Standard Income Tax System — Portugal

Brackets 1-5 (2026): 12.5% (€0-€8,342), 15.7% (€8,342-€12,587), 21.2% (€12,587-€17,838), 24.1% (€17,838-€23,089), 31.1% (€23,089-€29,397). Gradual progression for lower-middle income. Note: these are marginal rates - only income in each bracket taxed at that rate.

Brackets 6-8 (2026): 34.9% (€29,397-€43,090), 43.1% (€43,090-€46,566), 44.6% (€46,566-€86,634). Sharp increase hitting middle-upper income. 43.1% kicks in above €43,090 of taxable income - relatively low threshold compared to other countries. Example: €60,000 salary = IRS about €15,100, roughly 25% of gross.

Maximum rate 48% on taxable income exceeding €86,634 (roughly €7,220/month). Among Europe's highest top rates. Plus solidarity surcharge adds more. Total marginal rate can exceed 50% for highest earners. Why many high earners seek NHR or leave Portugal after NHR expires.

Solidarity surcharge (taxa extraordinária) added to income tax: 2.5% on taxable income €80,000-€250,000, 5% above €250,000. Applied after calculating regular income tax. Increases effective top rate to 50%+. Significant burden on high earners. NHR holders also pay this if Portuguese income exceeds thresholds.

Municipalities can charge additional up to 1.5% on taxable income above €7,703. Varies by location - Lisbon charges maximum 1.5%, some rural areas charge nothing. Another layer of taxation. Check your municipality rate.

Employment income (ordenados): taxed at progressive rates after social security. Employer withholds tax monthly (retenção na fonte). Annual return reconciles withholding vs actual tax due. NHR holders: 20% flat rate instead of progressive.

Self-employment income (rendimentos empresariais e profissionais): declare revenue, deduct expenses, pay tax on profit. Can choose simplified regime (deduce fixed 75% costs) or organized accounting (actual costs). Progressive rates apply. NHR holders: 20% flat rate on net profit.

Category E (rental income), F (investment income - dividends, interest), G (capital gains). Various rates: rental taxed progressively, dividends/interest 28% flat, capital gains 28% flat. NHR holders: foreign-source income in these categories tax-exempt, Portuguese-source follows standard rules.