Expatriate Tax: Special Expatriate Tax Regime in Portugal Allows 20% Flat Tax Rate

The new expatriate tax regime in Portugal is announced by the Government.

According to the new tax regime, expatriates in Portugal will benefit from a 20% flat tax rate for 10 years, effective from 1 Jan 2009. Currently the tax rate on top personal income tax bracket in Portugal is 42%. Thus, taxpayers who register for the special expat tax will benefit from the 20% tax rate, almost half of the tax being applied to individuals.

To be able to benefit from the special, 20% expatriate tax, individuals should register themselves especially for this tax regime at their local tax office. An individual may apply for the special expatriate tax regime unless they were subject to taxation in the country as a Portuguese tax resident within the last 5 years.

Some exemptions for foreign employment and self-employment income also exist in the new tax law. Foreign employment income and foreign self-employment income will not be subject to tax in case the taxpayer is paying taxes in a country where there is a tax treaty between Portugal and this country. In the case there is no tax treaty between the two countries but also the income which is subject to tax is not generated in Portugal, the income is again exempt from tax.

Read more about Portugal Tax.