Portugal Potential Tax Incentives in Future: What Expats Should Expect 

• Portugal potential tax incentives have become a relevant topic for investors, business owners, and expatriates who want to move to the country. Over the past few years, Portugal has established itself as a leading European destination for expats because of its pleasant climate, affordable lifestyle, as well as favorable residency programs like the Portugal Golden Visa. Apart from the lifestyle benefits, foreigners are also attracted to the tax-friendly environment of Portugal. However, in the present scenario, Portugal is expected to introduce new tax incentives, which can further enhance its appeal. For expats planning to register company in Portugal, settle, or retire, it is significant to understand what tax benefits may lie ahead. In this blog, we will explore the present tax landscape of Portugal, why new incentives will be introduced, and possible future changes.   

How is the present tax landscape of Portugal? 

• The tax system of Portugal has played a significant role in attracting foreign residents: 

Progressive structure 

• The Portugal tax regime has a progressive structure for residents, implying that higher income is taxed at higher rates. For the year 2025, the personal income tax structure is aiming to provide relief for the lower incomes, while also maintaining fiscal weight on the higher incomes. For non-residents, income derived from the Portuguese sources is taxed at a flat 25% rate, regardless of global income.  

Exemptions and tax benefits  

• There is a major push from the Portuguese government to ease the entry of young people up to the age of 35 years into the workforce. For individuals who invest in businesses they own can deduct at least 20% of the capital they invest from their PIT liability; this fosters risk-taking as well as innovation.  

Corporate tax  

• In the year 2025, the standard corporate tax rate has been lowered to 20%, which signals an effort to improve the business competitiveness of Portugal. Furthermore, the country’s rules for specific expenses such as company cars and entertainment now have friendlier rates, which can reduce the side tax burden for businesses engaging in such spending.  

Value-added tax and digital filing  

• VAT rates have not changed in Portugal. However, there are multiple interpretive and legislative tweaks that showcase EU harmonization as well as digital economy adaptation in the 2025 state budget law. In Portugal, tax return filing is fully digital for most of the taxpayers, as well as companies, and pre-filed returns have become increasingly available, which reduces the complexity for residents and expats.  

Why can Portugal introduce new tax incentives? 

Increase economic growth and attract investment  

• The 2025 state budget has introduced new reforms that are focused on making Portugal more competitive for both domestic as well as foreign businesses and investors. By reducing the corporate and personal income taxes, the government of the country wants to encourage economic activity, job creation, and investment. New incentives have been introduced, such as the IFIC+ regime, which are more favorable for startups, skilled professionals, and investors. These incentives have been designed to attract highly qualified talent internationally and foster innovation.  

Responding to international competition  

• Global tax competition has become more intense, with many countries lowering their tax rates in order to attract businesses and skilled workers. Portugal also uses tax incentives to strategically position itself as a prime destination for investment as well as residence within the EU, using favorable programs such as Golden Visa enhancement as well as the new NHR 2.0 (IFICI) rules.  

Upholding fiscal sustainability  

• Measures are created to balance out fiscal consolidation, which is long-term government budget health, with the targeted growth. Portugal is very careful in choosing incentives that offer a good return through new economic activity, taxes from the future growth, as well as demographic stabilization.  

Supporting young people and labor market participation  

• Portugal faces challenges such as youth emigration and an aging workforce. By providing major income tax exemptions to the young professionals up to the age of 35 for their first ten years of work. The Portuguese government focuses on retaining native talent, attracting youth from other countries, and increasing the participation of the labor force among the younger age groups.  

Possible future tax incentives for expats 

• In Portugal, possible future tax incentives are focused on targeted and competitive regimes that are created to attract skilled professionals, encourage foreign investment, and also support economic growth. While Portugal has recently renovated its most famous expat incentive, the Non-Habitual Resident of the NHR regime, the new and potential incentives consist of: 

IFICI (NHR 2.0) 

• Expats who are working for Portuguese-sourced employers or are self-employed within specific professions, especially those who are in scientific research, innovation, and technology, or qualified start-ups, will get a flat 20% personal income tax rate for up to 10 years. Non-Portuguese income such as dividends, rental, capital gains, continue to be exempted from the Portuguese tax, provided that it will be taxed in the source country and not from the pensions.  

Expansion of sector-specific incentives 

• There are specific regimes that are expected to reward those individuals working in the main industries for the growth of Portugal. This consists of research and development, export-focused companies, startups, tech-based roles, and teaching.  

• Furthermore, tax breaks for performance bonuses, profit-sharing, as well as innovative business activities may be expanded in order to attract high-value foreign workers.  

Madeira International Business Centre 

• The Madeira regime provides a 5% corporate tax rate for approved international business activities. This remains one of the lowest in the European Union, and is easily accessible for the qualifying expats and companies.  

Potential reductions and adjustments  

• The Portuguese government has also signaled its intention to reduce the corporate tax rate further. It is predicted that the rate will be reduced from 20% in the year 2025, to 15% by 2027, which will further make Portugal more attractive for expatriate business owners and investors. Lastly, performance bonuses and non-regular income can see some expanded exemptions for the foreign employees.  

Conclusion  

• On coming to the conclusion, Portugal’s potential tax incentives will play a significant role in transforming the economic landscape of the country in the upcoming years. The benefits for digital nomads, business owners, and retirees are likely to increase in the future, making Portugal a highly attractive immigration destination. The Portuguese government is set to introduce new measures that will support the economic goals and global trends. If you want to opt for Portugal’s golden visa program but find it difficult to navigate through the application process, then Tetra Consultants is your one-stop solution. Our team will help you prepare your visa application, from documentation to post-visa support; we are there with you every step of the way.  

• Contact us, and our team will get back to you within 24 hours.