Real Estate Taxation in Portugal for French Nationals: Local Taxes, Capital Gains, and Tax Treaty

Published on June 2, 2026 and written by Cyril Jarnias

Buying or holding real estate in Portugal has become a common goal for many French people, whether to plan for a retirement in the sun, diversify their assets, or optimize their tax situation. But behind the images of seashores and white houses, Portuguese real estate taxation is technical, especially when combined with the French system and the tax treaty between the two countries.

Local taxes in Portugal: IMI, AIMI, IMT, and stamp duty

The first major difference from France is that Portugal does not have a wealth tax on real estate in the sense of the French IFI. However, it applies a set of local taxes that, when combined, can be significant.

IMI: the annual property tax in Portugal

IMI (Imposto Municipal sobre Imóveis) is the equivalent, much simpler, of the French property tax (taxe foncière). It is owed by any owner of a property located in Portugal, whether resident or non-resident, individual or company. Nationality or place of tax residence does not change the rate: a French person pays the same IMI as a Portuguese person for an identical property.

IMI is calculated on the “taxable asset value” of the property, the VPT (Valor Patrimonial Tributário), which is an administrative value set by the Portuguese tax authorities. It results from a formula that takes into account location, size, age, construction quality, and the property’s use. It is often significantly lower than the market price, typically between 70% and 80% for a recent home and sometimes three to four times lower than the purchase price.

Rates are set by each municipality within a national range:

In practice, the vast majority of municipalities apply the minimum rate of 0.3%. In 2026, 199 out of 308 municipalities are at 0.3%, including Lisbon. Porto is around 0.325%, Faro at 0.35%.

The payment schedule is also standardized nationwide, with installment options depending on the annual amount:

IMI is owed by the person who is the owner as of December 31 of the previous year. If you purchase a property on December 30, 2025, you will be liable for IMI for the entire year 2026.

Non-residents do not benefit from this family reduction. However, they are subject to the exact same base rates.

AIMI: the surcharge on high-value real estate assets

The Adicional ao IMI (AIMI) is often presented as a sort of “mini wealth tax on real estate”. In reality, it is an annual surcharge on the sum of the VPT of your residential properties and building plots located in Portugal. Again, it applies equally to residents and non-residents.

The logic is simple: add up the VPT of all residential properties and building plots held as of January 1 of the year, subtract an allowance, then apply a rate schedule.

For individuals, the allowance is €600,000 per taxpayer. A married couple or those in a stable union who opt for joint taxation benefit from an allowance of €1,200,000 on the sum of their VPT.

Beyond these thresholds, a progressive rate schedule applies:

For jointly taxed couples, the thresholds of €1 million and €2 million are doubled. A couple whose Portuguese residential real estate assets have a total VPT of €1,500,000 will therefore only pay AIMI on €300,000, at 0.7%.

AIMI is calculated by the administration in June, the payment notice is posted online or sent at the end of August, and payment must be made in September. It is added to IMI, not replacing it.

Primary residences of moderate value often completely escape AIMI thanks to the allowances and the fact that the VPT is lower than the market value. A French person buying an apartment for €800,000 in Lisbon may well end up with a VPT of only €500,000, hence no AIMI.

IMT: the transfer tax on purchase

IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) is the equivalent of the French transfer tax, paid at the time of acquisition. It is due on the purchase price or on the VPT, whichever is higher, according to a progressive rate schedule that depends on the nature of the property (primary residence, secondary residence, rural, commercial).

For urban residential properties, the schedules are progressive by bracket with, for high prices, flat rates. The available texts present several grids but converge on the following approximate ranges for 2026:

For 2026, the Portuguese authorities have also announced a special measure: a flat rate of 7.5% on the purchase of secondary residences by non-residents. This rate may be refunded or adjusted if the buyer becomes a tax resident within two years or if the property is rented at controlled rents for at least 36 months.

– for companies whose purpose is buying and selling properties, provided they resell within three years without changing the use;

– for old properties or those located in urban rehabilitation areas, when the buyer undertakes renovation work within a certain timeframe.

These regimes require specific procedures (municipal recognition, refund requests, dedicated forms).

Stamp duty: the 0.8% tax on purchase

In addition to IMT, any purchase of real estate in Portugal is subject to the Imposto do Selo (stamp duty), at a rate of 0.8% on the purchase price or VPT, whichever is highest.

