In Portugal, income tax is called IRS (Imposto sobre o Rendimento das Pessoas Singulares). The Tax Authority (Autoridade Tributária, AT) divides your income into several 'Categories', and the key is that they are not all taxed the same way.
The main categories for investors:
- Categories A and B: Employment income (employee or self-employed). Taxed at progressive rates that can reach up to 48%.
- Category E (Capital income): Includes dividends from your shares or interest from your deposits.
- Category G (Capital gains, mais-valias): This is where gains from selling shares, funds, cryptocurrencies or real estate at a profit go.
⚠️ Important
The golden rule (Taxa Liberatória): By default, income from Categories E and G (your financial investments) is not added to your salary. It is taxed at a flat rate of 28%, regardless of whether your salary is very high or very low.