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Why it is good to invest in a vacation home in Portugal

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If you invest in a vacation home abroad, you escape the Box 3 capital gains tax from your tax return. This is because the tax on a vacation home abroad is levied in the country where the home is located. Are you thinking of making your vacation home your first home? Then you need to consider the tax consequences. In Portugal, these can be very advantageous.

A vacation home in Portugal

Portugal has no wealth tax, unlike France and Spain, for example. If you own a vacation home in Portugal, you therefore have to pay ‘only’ one tax on an annual basis: the ‘Imposto Municipal sobre os Imóveis’ (IMI). In Portugal, you do not pay income tax for the personal use of your vacation home (Spain does). If you get income from the (partial) rental of your house, you pay 28% Portuguese income tax on this (‘Imposto sobre o Rendimento das Pessoas Singulares’, IRS).

Turning your vacation home into your first home

If you decide to make your second home in Portugal your first home, you will become a resident of Portugal after you emigrate. From then on, you will have to pay taxes in Portugal on your world income. Do you still have income in the Netherlands? Then taxation will take place in Portugal or in the Netherlands, depending on the source of the income. For example, if you still own real estate in the Netherlands, the Netherlands will continue to tax it. Your savings and pension income will be taxed in Portugal after your emigration.

Advantageous for non-ordinary residents

Non-ordinary residents of Portugal (residentes não habituais) enjoy a tax advantage. Their pension is exempt from Portuguese income tax (IRS) for 10 years. Thus, as a non-resident, you pay tax on your pension income in your native country. For the Dutch, this regulation is advantageous. If you want to register as a non-resident in Portugal, you must meet 3 conditions:

You have not been a taxpayer in Portugal for the past 5 years.

You have been a demonstrable tax resident outside the territory of Portugal for the past 5 years.

You receive your income from a country other than Portugal.

For the above reasons it is therefore interesting to invest in a second home in Portugal. Apart from these interesting advantages, Portugal is of course also a wonderful

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