This tax applies to all buyers, whether Portuguese or French, resident or non-resident. Additionally, if there is a loan, stamp duty applies to the loan amount, with a rate that varies depending on the term (generally around 0.5% to 0.6% for loans of at least 5 years).

Notary and registration fees, often estimated between 7% and 8% of the price for all acquisition costs (IMT, stamp duty, fees, deeds), should be included in the overall investment budget.

Real estate capital gains in Portugal: general rules and non-resident regime

Regarding capital gains taxation, Portugal stands out both for its detailed formula and a key advantage: only half of the net gain is taxable, for both residents and non-residents (since 2023), except in specific cases.

How is the capital gain calculated?

The real estate capital gain (mais-valia) is determined using a precise formula:

Net capital gain = Selling price − (Acquisition price × inflation coefficient) − deductible expenses

Several elements may be considered:

– the acquisition price is the one stated in the purchase deed, which can be increased by stamp duty, notary fees, and IMT paid at the time;

– the inflation indexation coefficient applies as soon as the property has been held for more than two years and allows the purchase price to be restated to account for monetary erosion;

– deductible expenses include costs directly related to the acquisition and sale (agency, notary, mandatory certificates) as well as construction or improvement work carried out in the 12 years preceding the sale, provided they can be justified.

When the property is held by an individual (resident or non-resident, excluding tax havens) and it is real estate located in Portugal, the general rule is: only 50% of the net capital gain thus calculated is included in taxable income.

Capital gains taxation: progressive IRS rate schedule

This taxable half of the capital gain is added to other income for the year (salaries, pensions, rents, etc.) and taxed according to the progressive IRS (Portuguese personal income tax) rate schedule. For 2026, the tax brackets for individuals are as follows:

Beyond that, a solidarity surcharge of 2.5% applies between €80,000 and €250,000 of worldwide taxable income, and 5% above €250,000. This means that in practice, the effective tax rate on the capital gain, relative to the total gain, usually falls between 6% and 24%, which is often more advantageous than the former flat rate of 28% on 100% of the gain for non-residents, which was abolished in 2023.

Non-residents: same regime as residents since 2023

Before 2023, a non-resident selling real estate in Portugal was subject in principle to a flat-rate withholding of 28% on the entire capital gain. Under pressure from European law, this regime was deemed discriminatory. Since the 2023 State Budget, non-residents benefit from the same treatment as residents:

– only half of the net capital gain is taken into account;

– this half is subject to the progressive IRS rate schedule;

– to determine the applicable rate, the administration considers the taxpayer’s total worldwide income, even if not taxed in Portugal.

One exception remains: individuals fiscally resident in a jurisdiction listed as a tax haven by Portugal are taxed at 35% on 100% of the gain.

Exemptions and favorable regimes for capital gains

The Portuguese system provides several exemption or relief regimes, particularly interesting for those preparing their primary residence on site or their retirement.

Reinvestment in a primary residence

For Portuguese tax residents, when the property sold is their main habitual residence, it is possible to be exempt from tax on the capital gain if the proceeds from the sale (after repayment of any mortgage) are reinvested in a new primary residence.

The conditions are as follows:

– the property sold must be the seller’s main habitual residence, in practice their actual home;

– the reinvestment must be used to purchase, build, or renovate another home intended to become the taxpayer’s primary residence;

– the reinvestment timeline is regulated: within the 24 months before the sale or within the 36 months after the sale;

– if the entire net proceeds from the sale are reinvested, the capital gain is fully exempt; in the case of partial reinvestment, the exemption is proportional.

A decree from 2024 has secured this regime, with no retroactive effect and the possibility of using it several times over a lifetime.

Exemption for those over 65 or retirees

Portuguese residents aged 65 or over, or already retired, may benefit from a specific exemption on the capital gain from the sale of their primary residence, provided they reinvest the proceeds, within six months, not into a new home but into:

– an eligible insurance contract;

– a qualified pension fund;

– or certain public capitalization schemes.

The idea is to transform the value of the primary residence into protected retirement capital, rather than new property.

Temporary exemptions and targeted measures

Other mechanisms, more ad hoc, have existed or still exist:

– exemption, for the years 2022 to 2024, of capital gains on the sale of building plots or secondary residences when the proceeds were used to repay a mortgage, within three months of the sale;

– starting in 2026, the introduction or extension of incentives related to the supply of “affordable rental” housing, including a capital gains exemption in case of reinvestment in this type of rental stock;

– full exemption for properties acquired before January 1, 1989 (except building plots, which are taxable regardless of the year of acquisition).

