As an English speaking lawyer in Portugal I have helped many expats with inheritance matters in Portugal. One question comes up more than any other: “Do I have to pay inheritance tax in Portugal?” The short answer might surprise you – Portugal abolished inheritance tax in 2004.
But don’t stop reading this article yet! There is much more to understand about how Portugal handles inheritance and the tax liability that might still apply to your Portuguese assets and worldwide assets. Portugal is one of the countries without inheritance tax that attract foreign residents, though stamp duty still applies in certain situations.
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1. Portuguese Succession Law
Portuguese succession law is based on a civil law system which is very different from common law countries like the UK and US.
The main difference is the forced heirship rules which guarantee certain family members a fixed portion of the estate whatever the amount, regardless of what the Will might say. This is similar to the succession tax in Spain though with some differences in application.
When someone dies while resident in Portugal, their Portuguese assets will pass to their direct legitimate heirs – spouse, children, parents and close relatives in that order. Many Portuguese citizens don’t even make Wills because they are comfortable with these default rules of the law of your country. However for expats from many countries these forced heirship provisions can create unexpected complications.
Under Portuguese inheritance law, legitimate heirs (children, spouse and direct ascendants such as parents) are entitled to a legally protected share of the inheritance. For example:
- If the spouse is the only legitimate heir, they get half of the inheritance
- If both spouse and children are heirs, they get two-thirds of the estate
- If there is no spouse, children get half to two-thirds of the estate depending on how many descendants there are
- With no descendants but a spouse and ascendants, the legitimate quota is two-thirds
This means you can only dispose of a portion of your estate through a Will, the rest will be automatically allocated according to these rules. The value of this protected portion is determined by Portuguese law not by the law of your original country.
The Portuguese Wills Registry System
When making a Will in Portugal it’s important to understand the centralised Wills Registry (Registo Central de Testamentos). This registry keeps records of all registered Wills in Portugal so that heirs can find the most up to date valid Will after death.
Registering your Will isn’t mandatory but is highly recommended as it adds an extra layer of security. Unregistered Wills can be challenged or overlooked during the succession process especially if there are multiple Wills or family members are unaware of the existence of a Will.
The registration process involves submitting the details of your Will to the registry through a notary. This doesn’t mean the contents of your Will become public – only the existence and location of the Will is recorded. When registered your Will becomes harder to contest and provides more certainty that your wishes will be respected.
2. The Reality of Inheritance "Tax" in Portugal and Inheritance Tax Rates
Portugal proudly proclaims no inheritance tax but there is a 10% stamp duty that works like what would be called estate tax in other jurisdictions. However this stamp duty has important exemptions that benefit many families:
Direct family members including spouse, children, parents and grandparents are exempt from paying this stamp duty. This means many inheritances are tax free, no tax is paid regardless of the amount transferred.
However other beneficiaries such as siblings, nieces, nephews, aunts, uncles and cousins (the person receiving who isn’t exempt) must pay a flat 10% stamp duty on inherited assets. For property inheritances there’s an additional 0.8% stamp duty so the total is 10.8%. Unlike progressive inheritance tax rates in many countries Portugal has a flat rate regardless of the wealth transferred. This is just one of the property taxes Portugal applies to real estate holdings.
Many expats breathe a sigh of relief when they learn about these exemptions but cross border inheritance situations can quickly become complex. UK nationals for example may still be subject to UK inheritance tax on their worldwide assets even if living in Portugal. This creates a potential dual tax liability that needs to be planned.
Cross-Border Taxation Through DTAs
Double Taxation Agreements (DTAs) are key to international inheritance planning. Portugal has DTAs with many countries including the UK, US and many EU countries. This is especially important when comparing taxes in Spain and other neighboring countries. These agreements determine which country has taxing rights over specific assets and prevent the same inheritance from being taxed twice.
For British nationals with assets in both Portugal and the UK the Portugal-UK Double Tax Treaty is crucial but most expats miss the key points.
Firstly understand that the UK taxes worldwide assets of UK-domiciled individuals even if you’ve lived in Portugal for decades. Your “domicile” isn’t where you live – it’s your permanent home in the eyes of HMRC and changing it requires more than just moving abroad.
Under the treaty physical assets like property are typically taxed where they are located. So your Portuguese home would face stamp duty in Portugal and UK property would fall under UK inheritance tax. But for intangible assets like bank accounts and investments taxation depends on your domicile status.
