Retirees in Portugal: What You Need to Know About the 2025 Tax Regime

 

If you're a retired expat living in Portugal, the new NHR 2.0 regime introduces important changes that might affect your pension taxation. Here’s what you need to know:

Key Changes for Retirees in 2025

✔ No More 10% Flat Tax on Foreign Pensions
Previously, retirees benefited from a 10% flat tax rate on foreign pension income under the NHR regime. This is no longer available in NHR 2.0.

✔ Standard Progressive Taxation
Pension income is now subject to Portugal’s standard income tax brackets, ranging from 14.5% to 48%, depending on the amount received. This means that some retirees will pay higher taxes than before.

✔ Who Can Still Benefit from the Old NHR Rules?
If you applied for NHR before the end of 2023 and met the residency requirements (such as having a rental contract or house purchase), you may still qualify for the old rules, including the 10% tax rate for up to 10 years.

Mandatory Reporting at the AT Portal

As a tax resident in Portugal, you must comply with declarative obligations at the Portuguese Tax Authority (AT) website (www.portaldasfinancas.gov.pt):

📌 Annual IRS Declaration (Modelo 3)

• All residents must submit an IRS tax return (Modelo 3) between April 1st and June 30th each year.
• If you receive foreign pensions, you must declare them under Category H – Pensions in your IRS filing.

📌 Declaration of Foreign Bank Accounts (Modelo 53 - RCBE)

• If you have bank accounts abroad, you must report them in your IRS return.

📌 Declaration of Foreign Income (Modelo 44 or Modelo 30)

• If you receive income from rental properties abroad, dividends, or other foreign earnings, these must be declared and properly taxed.

📌 NIF and Tax Representation (If Needed)

• If you are a non-EU retiree, you must appoint a fiscal representative in Portugal to assist with tax compliance.

📌 Payment of Taxes & Instalments

• Taxes on foreign income must be paid directly via the AT Portal or through Portuguese banks.
• Some retirees may need to pay in instalments if their tax liability is high.

What Should Retirees Do Next?

✅ Consult a Tax Professional – Ensure compliance with Portuguese tax rules and optimize your tax strategy.
✅ Stay Updated – Tax regulations may change, so always check for official updates from the AT Portal.
✅ Plan for Higher Taxes – If you relied on the old NHR benefits, review your budget to adjust for potential increases in tax payments.

📌 Portugal remains a fantastic destination for retirees, but tax compliance is key! Make sure you're fully informed and prepared.

Sources: 

https://www.movingtoportugal.pt/en/destination-portugal/retire-to-portugal/

https://prismaat.com/nhr-2-0-portugals-updated-tax-regime/

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