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Inheritance Tax Portugal: A Wealth Manager’s Guide for Expats & Residents

Learn about inheritance tax in Portugal. While traditional inheritance tax was abolished, a 10% stamp duty (Imposto do Selo) applies to Portuguese assets for non-direct heirs. This guide covers exemptions, forced heirship, and double taxation for expats and residents

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Table of Contents

Introduction on Inheritance Tax Portugal

Understanding inheritance tax in Portugal is crucial for anyone with assets in the country or planning to move here. It is relative straightforward, especially when compared to many other countries (See IHT in Spain, or IHT in laws in France)

While Portugal abolished traditional inheritance tax in 2004, a specific stamp duty, known as Imposto do Selo, still applies in certain situations.

This guide will provide a detailed overview of Portuguese inheritance tax rules, helping you navigate the complexities and plan your estate effectively.

Understanding Inheritance Tax in Portugal: The Stamp Duty (Imposto do Selo)

Portugal’s approach to inheritance is unique.

The traditional inheritance tax was abolished almost two decades ago.

However, it was replaced by a stamp duty. This means that while you won’t encounter a tax explicitly named “inheritance tax” in Portugal, the Imposto do Selo functions similarly for certain beneficiaries and assets.

Key Exemptions from Portuguese Inheritance Tax (0% Rate)

One of the most significant aspects of inheritance tax in Portugal is the generous exemption for close relatives.

These individuals are completely exempt from the stamp duty on inheritances and gifts. This means they pay a 0% rate on the value of assets received.

The following close relatives are exempt from this stamp duty:

  • Spouse: Legally married partners.
  • Children: Biological and adopted children.
  • Grandchildren: Descendants of your children.
  • Parents and Grandparents: Ascendants.

 

For these direct heirs, the concept of inheritance tax in Portugal is effectively non-existent.

The 10% Stamp Duty Rate for Other Beneficiaries

If the beneficiary of an inheritance or gift is not one of the exempt close relatives listed above, then a 10% stamp duty applies.

This is where the term “inheritance tax Portugal” becomes relevant for a broader range of beneficiaries.


This 10% stamp duty typically applies to:

  • Siblings
  • Cousins
  • Friends
  • Unmarried partners (unless legally registered as a “de facto union” in Portugal, which grants them similar rights to spouses for inheritance purposes).
  • Any other individual not classified as a direct heir.

 

The 10% stamp duty is only due on Portuguese-sited assets. This is a critical distinction.

Examples of assets that would be subject to this tax if inherited by a non-exempt beneficiary include:

  • Real estate located in Portugal.
  • Bank accounts held in Portugal.
  • Securities (e.g., shares in Portuguese companies) held in Portugal.
  • Valuable movable assets situated in Portugal.

 

Noe: If you are a non-resident inheriting assets located outside of Portugal, Portuguese inheritance tax (i.e., stamp duty) generally does not apply, even if the deceased was a Portuguese resident.

Navigating Inheritance Tax in Portugal

The process of dealing with an inheritance in Portugal, while seemingly straightforward, requires adherence to specific legal steps.

Understanding these steps is vital to ensure a smooth transfer of assets and compliance with inheritance tax Portugal regulations.

There are essentially 4 major steps:

  1. Submission of Documents: The death certificate and the deceased’s will (if one exists) are submitted to the relevant authorities.
  2. Identification of Assets and Debts: A comprehensive inventory of the deceased’s assets and liabilities must be compiled.
  3. Declaration to Tax Authority: Heirs are required to file a declaration with the Portuguese tax authority (Autoridade Tributária e Aduaneira) within three months of the death. This declaration details the assets inherited and identifies the beneficiaries.
  4. Payment of the Stamp Duty: If the 10% stamp duty applies to the inheritance, it must be paid at this stage. It’s crucial to be aware that this duty may need to be paid before the asset (such as property) is actually realised or sold.

Inheritance Tax Portugal: Considerations for Foreigners Living in Portugal

For foreigners residing in Portugal, whether under a D7 visa, the Non-Habitual Resident (NHR) regime, or any other status, understanding the interplay between inheritance tax in Portugal and their home country’s laws is paramount.

While Portugal may not levy traditional inheritance tax on direct heirs, your country of origin might still impose its own inheritance or estate taxes on your worldwide assets, depending on your domicile, nationality, or last habitual residence.

This is a common area of confusion and requires careful planning.

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Default Inheritance Law in Portugal: Forced Heirship

Beyond the tax implications, it’s essential to understand Portugal’s default inheritance law, particularly the concept of “forced heirship”.

This principle dictates how a portion of an estate must be distributed, regardless of the deceased’s will. This is a fundamental aspect of inheritance law in Portugal.

Forced Heirs – "Herdeiros Legítimos"

Portuguese law guarantees a portion of the estate to close family members. These “forced heirs” cannot be disinherited except in very rare and serious cases (e.g., severe abuse, neglect, or certain criminal acts against the deceased).

