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
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.
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.
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:
For these direct heirs, the concept of inheritance tax in Portugal is effectively non-existent.
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:
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:
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.
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:
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.
Do you require Succession planning in Portugal
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.
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:
The law reserves a minimum portion of the estate for these individuals:
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.
If an individual dies without a valid will (intestate succession), Portuguese law automatically applies a strict order of inheritance for the entire estate:
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.
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.
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.
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
Key Points for Consideration
Are you still unsure about inheritance tax 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.
Here are some common questions about inheritance tax in Portugal I get asked:
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.
To illustrate how inheritance tax in Portugal applies, consider the following scenarios:
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.
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.
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.
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
If you are unsure of your specific situation don’t hesitate to reach out.
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.
Disclaimer: Tax laws, rates, and reliefs are subject to change and may vary depending on individual circumstances and residency status. Any information provided on this website is based on our understanding of current regulations (or the date of when the content was published) and should not be considered personalised financial or tax advice. As tax obligations can differ across regions, countries and evolve over time, we strongly recommend seeking professional advice tailored to your specific situation before making any financial decisions.
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