I recently worked with a British couple living in the Algarve for 8 years who assumed their Portuguese bank accounts would be outside of UK inheritance tax. They were shocked to discover their UK domicile status meant these assets were within HMRC’s reach. By documenting their permanent intention to remain in Portugal and restructuring certain assets we were able to strengthen their domicile position and reduce their UK tax liability.
The treaty also has specific provisions for avoiding double taxation through tax credits. If your heirs pay Portuguese stamp duty on certain assets this payment can offset UK inheritance tax liability on those same assets so you don’t pay tax twice.
With the UK’s planned abolition of non-domiciled tax status British expats must be even more careful with their estate planning. This will pull many more worldwide assets into the UK tax net making treaty protections more important than ever.
3. Tax Planning for Portuguese Residents
Residency and Inheritance Rules
For those who become a Portuguese resident understanding how Portuguese inheritance rules interact with your home country’s laws is crucial for tax purposes.
Under EU Regulation 650/2012 the courts of the country where the deceased had their habitual residence have jurisdiction over the entire succession. Being a tax resident in Portugal can be advantageous especially if you are enrolled in the NHR program in Portugal which provides preferential tax treatment for qualifying individuals.
Your tax residency status is key to your inheritance tax position in ways many expats don’t realize -until it’s too late!
Location Matters More Than You Think
In Portugal tax residency applies if you:
- Spend 183+ days in Portugal during a calendar year
- Have a habitual residence in Portugal (a permanent home you intend to use regularly)
Portuguese tax residents benefit from Portugal’s no-inheritance-tax system for direct family members but this doesn’t disconnect you from your home country’s tax regulations. Your previous country might still claim taxing rights based on factors beyond residency – such as domicile, citizenship or property location.
For Portuguese tax residents foreign-source inheritances are generally tax free. So a Portuguese resident inheriting assets from relatives abroad won’t pay Portuguese tax on those inheritances. But the source country might still impose its own inheritance taxes.
Non-residents inheriting Portuguese assets face a different situation. While the same exemptions apply for close family members proving relationships and claiming these exemptions can involve more paperwork. Non-resident heirs often face longer processing times and more scrutiny from Portuguese tax authorities.
Golden Visa Considerations
For Golden Visa holders inheritance planning is more complex:
- Golden Visa investors enjoy the same inheritance tax benefits as other residents
- Their unique residency status (requiring only 7 days of presence in Portugal per year) creates complex cross-border inheritance situations
- Limited physical presence in Portugal might affect the determination of their ‘habitual residence’ for succession purposes
- Despite being tax resident elsewhere their Portuguese assets are subject to Portuguese succession rules unless they’ve explicitly chosen their national law in their Will
This makes estate planning even more important for Golden Visa investors with significant Portuguese property investments.
Choosing Your National Law
You can choose the law of your nationality to govern your succession. This must be explicitly stated in a Will or similar legal document. Without this express choice Portuguese law applies to Portuguese residents at the time of death.
When choosing to apply the law of your nationality:
- A Declaration of Law is essential
- This formal declaration explicitly states your intention to have your national law apply to your estate
- For foreign Wills to be fully recognized in Portugal they may need to be:
- Accompanied by this Declaration of Law
- Properly certified
- Possibly translated into PortugueseThis can be useful for financial planning purposes. For example a UK national living in Portugal might choose UK law to apply to certain parts of their estate to avoid Portugal’s forced heirship rules. But this won’t necessarily exempt them from UK inheritance tax.
The declaration must meet specific legal requirements to be valid for Portuguese authorities. This is particularly important for expats who want to maintain full testamentary freedom according to their home country’s laws while living in Portugal.
Effective financial planning requires understanding both systems and Portuguese tax rates. While Portugal has no inheritance tax your worldwide assets might still be taxed in your original country creating a complex situation that requires specialist advice to transfer wealth and minimize liability.
