Not so long ago, the only clear tax exclusion provided by the Portuguese Personal Income Tax Code applied to certain financial products that many people hold in Portugal - namely, life insurance and unit-linked life insurance policies.

Just as a side note, we have several articles and webinars about these products on our blog, so if you are interested, you can check them there. And here we’re not talking about proceeds paid to beneficiaries, but rather about the early withdrawal of funds once invested.

Now, it seems the Portuguese market is aiming to become even more attractive to both local and foreign investors, as a brand-new tax provision has been added to the law. This provision introduces an exclusion for a substantial portion of gains from securities - meaning you may avoid paying tax on a significant percentage of your gains if you follow the rules.

This new exclusion bears some similarity to the distinction between ordinary and qualified gains in the U.S., where only long-term gains benefit from lower tax rates.

Here’s a quick overview of the Portuguese exclusion for your gains:

Exclusion %Holding period Rule
10% of the taxable gainsAsset held for > 2 years and < 5 years
20% of the taxable gainsAsset held for > 5 years and < 8 years
30% of the taxable gainsAsset held for > 8 years

 

All taxable gains are generally subject to a flat rate of 28%, with the option to aggregate them under progressive rates.

For U.S. nationals benefiting from the NHR or for all tax residents benefiting from TISRI (IFICI or NHR 2.0) regimes, capital gains from securities from a foreign source are already exempt from taxation. However, this new provision is worth considering for long-term tax planning, if you plan to live in Portugal beyond the 10-year tax vacation.

Although the time required to reach the highest exemption is undeniably long, this new provision sends a clear signal: Portugal is positioning itself as a home for investors. The intent aligns with the broader direction the country is taking toward financial growth - a direction we can also see in the progressive provisions regarding crypto gains, which are entirely exempt from taxation if held for more than a year, regardless of NHR or TISRI!

In short, this is the start of something new - a move that could help soften the impact of Portugal’s high tax brackets and make life here even more appealing after the NHR and TISRI periods end.

Frequently Asked Questions

Automatically Created

What is the new capital gains tax exclusion in Portugal?
Portugal has introduced a new tax provision that excludes a portion of gains from securities, rewarding long-term investors with tax reductions based on how long they hold their assets.
How does the holding period affect the capital gains tax exclusion in Portugal?
The exclusion percentage increases with the holding period: 10% for assets held over 2 years, 20% for over 5 years, and 30% for over 8 years.
Are U.S. nationals with NHR affected by the new capital gains tax exclusion in Portugal?
U.S. nationals benefiting from the NHR regime already have exemptions on foreign-sourced capital gains, but the new provision may be relevant for long-term tax planning if they plan to stay in Portugal beyond the 10-year tax holiday.
What is the tax rate for capital gains in Portugal?
All taxable gains are generally subject to a flat rate of 28%, with the option to aggregate them under progressive rates.
How does Portugal's new tax reform affect crypto gains?
Crypto gains are entirely exempt from taxation if held for more than a year, regardless of NHR or TISRI status.