What IFICI exempts abroad, and what it quietly does not
Five categories of foreign income out of Portuguese tax. Pensions are not one of them, and income from a blacklisted jurisdiction is worse off than without the regime.
Foreign source income in categories A, B, E, F and G is exempt from Portuguese income tax under IFICI. Category H, pensions, is not, and is taxed at ordinary progressive rates. Income of any category paid from a jurisdiction on the Portuguese blacklist is taxed at 35%. The exemption is applied with progressivity, so exempt income still counts towards the rate on whatever is taxed.
- ExemptForeign employment, self employment, investment, rental and capital gains
- ProgressiveForeign pensions, category H, outside the exemption
- 35%Any category, when paid from a blacklisted jurisdiction
- 20%The flat rate, which applies only to Portuguese work income
Generous, then silent, then punitive
The exemption is wide enough that the exceptions are what decide whether the regime works for you.
Five categories, whatever the amount.
Foreign employment income, self employment income, investment income including dividends and interest, rental income and capital gains are all exempt. There is no ceiling and no minimum holding period. For an investor whose income arrives as dividends and gains, this is the whole point of the regime.
Autoridade Tributária, IFICI information leafletPensions, and it is deliberate.
Category H sits outside the exemption and is taxed at the ordinary progressive rates, which run well above 20%. This is the sharpest break from the old non habitual resident regime and the reason IFICI suits people still earning and rarely suits people who have stopped.
Autoridade Tributária, IFICI FAQ35%, and it beats the ordinary rules downwards.
Income of any category paid or made available by entities domiciled in a country, territory or region with a clearly more favourable tax regime is taxed at 35%. If your holding structure sits in one of those jurisdictions, IFICI makes your position worse rather than better, and that is worth checking before you move rather than after.
Autoridade Tributária, IFICI information leafletCategory by category
Portuguese income tax sorts income into lettered categories, and IFICI treats them differently. This is the list that matters when you map your own income onto the regime.
- Category A, employment
- Foreign employment income: exempt. Portuguese employment income from an eligible activity: flat 20%
- Category B, self employment
- Foreign self employment income: exempt. Portuguese self employment income from an eligible activity: flat 20%
- Category E, investment income
- Foreign dividends, interest and royalties taxed as investment income: exempt, unless paid from a blacklisted jurisdiction, where the rate is 35%
- Category F, rental income
- Foreign property income: exempt
- Category G, capital gains
- Foreign gains, including on securities: exempt. Portuguese source gains follow the ordinary rules, so a Portuguese disposal is not covered
- Category H, pensions
- Not exempt. Taxed at progressive rates, foreign or Portuguese
- How the exemption is applied
- Exemption with progressivity: the exempt income is not taxed, but it is taken into account in setting the rate on income that is taxed progressively. The regime applies without prejudice to the option to aggregate
Exempt in Portugal is not exempt everywhere
IFICI decides what Portugal charges. It has nothing to say about what the source country withholds, or about what a country that taxes on citizenship rather than residence will still ask for. Whether a dividend arrives untaxed depends on the treaty and on your own nationality, not on the regime, and that is the part worth modelling with actual numbers before you commit to a move.
Common questions
The ones we answer on almost every call, and the ones the market most often gets wrong.
Are my foreign dividends really untaxed in Portugal?
Under IFICI, yes, unless they are paid by an entity domiciled in a blacklisted jurisdiction, in which case the rate is 35%. Your source country may still withhold at source, which is a treaty question rather than an IFICI question.
What about my pension?
Pensions are category H and sit outside the exemption. They are taxed at ordinary progressive rates. If your income is mostly pension income, IFICI adds very little, and the honest answer is often that the regime is not the reason to move.
If the income is exempt, why does Portugal want to see it?
Because the exemption is applied with progressivity. The exempt income is not itself taxed, but it is taken into account when the rate on your taxable income is set, so it still has to be declared.
Does the exemption cover gains on Portuguese assets?
No. The exemption is for foreign source income. A gain on a Portuguese asset follows the ordinary Portuguese rules, and selling a Portuguese company or property is not sheltered by the regime.
Which jurisdictions are on the blacklist?
Portugal publishes the list of countries, territories and regions with clearly more favourable tax regimes, and it is amended from time to time. The practical step is to check where each paying entity in your structure is domiciled against the current list before you become resident.
Talk to us
We advise founders, investors and executives on both sides of this: the tax position and the residency route, together rather than separately.
