News and developments
Taxation of Financial Income (Interest, Dividends and Capital Gains) under Portuguese Personal Income Tax
23/07/2025
The taxation of investment income is of particular relevance to investors and savers. These types of income fall within Categories E and G of the Portuguese Personal Income Tax (PIT), depending on their nature, and are subject to a tax regime that combines progressive rates, flat rates, and, in some cases, exemptions.
Understanding the applicable rules and assessing available tax planning options is key to ensuring compliance with reporting obligations while identifying opportunities for tax optimisation.
This briefing note summarises the main aspects to consider.
Investment Income (Interest and Dividends)
Investment income (Category E of PIT) includes, among others, interest, dividends, royalties (when not earned by the original author or rights holder), as well as income from “unit-linked” life insurance policies.
As a general rule, this income is subject to a flat tax rate of 28%.
Exceptions and specific rules:
It is also important to note that, in the case of foreign-source investment income, Portugal’s wide network of Double Tax Treaties (DTT) generally limits withholding tax in the source country to reduced rates (typically between 5% and 15%). It is essential to monitor whether the DTT is being properly applied; otherwise, a refund request may be submitted in the source country for any excess tax withheld.
Taxpayers who qualify as Non-Habitual Residents (NHR) or are registered under the new Incentive for Scientific Research and Innovation (TISRI or “NHR 2.0”) may benefit from an exemption on foreign-sourced investment income. For further details, see our briefing notes: Non-Habitual Resident (NHR) and The new TISRI or NHR 2.0.
Capital Gains on Financial Assets
Capital gains refer to profits realised from the sale of financial instruments such as shares, bonds, and investment fund units. The applicable tax treatment depends on the type of asset and the holding period:
Capital gains are assessed individually but computed on a net basis: if the annual balance is positive, tax is due; if negative, and aggregation is chosen, the loss may be carried forward for five years to offset future gains in the same category.
Additionally, foreign exchange gains realised by individuals – whether due to currency appreciation or conversion – are not subject to taxation under PIT, as they are not considered taxable capital gains under Category G.
Regarding precious metals, a distinction must be made between the sale of physical metals (such as bullion or coins in gold, silver, or platinum), outside the scope of a commercial or professional activity, and the sale of financial instruments indexed to precious metals (e.g., ETFs, CFDs or derivatives on gold, silver, etc.). The former is not subject to taxation, while the latter is taxed under the rules mentioned above (28% or 35% if sourced in blacklisted jurisdiction).
In the case of foreign-source capital gains, Portugal’s DTTs generally allocate taxing rights to Portugal, and no withholding should apply abroad. If foreign withholding does occur, it may be possible to request a refund in the source country under the applicable DTT.
Finally, taxpayers who qualify as Non-Habitual Residents (NHR) or are registered under the TISRI or “NHR 2.0” may benefit from an exemption on foreign-source capital gains.
Annual PIT Reporting
Investment income and capital gains must be properly reported in the annual PIT return:
Final Notes
The taxation of investment income — whether interest, dividends or capital gains — entails the application of distinct rules, with options that can significantly affect a taxpayer’s overall liability.
In-depth knowledge of the applicable rules, the aggregation option, and available tax benefits (such as those under the NHR or TISRI regimes) is essential not only to ensure compliance but also to enable effective and tailored tax planning.
It should also be noted that reporting investment income and capital gains can be administratively complex and documentation-intensive, especially for investors with a high volume of transactions, including low-value or fractional trades. Each sale must be reported individually and in accordance with strict criteria (particularly the FIFO method), which can result in a significant compliance burden and increased risk of error or omission.