The forced heirs include:

  • Spouse
  • Children (biological or adopted)
  • Parents (if there are no children)

 

The law reserves a minimum portion of the estate for these individuals:

  • If spouse + children: They are entitled to at least 50% of the estate, shared between them.
  • If only children (no spouse): They receive at least 50% to 60%, depending on the number of children.
  • If only spouse (no children or parents): The spouse receives a minimum of 50%.
  • If only parents (no spouse or children): They are entitled to 50%.

 

The remaining portion of the estate, known as the “available quota,” can be freely distributed by will to anyone, including friends, charities, or other family members.

Intestate Succession (No Will) in Portugal

If an individual dies without a valid will (intestate succession), Portuguese law automatically applies a strict order of inheritance for the entire estate:

  1. Spouse and descendants (children, grandchildren)
  2. Spouse and ascendants (parents, grandparents)
  3. Siblings and their descendants
  4. Other relatives up to the 4th degree
  5. The State (if no legal heirs exist)

Example: If someone dies with a spouse and two children, the estate is divided among them according to the law.

If there are no children or spouse, the parents inherit.

If no family remains, the Portuguese State inherits the assets.

The Importance of a Portuguese Will and Brussels IV

While the forced heirship rules are strong, drafting a Portuguese will is highly recommended, especially for foreigners. For EU citizens, the EU Regulation 650/2012 (known as the “Brussels IV” regulation) offers a significant planning opportunity.

This regulation allows you to elect the law of your nationality to govern your succession, rather than the law of the country where you habitually resided at the time of death.

Crucially, this election must be clearly stated in a valid will. At the time of writing, this regulation also includes the United Kingdom, despite its departure from the EU. Electing your national law can help circumvent Portugal’s forced heirship rules for the entire estate, aligning the inheritance with your wishes.

Inheritance Law on Pensions in Portugal

The treatment of pensions under inheritance law in Portugal is often distinct from other assets.

Generally, private pension funds are not considered part of the deceased’s estate for the purpose of Imposto do Selo (stamp duty).

Instead, these funds are typically paid directly to the nominated beneficiaries of the pension scheme. This means that even if the beneficiary is not a direct heir, the 10% stamp duty on inheritance tax Portugal may not apply to the pension payout, as it bypasses the traditional inheritance process.

However, specific pension scheme rules and the tax laws of the country where the pension is held will ultimately determine the tax treatment.

Double Taxation and Inheritance Tax Portugal

A common concern for international individuals is double taxation.

Unfortunately, Portugal does not have specific inheritance tax agreements with other countries under its bilateral Double Taxation Agreements (DTAs).

Portugal’s Position

  • No Inheritance Tax DTAs: Portugal’s DTAs are primarily designed to prevent double taxation on income and capital gains, not on inheritance or gift taxes.
  • Situs Principle for Stamp Duty: The 10% stamp duty applies only to assets located in Portugal and only if the heir is not a direct heir (spouse, descendant, or ascendant).

 

Key Points for Consideration

  • Portugal-Only Tax for Portuguese Assets: The Imposto do Selo only applies to assets physically located in Portugal, and only when inherited by non-exempt beneficiaries.
  • Foreign Inheritance Taxes Still Apply: If you are subject to inheritance tax in your home country (based on domicile, nationality, or residency rules), that tax will likely still apply to your worldwide estate, regardless of the Portuguese rules.
  • No Relief via DTA, but Unilateral Credit Possible: Since there are no specific DTAs for inheritance tax, you won’t find direct relief. However, some countries may offer “unilateral credit relief” for foreign taxes paid.
    For example, the Portugal-UK DTA (1969) does not cover inheritance tax, but the UK may allow a unilateral credit for the Portuguese stamp duty paid on Portuguese assets.
  • Risk of Double Taxation: Without a corresponding provision for credit in your home country’s tax laws, you could face true double taxation—paying both the 10% Portuguese stamp duty and your home country’s inheritance or estate tax on the same asset.
  • Mirroring Wills: It is crucial to ensure that any wills you have in varying countries are consistent and reflect your preferences, especially regarding the election of national law under Brussels IV, to avoid conflicts with forced heirship rules.
  • Understand Home Country Liabilities: If you are a foreigner resident in Portugal, thoroughly understand your home country’s inheritance tax situation and how it may affect your estate.
    Living in Portugal does not automatically exempt you from inheritance tax liabilities elsewhere.
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How to Calculate and Pay Inheritance Tax in Portugal

Calculating inheritance tax in Portugal is straightforward when it applies.

It is simply 10% of the taxable value of the Portuguese-sited assets received by a non-exempt beneficiary.

For example, if a sibling inherits a Portuguese property valued at €300,000, the stamp duty would be €30,000.

Payment is made through the Portuguese tax authority after the inheritance declaration has been filed, typically within the three-month window following the death.