4. Stamp Duty and Other Considerations
When dealing with inheritance in Portugal remember:
- All inherited assets must be declared to the Tax and Customs Authority (Autoridade Tributária e Aduaneira) within the third month after death occurred, even if no tax is due
- You’ll need a Portuguese tax identification number (NIF) to process any inheritance
- Payment of stamp duty can be spread over as many as 10 installments making it more manageable for beneficiaries who have to pay tax
- For property inheritances beneficiaries should consider future capital gains tax and income tax implications if they later sell the property. Understanding Portugal capital gains tax regulations is essential for beneficiaries who plan to sell inherited property
- Foreign assets inherited by Portuguese residents are generally tax free (but may be taxed in the country of origin)
For UK nationals in particular Brexit hasn’t changed Portugal’s inheritance tax rules but it has changed some estate planning considerations for those who retire to Portugal from UK. British expats are still liable for UK inheritance tax on worldwide assets in many cases. Understanding the customs authority requirements in both jurisdictions is key for a smooth transfer of funds and assets. Those considering property investments should also understand the implications if they need to sell property in Spain while resident in Portugal as this creates additional tax considerations across multiple jurisdictions.
5. How Portugal Compares: A Global Inheritance Tax Perspective
Portugal is one of the most inheritance friendly countries in Europe but how does it really compare to other expat destinations?Unlike Spain where inheritance tax rates can reach 34% with modest exemptions that vary by region, Portugal’s system is remarkably simple and generous for close family members. I have had many clients who bought property just across the Portuguese-Spanish border to benefit from Portugal’s more favourable inheritance rules.
Switzerland has a similar approach to Portugal with inheritance tax at cantonal level and spouses are usually exempt. But children may be taxed in certain cantons whereas in Portugal they are fully exempt.
Italy has inheritance tax ranging from 4-8% with exemptions for close relatives, it’s less favourable than Portugal but still moderate compared to northern European countries.
The UK is in a different league with 40% inheritance tax on estates above the nil-rate band (currently £325,000) although primary residences can qualify for additional exemptions. This is why many British retirees choose Portugal as their final home.
In practice these differences create significant planning opportunities. Consider relocating assets to Portugal before death (if possible) to benefit from Portugal’s exemptions. But timing matters - transfers shortly before death may be viewed as tax avoidance in your home country.
For those with global assets Portugal is an option within a diversified estate plan. The key is to understand where each jurisdiction claims taxing rights and structure your affairs accordingly rather than looking at any one country’s system in isolation.
6. Practical Steps for Protecting Your Portuguese Legacy
While minimising tax is important (see below) protecting your legacy is much more than that. From my years working with expats I have found these practical steps make all the difference:
- Create a Portuguese Will alongside any existing Wills in your home country
- Consider using a Declaration of Law to apply your national law (avoid forced heirship)
- Register your Will with Portugal’s Central Wills Registry
- Ensure all heirs have Portuguese tax identification numbers (NIFs)
- Keep detailed records of asset purchases and improvements (especially for property)
Remember Portuguese inheritance proceedings can take time. I have seen cases where heirs waited over a year to access inherited assets due to missing documentation or procedural delays. Proper planning now prevents these headaches later.
The most successful estate plans I have helped create look beyond just the tax implications to consider family dynamics, asset protection and administrative simplicity during an already difficult time for loved ones.
The peace of mind that comes from knowing your affairs are in order is perhaps the greatest benefit of all.
7. Estate Planning and Tax Efficiency
Tax efficient estate planning can legally reduce the tax burden on your heirs. Consider:
- Using lifetime gifts strategically to transfer wealth (but be aware of the 10% gift tax unless the recipient is a direct family member)
- Creating a Portuguese Will alongside any existing Wills in your home country
- Company structures or trusts for holding certain assets (but these require specialist advice)
- Double taxation agreements and how they apply to your situation
- Organizing your funds and Portuguese assets to maximize exemptions
Remember declaring inherited assets is mandatory in Portugal even if no tax is due. Failing to do so within three months can result in fines and penalties. The declaration must be filed with the Tax and Customs Authority regardless of the estate’s value.
For detailed financial planning around inheritance, consult with a specialist who understands both Portuguese succession law and your home country’s tax system. This is especially important for estates above certain thresholds that may trigger significant taxation in your home country.
UK expats should be aware of recent changes to the UK non-dom tax regime. The UK’s planned abolition of the non-dom status will impact inheritance tax planning for British nationals living in Portugal.
Previously non-doms could potentially shield certain foreign assets from UK inheritance tax but these protections are being phased out. This means UK expats in Portugal need to reassess their estate planning strategies as their worldwide assets may now fall within the UK inheritance tax net regardless of their residency status.
This is especially concerning for UK residents receiving inheritance from abroad who must navigate multiple tax systems simultaneously. Consulting with tax professionals familiar with both jurisdictions has become even more important for wealth transfer planning.
