Strategic tax planning is critical if you’re a high-net-worth individual from the U.S. moving to Portugal via a Golden Visa or residency permit. By playing your cards right, you’ll be able to receive some of the highest tax deductions in all of Europe as an expat.
1. Non-Habitual Residency (NHR)
Without question, one of the most powerful incentives for new Portuguese residents was the Non-Habitual Resident (NHR) regime. This was accessible to all high-net-worth individuals, retirees, and remote workers.
Under the original NHR rules (this ended late 2023), qualifying foreign income, for example, dividends, interest, and business profit, was exempt from Portuguese tax for 10 years. Portuguese-source income was then taxed at 20%, and foreign pensions, 10%.
Unfortunately, this no longer exists. However, there’s a new program investors are calling “NHR 2.0”. This is referred to as the Tax Incentive for Scientific Research and Innovation (IFICI).
To qualify for IFICI, you need to operate in a sector deemed relevant by the AICEP (Trade & Investment Agency) or IAPMEI (Agency for Competitiveness and Innovation), or involve higher education, qualified startups, or scientific research.
Similarly, however, it grants a 20% flat rate on qualifying Portuguese income and exempts most foreign-source income for 10 years. The main difference, regarding tax, is that foreign pensions are taxed at regular Portuguese rates.
Therefore, despite the original NHR program ending, those who qualify for IFICI can still receive some excellent tax deductions for expats.
2. U.S. Foreign Tax Credit (FTC)
Those in the U.S. must pay tax on worldwide income. That’s what makes credit relief important. Fortunately, Portuguese tax can usually be credited against U.S tax under IRC §901.
Simply, the U.S.-Portugal tax convention requires the U.S. to avoid double taxation by granting credit for tax paid in Portugal.
Therefore, let’s say you pay Portuguese income tax on your salary, dividends, rent, etc. This can be offset against your U.S. tax liability on the same income.
For example, if you pay 35% in Portuguese tax on foreign business income, you can mark it as a Foreign Tax Credit on your U.S return.
By using the FTC and treaty correctly, expats can ensure they aren’t taxed twice on the same dollar. This improves cross-border tax efficiency tenfold.
3. Foreign Earned Income Exclusion (FEIE)
U.S. tax law also offers an exclusion that U.S. expats can leverage. This is under IRC §911.
It says qualifying Americans working abroad can be excluded up to $130,000. To qualify for the Foreign Earned Income Exclusion (FEIE), you must meet the bona fide residence or 330-day test.
Alongside this, you have the Foreign Housing Exclusion, allowing you to exclude certain housing costs. As of 2025, this is capped at around $39,000. For high-rent areas like Lisbon, higher limits may apply by IRS notice.
By using FEIE and the Foreign Housing Exclusion, Americans can exclude a large chunk of their earned income and housing expenses from U.S tax.
4. Charitable Donation Deductions
Portugal’s tax code is very philanthropy-heavy, granting those who utilize it generous tax credits.
For example, individual taxpayers in the country can claim a 25% credit on cash donations to qualifying public-benefit organizations. It’s possible to donate to other entities, however, this can range from a 15% to 25% tax credit.
Therefore, let’s say you donate $10,000; you can claim a tax deduction of up to $2,500.
5. Other Portuguese Deductions
Beyond the above four highly important tax deductions, there are some smaller ones to consider as well.
These include:
- PPR Retirement Contributions: Contributions to a PPR (Plano Poupança Reforma) retirement saving plan can earn a 20% tax credit. The max credit depends on your age.
- Health Expenses: 15% tax credit on specific non-reimbursed medical expenses (up to €1,000 per year).
- Education Expenses: 30% credit on certain educational costs (up to €800, or up to €1,100 if also paying rent).
- Household and Domestic Services: 35% credit on qualifying household services, home repairs, services, etc. (Max €250 or €500 for joint returns).
- Other Specific Credits: There are also varying credits for mortgage interest, rent, home improvements for retirees, etc., each with its own limit.
The tax deductions are very modest. However, together, they can help reduce your taxable income.
To learn more about the standard Portuguese tax rules, claim this free tax guide today.
Conclusion
The strategies mentioned above can help reduce a U.S. expat’s tax liability if they’re living in Portugal.
To fully take advantage of these deductions, however, you need a professional by your side. Someone who understands U.S. and Portugal’s tax laws.
Holborn Assets specialize in helping high-net-worth individuals with cross-border financial planning, tax-efficient investment strategies, and ongoing wealth management.. Contact us today to learn more, sign up for our webinar on “Tax Efficient Tips and Financial Planning for Expats in Portugal,” or get in touch for a personalized consultation.
