Portugal has long been one of the most talked-about countries for Swedes wanting to combine southern living with a lower tax burden. That picture has changed fundamentally in recent years – and anyone working from how things looked in 2018 risks getting the numbers badly wrong.
Two changes that rewrite the calculation
- The tax treaty between Sweden and Portugal has been terminated and is no longer in force. Protection against double taxation therefore no longer follows from a treaty, but only from domestic Swedish and Portuguese credit rules. For anyone with a Swedish pension, this is the single most important change.
- The old NHR regime was closed to new applicants, with transitional rules for those already covered. What exists today is a narrower regime aimed at certain qualifying activities – not the broad relief that once attracted pensioners.
The conclusion is not that Portugal is unattractive, but that the calculation has to be redone from scratch on today's rules.
What you pay when you buy
You need a Portuguese tax number, an NIF. On acquisition you pay:
- IMT – transfer tax calculated progressively on the purchase price and on how the property will be used (permanent home, holiday home or other).
- Imposto do Selo – stamp duty on the acquisition.
- Notary and registration costs.
Ongoing taxes while you own
The municipal property tax IMI is payable annually, calculated on the Portuguese rateable value with the municipality setting the rate within a range. Holdings above a certain value also attract the additional tax AIMI. Rental income from Portuguese property is taxed in Portugal, with a separate regime for short-term tourist letting that is in practice tightly regulated and subject to licensing in several municipalities.
When you sell
Capital gains on the sale of Portuguese property are taxed in Portugal. For individuals, only part of the gain is taxable, and relief is available on reinvestment in your own permanent home if the conditions are met. The rules differ depending on whether the seller is tax resident in Portugal, and the legal position has been shaped by EU case law.
How this affects your Swedish tax
Without a treaty, the Swedish side becomes more complicated, not less:
- No treaty-based allocation of taxing rights. Sweden tests its taxing rights against domestic law alone, and relief is given by credit under the Swedish credit act – with the limitations that follow from it.
- A Swedish pension paid to a person resident in Portugal may be taxed in Sweden while Portugal taxes the same income. This is precisely the situation the treaty used to resolve.
- If you remain unlimitedly liable to tax in Sweden, rental income and capital gains from the Portuguese property must be reported here, with a credit for Portuguese tax.
- Deferral on replacing a home may be available since Portugal is within the EEA.
The mistakes we see most often
- Basing the whole relocation decision on NHR information that no longer applies.
- Counting on treaty protection that no longer exists, particularly for pension and employment income.
- Starting short-term letting without a licence and without resolving the Portuguese registration.
- Moving the population registration but keeping the home in Sweden – and therefore remaining unlimitedly liable to tax here.
About the author and NORTH INVESTMENTS
Felix Schöttle is a lawyer specialising in Swedish and international tax law, assisting individuals and companies with cross-border tax matters through NORTH INVESTMENTS.
This article describes the main features of the rules and is intended as general information only. Rates, fees and exemptions change and often differ between regions and municipalities – always confirm what applies to your transaction. It does not constitute tax or legal advice; professional advice should always be obtained based on your individual circumstances.
