreign employment, businesses, investments or property may become relevant to your Portuguese tax position after relocating.
As explained in our guide to tax residency vs legal residency in Portugal, obtaining a residence permit does not automatically determine when you become a Portuguese tax resident.
Understanding the distinction can be particularly important when deciding whether to relocate before or after the start of a new tax year.
2. Higher Earners: Changes to Portugal's Solidarity Surcharge
The proposed budget also adjusts the threshold for Portugal's additional solidarity surcharge (taxa adicional de solidariedade).
This tax applies to individuals with higher levels of taxable income, on top of the standard progressive income tax rates.
Under the proposal, the additional rates would apply as follows:
|
Annual Taxable Income |
Additional Tax |
|
Up to €89,995 |
No surcharge |
|
€89,995 to €250,000 |
2.5% on the portion above €89,995 |
|
Above €250,000 |
5% on the portion above €250,000 |
What Does This Mean for International Professionals and Entrepreneurs?
For individuals moving to Portugal with higher salaries, business income or professional earnings, the solidarity surcharge is an important part of calculating their potential tax liability.
However, not everyone relocating to Portugal will necessarily be subject to the standard progressive IRS system for all their income.
For example, some professionals may qualify for the Incentive for Scientific Research and Innovation (IFICI), frequently referred to as NHR 2.0.
IFICI offers specific tax benefits for qualifying individuals, but eligibility depends on several conditions, including professional activity, the relevant organization and the applicable qualification route.
The IFICI eligibility checker can help individuals understand which requirements may be relevant to their circumstances.
For anyone considering moving to Portugal in 2027, comparing the standard tax system with any special regime they may qualify for is more useful than looking at headline tax rates alone.
3. Rental Property: A Proposed 10% Tax Rate for Qualifying Landlords
Portugal has also introduced proposals aimed at encouraging more properties to enter the residential rental market.
One measure under the separate housing legislative package would reduce the autonomous personal income tax rate on qualifying residential rental income from 25% to 10%.
The proposed benefit concerns rental agreements meeting the requirements of the moderate-rent framework, including a monthly rent limit of €2,300, and is intended to apply until the end of 2029.
This measure is part of a separate housing reform proposal and should not be confused with the 2027 State Budget itself. Its final application depends on the relevant legislation and eligibility conditions.
How Much Could Landlords Save?
Consider a residential property generating €1,500 per month in rent, equivalent to €18,000 annually.
Assuming, for illustration, that the full annual rental income were taxable at either rate:
|
25% Tax Rate |
10% Tax Rate |
|
|
Annual rental income |
€18,000 |
€18,000 |
|
Illustrative income tax |
€4,500 |
€1,800 |
|
Annual difference |
€2,700 |
What Does This Mean for Property Investors?
For someone buying a rental property in Portugal, a reduction in rental income tax could affect the expected return on investment.
However, a property generating less than €2,300 per month would not necessarily qualify automatically.
The type of rental agreement, legal conditions, property use and owner's tax situation may all be relevant.
Investors also need to consider whether short-term accommodation, mid-term rentals or long-term residential leases are better suited to their property.
Tax treatment is only one element of that decision. Rental demand, operating costs, maintenance, vacancy periods and restrictions on property use also affect profitability.
For anyone considering purchasing or changing the use of a property, it is important to evaluate the investment under both the current rules and the proposed measures, rather than assuming the new incentives will apply.
4. The Regressar Programme Could Be Extended to Returning Residents in 2027
Another important proposal concerns the extension of Portugal's Regressar tax regime.
The programme provides tax relief for certain individuals who previously lived in Portugal and subsequently moved abroad.
Under the proposed 2027 State Budget, the regime would be extended to eligible individuals who become Portuguese tax residents during 2027.
What Tax Benefits Does Regressar Offer?
The regime allows qualifying returning residents to exclude 50% of eligible employment and business or professional income from Portuguese personal income tax.
The benefit generally applies for five years, subject to an annual eligible income limit of €250,000.
For example, if someone returns to Portugal and earns €60,000 annually in qualifying employment income, €30,000 could be excluded from Portuguese income tax under the regime.
The remaining taxable income would still be subject to the applicable tax rules.
This is a simplified example, and the actual tax treatment will depend on individual circumstances.
Who Could Qualify?
The programme is designed for former Portuguese tax residents who meet specific requirements.
In general, these include:
- Becoming a Portuguese tax resident again within the qualifying period.
- Having been non-resident in Portugal for at least the previous five years.