8. When To Seek Professional Help
Inheritance matters involving multiple countries require specialist knowledge. I strongly recommend consulting with a lawyer who understands both Portuguese succession law and the inheritance rules of your home country.
Common situations that demand professional guidance include:
- Owning property in multiple countries
- Having family members in different jurisdictions
- Wanting to avoid Portugal’s forced heirship rules
- Passing significant assets to non-exempt beneficiaries
- Double taxation between Portugal and your home country
Without proper planning you risk your heirs facing unexpected tax bills or legal disputes. The Portuguese legal system can be slow and bureaucratic when handling contested inheritances especially those involving foreign elements.
9. Taxation Process
When inheritance tax in Portugal was replaced with stamp duty the process became simpler but still requires attention to detail. Here’s what happens after death:
- Heirs must obtain a tax identification number if they don’t already have one
- A declaration must be submitted to the Tax and Customs Authority within three months
- If stamp duty is due the Tax and Customs Authority will calculate the amount based on the declared value
- For property transfer additional documentation will be required
- Payment of any tax liability must be arranged, either in full or in installments
Failure to comply with these requirements can result in penalties and interest charges so it’s important to deal with these matters promptly when a family member passes away.
In Portugal’s legal system Notary Publics (Notários) play a central role in inheritance matters. Unlike in some common law countries where notaries have limited powers, Portuguese Notaries are highly trained legal professionals with significant powers. They authenticate documents, certify signatures and oversee the proper execution of Wills and inheritance procedures.
When dealing with inheritance in Portugal you will inevitably interact with a Notary Public for several key steps: creating a Portuguese Will, registering a Will with the central registry, executing a Declaration of Law to choose your national law and transferring property ownership to heirs.
The Notary ensures all documentation meets legal requirements and helps prevent future disputes by properly formalizing the inheritance process. While their services include fees the legal certainty they provide is invaluable for cross-border inheritance situations.
10. Your Portuguese Inheritance Plan
Every situation is unique which is why off-the-shelf solutions rarely provide optimal results for complex cross-border inheritance planning. Your nationality, residency status, family situation and asset mix all influence the best approach for your circumstances.
Ask yourself these key questions:
- Who do I want to inherit my Portuguese assets?
- Do these wishes align with Portugal’s forced heirship rules?
- What tax exposures exist in both Portugal and my home country?
- Have I documented my intentions clearly through properly structured Wills?
The answers will reveal where your current plans may fall short and what specific steps you should take next.
Portuguese inheritance matters combine legal, tax and family considerations in ways that demand specialist guidance. I’ve seen too many families discover costly mistakes only after a loved one has passed, when options for correction are limited or non-existent.It’s not just about saving money – it’s about peace of mind for your family when they need it most. And that’s the most important financial planning you’ll ever do.
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11. Frequently Asked Questions
Is Portugal's inheritance tax free?
Yes, Portugal abolished inheritance tax in 2004. However, a 10% stamp duty (Imposto do Selo) applies to most inherited assets located in Portugal. Direct family members, such as spouses, children, and parents, are exempt from this tax. Non-residents inheriting Portuguese assets may still be subject to stamp duty, depending on the circumstances..
What is the inheritance system in Portugal?
Portugal follows a forced heirship system, meaning that a portion of an estate must go to legitimate heirs (spouse, children, and sometimes parents). By law, at least 50% of the estate must be reserved for these heirs, increasing to 60% if there are multiple heirs. The remaining portion of the estate can be freely allocated through a Will. If no Will exists, the estate is distributed according to Portuguese succession laws, prioritizing close family members.
What is the 10 year tax rule in Portugal?
The 10-year tax rule in Portugal refers to the Non-Habitual Resident (NHR) regime, which grants tax benefits to qualifying new residents for 10 years. Under NHR, most foreign income (such as pensions, dividends, and rental income) may be exempt from Portuguese taxation, depending on tax treaties. Income earned in Portugal from high-value professions is taxed at a flat 20% rate, instead of progressive tax rates. However, the NHR regime has undergone recent reforms, with some benefits changing for new applicants from 2024 onward.
Does owning property in Portugal make you a tax resident?
Owning property in Portugal does not automatically make you a tax resident. You become a tax resident if you spend 183+ days per year in Portugal or have a habitual residence, meaning a permanent home you intend to use as your main residence. Meeting either condition can require you to pay tax on worldwide income in Portugal.
