Filing period: 1 April to 30 June 2026
Income concerned: 2025
Legal framework: Portuguese Personal Income Tax Code (Código do IRS – CIRS) and Tax Benefits Statute (EBF)

If you are a tax resident in Portugal in 2025, your annual IRS return must be submitted electronically between 1 April and 30 June 2026 through the Portal das Finanças.

This guide summarises the main income categories, specific deductions, tax credits (deduções à coleta), and IRS rates applicable to 2025 income, based on the legislation in force as of February 2026.

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1. Do You Need to File a Model 3 Return?

Before filing, you should verify whether:

• You qualify for Automatic IRS (Declaração Automática de Rendimentos); or

• You are covered by the exemption from filing (Dispensa de Entrega da Declaração Modelo 3).

If neither applies, you must submit Model 3 electronically via:

Entregar Declaração → Preencher Declaração

During assessment, the Portuguese Tax Authority (Autoridade Tributária e Aduaneira – AT) may identify discrepancies between your declared amounts and third-party reported data (e.g. employers, banks, insurers). These must be justified within the legal deadline.

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2. Income Categories and Specific Deductions

Under the Portuguese Personal Income Tax Code (CIRS), income is classified into categories.

Category A – Employment Income (Art. 2 CIRS)

Specific deduction (2025):

• €4,462.15 standard deduction; or

• €4,702.50 if the difference results from mandatory professional association contributions; or

• Full amount of mandatory social security and legal health system contributions if exceeding those limits.

Additional deductions:

• Trade union fees (1% of gross income, increased by 100%)

• Compensation paid by the employee for unilateral termination

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Category B – Business and Professional Income (Arts. 3–4 CIRS)

Income is taxed under:

• Simplified regime; or

• Organised accounting.

Deductibility depends on the regime applied. For freelancers and self-employed professionals, correct classification is essential for tax optimisation and compliance.

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Category E – Capital Income (Arts. 5–6 CIRS)

If dividends from a Portuguese, EU or EEA company are included in global taxation (englobamento):

• Only 50% of the distributed profits are taxable.

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Category F – Rental Income (Art. 8 CIRS)

If not taxed under Category B:

Deductible expenses include:

• Documented maintenance and conservation costs

• IMI (municipal property tax), stamp duty and AIMI

• Condominium charges

• Pre-letting renovation costs (within 24 months prior)

• Certain relocation-related rent deductions (subject to strict conditions)

Financial costs and depreciation are generally not deductible.

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Category G – Capital Gains (Arts. 9–10 CIRS)

Deductible elements include:

• Improvement costs from the last 12 years

• Acquisition and disposal expenses

• Certain compensation paid

• Costs related to securities and crypto-assets (non-securities)

Special anti-abuse rules apply if public non-refundable support exceeding 30% of VPT was received and the property is sold within 10 years.

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Category H – Pensions (Art. 11 CIRS)

Standard deduction:

• €4,462.15

Additional deductions:

• Trade union fees

• Social security contributions exceeding the threshold

For taxpayers with ≥60% disability, only 90% of pension income is considered for IRS purposes (subject to cap).

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3. Personal Tax Credits (Deduções à Coleta)

These are applied after tax calculation.

Dependents (Art. 78.º-A CIRS)

Examples (joint taxation):

• €600 per dependent

• €726 for dependent ≤3 years

• Increased deductions for second and subsequent dependents ≤6 years

Single-parent households benefit from higher percentage limits in certain deductions.

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Disability (Art. 87 CIRS)

For ≥60% certified permanent disability:

• €2,090 per disabled taxpayer

• €1,306.25 per disabled dependent

• Additional €2,090 for ≥90% disability (accompanying expenses)

Transitional reductions apply if disability rating decreases.

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4. Automatic Deductions Calculated by AT

These rely on e-Fatura and reported data.

General Family Expenses (Art. 78.º-B)

• 35% of expenses

• Limit: €250 per taxpayer

• 45% (limit €335) for single-parent households

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Health Expenses (Art. 78.º-C)

• 15% of expenses

• Limit: €1,000

Includes:

• VAT-exempt or reduced-rate medical expenses

• Standard VAT expenses if supported by medical prescription

• Health insurance premiums

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Education Expenses (Art. 78.º-D)

• 30% of expenses

• Limit: €800

• Up to €1,100 if including student rent (>50km from residence, ≤25 years)

Additional 10 percentage point increase for institutions in interior regions or Autonomous Regions.

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Housing – Rent or Mortgage Interest (Art. 78.º-E)

For permanent residence:

• 15% deduction

• Limit: €700

Higher limits apply depending on taxable income thresholds.

Mortgage interest deduction only applies to contracts signed before 31 December 2011.

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VAT Deduction on Invoices (Art. 78.º-F)

15% of VAT paid (limit €250) on:

• Car repairs

• Restaurants

• Hairdressers

• Veterinary services

• Gym and sports activities

• Newspapers and magazines

Public transport passes: 100% VAT deductible (within limit).

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Domestic Work (Art. 78.º-H)

• 5% deduction

• Limit: €200

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Nursing Homes (Art. 84 CIRS)

• 25% deduction

• Limit: €403.75

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5. Deductions Declared in Annex H (Model 3)

These require manual completion and documentary support.

Examples:

• PPR (Retirement Savings Plans) – 20% deduction up to €400 / €350 / €300 depending on age

• PEPP (Pan-European Personal Pension Product)

• Public Capitalisation Regime

• Urban rehabilitation expenses (30%, limit €500)

• Donations (25%, up to 15% of tax due)

Important: No deduction is allowed for pension savings contributions made after retirement.

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6. Overall Deduction Cap

For taxpayers with taxable income above €8,059:

A global cap applies to the sum of several deductions (health, education, housing, VAT, nursing homes, domestic work, etc.):

• No limit if taxable income ≤ €8,059

• Sliding scale between €1,000 and €2,500

• €1,000 maximum if taxable income > €80,000

In joint taxation, income is divided by 2 before applying thresholds.

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7. IRS Tax Rates for 2025 Income (Art. 68 CIRS)

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Additional Solidarity Tax (Art. 68.º-A CIRS)

• 2.5% on income between €80,000 and €250,000

• 5% above €250,000

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8. Special Regimes

IRS Jovem

Reduced taxation for young professionals (conditions apply).

IRS Estudante

Up to €2,612.50 of employment or service income excluded (dependent students).

Programa Regressar (Art. 12.º-A CIRS)

50% exclusion (up to €250,000) for former residents returning to Portugal, for 5 years.

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Final Remarks

The correct optimisation of Portuguese IRS depends on:

• Accurate classification of income

• Proper validation of e-Fatura expenses

• Strategic use of Annex H

• Understanding global deduction caps

• Correct choice between separate and joint taxation

Each taxpayer’s situation must be analysed individually, particularly for expatriates, freelancers and families with dependents.

This summary does not replace consultation of the legislation in force or professional tax advice.