- Having previously been a Portuguese tax resident.
- Meeting the conditions concerning previous access to preferential tax regimes.
- Having their tax affairs in order.
An important distinction is that Regressar is not exclusively available to Portuguese nationals.
Foreign citizens who previously lived in Portugal may also qualify if they satisfy the applicable requirements.
Why Does the 2027 Extension Matter?
Someone who previously lived in Portugal, spent several years working abroad and is now considering returning may be able to benefit from substantial tax relief.
However, the date of their return matters.
For someone deciding whether to relocate in late 2026 or during 2027, the proposed extension could affect their tax planning.
Because the extension to 2027 has not yet been approved, anyone planning a return should consider the possibility that the final legislation may differ from the current proposal.
5. What Should You Consider if You Are Moving or Investing in Portugal in 2027?
The proposed changes may have different implications depending on your circumstances.
If You Are Moving to Portugal
Review when you are expected to become a Portuguese tax resident and how your income will be taxed.
This is particularly important if you receive income from another country or continue working for a foreign company after relocating.
The proposed 2027 income tax reductions may be relevant, but the timing of your move and any available special tax regimes could have a greater impact on your overall tax position.
If You Are Buying Property
Calculate the expected rental return using the tax rules currently in force, then compare it with a scenario in which the proposed housing measures are enacted.
A reduced rental income tax rate could improve net returns, but eligibility requirements and other property expenses must also be considered.
If You Are Returning to Portugal
Review your previous tax residency history and whether you may qualify for the Regressar Programme.
If your return is planned for 2027, the proposed extension could be relevant, but it should not be treated as guaranteed until the legislation is finalized.
If You Own a Business Abroad
Consider how becoming a Portuguese tax resident could affect your business income, foreign company interests and international tax obligations.
Portugal's personal income tax brackets are only one part of the calculation.
For individuals running foreign businesses while living in Portugal, understanding how their activities are structured and managed can be particularly important.
6. When Will Portugal's 2027 State Budget Be Approved?
The Portuguese Government submitted the proposed State Budget to Parliament on 8 October 2026.
However, submitting the proposal does not mean the measures have become law.
The budget must pass through several stages of parliamentary scrutiny, debate and voting.
The expected timetable is:
|
Date |
Parliamentary Stage |
|
8 October 2026 |
Government submits the budget proposal |
|
27 and 28 October 2026 |
General debate and vote |
|
29 October to 6 November 2026 |
Committee hearings |
|
18 to 23 November 2026 |
Detailed debate and voting on individual measures |
|
24 November 2026 |
Final overall vote |
During this process, Parliament may introduce amendments, change proposed measures or remove provisions from the original text.
Following parliamentary approval, the legislation must complete the remaining constitutional and publication procedures before entering into force.
The budget is intended to take effect on 1 January 2027, subject to the final approved legislation and any specific commencement dates.
Why Should You Avoid Relying on the Draft?
For individuals planning an international move or property investment, even relatively small changes to tax rules can affect financial projections.
For example:
- Someone relocating in 2027 might calculate their expected tax liability using the proposed IRS brackets, only for those brackets to change during parliamentary discussions.
- A property investor might expect a 10% rental income tax rate without satisfying the final eligibility requirements.
- A former resident might schedule their return based on the proposed Regressar extension before it is formally approved.
These scenarios show why the distinction between a proposal and legislation already in force matters.
The safest approach is to plan for more than one outcome. Calculate your financial position under the existing rules and compare it with the proposed changes.
That way, a relocation or investment decision does not depend entirely on legislation that Parliament has not yet finalized.
What the 2027 Budget Means for Portugal's Newcomers
Portugal's proposed 2027 State Budget includes measures that could affect people moving to the country, international professionals, higher earners and former residents considering returning.
The adjustments to income tax brackets may reduce the tax burden for some residents, while the proposed extension of Regressar could create additional opportunities for eligible returnees.
Separate housing reforms may also change the financial calculations for residential property investors.
But there is one point to keep in mind: these changes are not all approved laws.
The 2027 State Budget remains under parliamentary consideration, and the housing measures follow a separate legislative process. The final rules may differ from those currently proposed.
For anyone planning to move to Portugal, buy property or return in 2026 or 2027, understanding both the current rules and the potential changes is essential.
Plan for what is already in force, assess what could change, and avoid making financial commitments based solely on draft legislation.
This article reflects the legislative proposals and parliamentary timetable available as of 19 October 2026. It is intended for general information and does not constitute individual legal or tax advice.
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