Frequently Asked Questions (FAQs) about Inheritance Tax in Portugal

Here are some common questions about inheritance tax in Portugal I get asked:

Q: How does inheritance tax work in Portugal?

A: Portugal abolished traditional inheritance tax in 2004. Instead, a 10% stamp duty (Imposto do Selo) applies to inheritances and gifts of Portuguese-sited assets, but only if the beneficiary is not a direct heir (spouse, children, grandchildren, parents, grandparents), who are exempt (0% tax).

A: For direct heirs (spouse, children, grandchildren, parents, grandparents), the rate is 0%. For all other beneficiaries, a 10% stamp duty applies to the value of Portuguese-sited assets received.

A: Portugal does not have a separate “estate tax” as found in some other countries. The 10% Imposto do Selo on inheritances and gifts serves as the closest equivalent to an inheritance or estate tax, but with significant exemptions.

A: If the 10% stamp duty applies, it is paid to the Portuguese tax authority after the declaration of inheritance has been filed, typically within three months of the death.

A: Generally, private pension funds are not subject to the 10% Imposto do Selo in Portugal, as they are usually paid directly to nominated beneficiaries outside the deceased’s estate. However, the tax treatment will depend on the specific pension scheme and the laws of the country where the pension is held.

A: Non-residents inheriting Portuguese-sited assets from a deceased person (whether resident or non-resident) will be subject to the 10% stamp duty if they are not a direct heir. If the assets are outside Portugal, Portuguese stamp duty generally does not apply.

A: Forced heirship is a principle in Portuguese law that reserves a guaranteed portion of an estate for close family members (spouse, children, or parents), regardless of the deceased’s will.

A: For direct heirs, there is no inheritance tax in Portugal to avoid, as the rate is 0%. For other beneficiaries, the 10% stamp duty applies to Portuguese-sited assets. Strategic estate planning, including the use of wills and understanding international tax implications, can help manage your overall tax burden.

A: The Brussels IV Regulation (EU Regulation 650/2012) allows EU citizens (and, at present, UK citizens) to choose the law of their nationality to govern their succession, rather than the law of their last habitual residence. This choice must be explicitly stated in a will.

Inheritance Tax Portugal: Case Studies

To illustrate how inheritance tax in Portugal applies, consider the following scenarios:

Case Study 1: Exempt Beneficiary

Scenario: Maria, a Portuguese resident, passes away, leaving her apartment in Lisbon, valued at €500,000, to her daughter, Sofia.

Outcome: Sofia is a direct heir (daughter). According to Portuguese inheritance tax rules, she is exempt from Portuguese IHT. Therefore, Sofia pays 0% tax on the inheritance of the Lisbon apartment.

Case Study 2: Non-Exempt Beneficiary

Scenario: John, a British expat living in Portugal, passes away, leaving his Portuguese bank account containing €100,000 to his beloved friend, David.

Outcome: David is not a direct heir. The bank account is a Portuguese-sited asset. Therefore, David is subject to the 10% Stamp Duty. David would pay €10,000 in Portuguese stamp duty (€100,000 * 10%). John’s estate might also be subject to UK inheritance tax depending on his domicile.

Case Study 3: Non-Resident with Portuguese Property

Scenario: Sarah, a Canadian resident, owns a holiday home in the Algarve, Portugal, valued at €400,000. She passes away, leaving the property to her brother, Mark.

Outcome: Mark is not a direct heir. The property is a Portuguese-sited asset. Therefore, Mark is subject to the 10% Imposto do Selo on the Portuguese property. Mark would pay €40,000 in Portuguese stamp duty (€400,000 * 10%). Sarah’s estate would also be subject to Canadian inheritance/estate tax rules on her worldwide assets.

Summary of Portuguese Inheritance Tax (Stamp Duty)

This table provides a quick overview of when the Imposto do Selo which functions as Portugal’s inheritance tax, applies:

Recipient

Tax Rate

Applies to

Spouse/Children/Parents

0%

All assets (Portuguese-sited or otherwise)

Siblings/Friends/Others

10%

Portuguese-sited assets only

Non-residents (as heirs)

10%

Portuguese-sited assets only (if not direct heir)

Notes

  • There is no automatic exemption for long-term unmarried partners unless legally registered (as “de facto unions”).
  • Some types of gifts and donations may also trigger stamp duty.

 

If you are unsure of your specific situation don’t hesitate to reach out.

Conclusion on Portuguese Inheritance Tax

While the term “inheritance tax Portugal” might be misleading due to the abolition of a specific inheritance tax, the 10% Imposto do Selo on Portuguese-sited assets for non-direct heirs is a crucial consideration.

Coupled with Portugal’s forced heirship rules and the complexities of international tax implications, comprehensive estate planning is essential for anyone with ties to Portugal.

For peace of mind for you and your families, we would be happy to provide tailored advice on your specific circumstances, ensuring your estate plan aligns with both Portuguese law and your broader international tax obligations.

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