Inheritance & Gift Tax in Portugal

Unlike many European countries, Portugal abolished traditional inheritance tax in 2004. Instead, a stamp duty called Imposto do Selo applies in specific circumstances. This creates one of Europe's most favorable inheritance tax environments for direct family transfers. Key advantage: Spouses, children, grandchildren, parents, and grandparents are entirely exempt from inheritance and gift taxation.

This exemption applies to all Portuguese-situs assets transferred by death or lifetime gift. Portugal inheritance tax applies only to Portuguese-located assets. Foreign property, overseas bank accounts, and international investments held by deceased persons fall outside Portugal's tax jurisdiction. Taxbordr Credential Our team includes advisors qualified under Ordem dos Economistas Cédula No.

16379, providing compliance-certified guidance on Portuguese tax matters and international succession planning.

Standard Rates and Direct Family Exemptions Heir Relationship Rate Conditions Spouse 0% Completely exempt Children 0% Completely exempt Grandchildren 0% Completely exempt Parents 0% Completely exempt Grandparents 0% Completely exempt Siblings 10% Non-direct heirs Nieces/Nephews 10% Non-direct heirs Friends/Unmarried Partners 10% Non-direct heirs The 0% rate for direct descendants represents the core of Portugal's inheritance tax advantage.

Estate planning for families with children, spouses, or parents becomes dramatically simpler without transfer tax friction. The 10% Rate for Non-Direct Heirs When assets pass to siblings, nieces, nephews, friends, or unmarried partners, the 10% stamp duty applies.

For unmarried partners, an exception exists: if the couple registered as união de facto (consensual union) for at least two years, the partner qualifies for exemption. This distinction creates planning opportunities. Couples should consider formal registration or marriage before death to preserve exemptions for non-legal spouses. Donations and Lifetime Gifts (Inter Vivos) Gifts during your lifetime follow identical rules.

Gifts to spouses, descendants, and ascendants remain completely tax-free. Gifts to other parties incur 10% stamp duty. Reporting requirement: Donations between spouses or civil partners, descendants and ascendants totaling under €5,000 do not require filing for stamp tax purposes. Larger gifts require proper documentation through a notary.

Portugal inheritance tax applies only to Portuguese-situs assets. Understanding which assets trigger stamp duty prevents surprises during estate administration.

Free Assets (No Stamp Duty) Bank accounts with Portuguese institutions Shares and securities held through Portuguese brokers Investment portfolios managed in Portugal Business interests and shareholdings in Portuguese companies Real estate located in Portugal (except as noted below) Vehicles registered in Portugal Intellectual property and business assets in Portugal Special Real Estate Considerations (VPT Valuation) Real estate inheritance involves a distinction between VPT (Valor Patrimonial Tributário) and actual market value.

VPT is the tax authority's assessed property value based on:

• Location and neighborhood
• Property size and condition
• Age and deterioration coefficient
• Year of construction VPT typically falls below market value by 30-60%, creating a favorable tax base. However, tax authorities automatically update VPT every three years using depreciation coefficients

For inheritance stamp duty purposes, the lower of VPT or actual market value applies. This valuation advantage means property transfers often trigger minimal or no stamp duty within the direct family exemption framework. Planning note: Families should request an official VPT assessment before death to minimize valuation disputes with tax authorities during succession.

Portuguese succession law enforces forced heirship (legítima) protecting spouses and descendants. This mandatory inheritance framework restricts testamentary freedom but ensures family security. The Legítima Portions The law guarantees minimum estate shares to protected heirs: Spouse and children present: The couple and children collectively receive at least 2/3 of the estate.

Children only (no spouse): Children collectively receive between 1/2 and 2/3 depending on number of children and their relationship to deceased. Spouse only (no descendants): The surviving spouse receives at least 1/2 of the estate. Parents/grandparents only: In absence of spouse and descendants, ascendants receive at least 1/2.

Quota Disponível (Available Portion) The complementary concept is quota disponível (available quota)—the remaining portion you can freely dispose via will, gift, or trust. If you have one child, the quota disponível typically equals 1/2. With multiple children and a spouse, the available portion shrinks further. You typically may not disinherit spouses or children regardless of will language.

International impact: Only Portuguese assets fall under forced heirship rules. However, Portugal applies legítima to your worldwide estate except for real estate outside Portugal. Implications for Business Owners Business succession becomes constrained by forced heirship. If your company represents 80% of your estate and you have two children, they automatically inherit specified portions regardless of management capability.

Planning solutions include:

• Trusts established during lifetime avoiding forced heirship
• Life insurance designating beneficiaries outside the estate
• Usufruct arrangements providing surviving spouse lifetime rights while ownership transfers to children
• EU Regulation 650/2012 election for nationals of other countries to apply home country law

Testamento Validity Requirements Portuguese wills (testamento) may need to meet strict formalities: Written form: Wills may need to be in Portuguese or documented translation. Notarization: Most wills require authentication by a Portuguese notary or foreign equivalent. Witnesses: Some will types require disinterested witnesses without beneficiary status. Testator capacity: The deceased may need to possess full legal capacity at time of signing.

Informal wills or unwitnessed documents often fail probate challenges. Expats should use qualified Portuguese lawyers to ensure compliance. Types of Portuguese Wills Testamento notarial (notarial will): Prepared by notary with maximum legal force. Testamento cerrado (sealed will): Private document authenticated by notary, providing confidentiality. Testamento hológrafo (holographic will): Handwritten, signed document; limited circumstances.

For expats and complex estates, notarial wills provide greatest enforceability and international recognition. Will Elections Under EU Regulation 650/2012 The EU Succession Regulation (Brussels IV) introduced a critical planning tool: choice of law elections. Instead of Portuguese law governing your entire succession, you may elect the succession law of your nationality.

This election may need to appear explicitly in your Portuguese will. Strategic example: A UK national in Portugal can elect English law to govern succession, potentially avoiding forced heirship restrictions and applying English probate principles to Portuguese assets. Limitation: Tax consequences remain governed by Portuguese law. Property transfer taxes still apply to Portuguese real estate regardless of succession law election.

Gifts during your lifetime receive identical tax treatment to inheritances. This creates planning opportunities for wealth transfer before death. Tax-Free Giving to Family Gifts to spouses, descendants, and ascendants incur zero stamp duty regardless of amount. You may transfer substantial wealth tax-free during your lifetime. Advantage: Lifetime gifts avoid probate costs, provide clarity regarding beneficiary intentions, and reduce estate-related disputes.

Documentation: Formal notarized donations create clearer evidence than informal transfers. Notarial documentation prevents challenges from other heirs claiming unexpected dispositions. Reporting and Registration Gifts below €5,000 to direct family members require no formal filing. Larger gifts may need to be properly documented and reported for tax administration records.

For non-direct family members receiving gifts, 10% stamp duty applies and proper tax returns may need to be filed. Lifetime Gift Strategy Families can implement gradual wealth transfers over years without triggering probate complications. Children, spouses, and parents can receive gifts annually at zero tax cost.

This approach proves particularly effective for business owners gradualizing shareholding transitions or real estate investors distributing property interests.