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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