Finally, the consideration of inflation via the indexation coefficient as soon as two years of ownership is in itself a form of tax relief, mechanically reducing the taxable net capital gain.

Special cases: professional activity or short-term rental

When the property has been held as part of a professional activity (for example through a company or as part of a short-term rental activity such as tourist accommodation), the sale is treated differently.

If the property has served as the basis for a short-term rental activity treated as a business, the rule of taxing only 50% of the capital gain applies fully only if the activity ceased at least 36 months before the sale. Otherwise, up to 95% of the gain may be taxed. This type of situation justifies careful planning of the end of the activity and the sale.

Rental income: focus on Portuguese taxation and its interaction with France

For a French person renting out their Portuguese property, the question is not only how much they will pay in Portugal, but also how France will treat these rents.

Taxation of rents in Portugal

Income from renting out a Portuguese property is considered Portuguese-source income and is taxed in Portugal. The general rule for individuals is a flat rate of 28% on gross rent. However:

– for residential rentals, a reduced rate of 25% generally applies;

– rate reductions may be granted for long-term leases, as the legislator seeks to encourage rental stability;

– Portuguese residents or EU/EEA residents may opt for including these rents in their overall income and taxation under the progressive schedule rather than the flat rate.

For resident companies, rents are part of the taxable profit and are subject to corporate income tax (CIT) at a base rate of approximately 19%, to which a municipal surcharge and a state surcharge may be added, up to an additional cap of 9%. Non-resident companies without a permanent establishment are taxed at the flat rate of 25% on Portuguese rents, with deduction rules similar to those for individuals.

How the France–Portugal tax treaty treats rents

The tax treaty signed in 1971 between France and Portugal is based on a fundamental principle: income from real estate is taxable in the country where the property is located. For an apartment in Lisbon owned by a French tax resident, this means:

More concretely:

– Portuguese rents are taxed in Portugal, often via a withholding tax of 25% as mentioned in some texts;

– in France, these Portuguese-source incomes are not added to the taxable base for income tax;

– however, the French administration may include them to calculate the average tax rate it will apply to the taxpayer’s other French income.

The treaty also provides for tax credit mechanisms in certain cases: when Portuguese-source income is taxable in France, France grants a credit equal to the Portuguese tax actually paid, but limited to the French tax that would have been charged on that same income.

For a French owner who has only Portuguese rental income and classic French income (salaries, pensions), the most common pattern is exemption with progression for the Portuguese rents: double taxation is avoided, but the rents potentially increase the average rate applied to French income.

France–Portugal tax treaty and capital gains: who taxes what?

The interaction of Portuguese domestic rules with the tax treaty is more delicate when it comes to capital gains. The documentation provided reveals two approaches:

– on the one hand, certain provisions of the treaty and OECD commentary indicate that the general rule for capital gains is taxation by the state of residence, except for real estate;

– on the other hand, the France–Portugal treaty, in the interpretation proposed, provides that capital gains from real estate located in Portugal are taxable only in Portugal and must therefore be exempt in France.

The key points to remember for a French tax resident are as follows:

The practical difficulty comes from another issue: the French exit tax on unrealized capital gains on securities (shares, partnership interests) when moving abroad. The texts mention the complex interaction between the French exit tax, triggered at the time of transfer of residence, and Portuguese taxation, triggered at the time of the actual sale of the securities, sometimes years later.

For real estate, however, the logic remains clearer: the capital gain on an apartment located in Portugal is taxed in Portugal and not in France, as long as the treaty remains in force in the same terms.

Tax residence: the key to the system

This entire framework only makes sense if you know in which country you are considered a tax resident. From the French perspective, Article 4 B of the French General Tax Code (CGI) considers a person to be domiciled in France if they meet one of four alternative tests: home (family) in France, main place of stay, main professional activity, or center of economic interests.

For a French person who settles permanently in Portugal, becomes a Portuguese tax resident and declares their income there, several things change:

Conversely, a French person who remains a resident of France but owns an apartment in Portugal will see:

– that apartment subject to IMI and, beyond certain thresholds, to AIMI;

– their rents taxed in Portugal and neutralized in France by the exemption with progression mechanism;

– the capital gain on resale taxed in Portugal, with no additional tax in France under the treaty, but potentially taken into account for the French average rate.

Quick comparison with French real estate taxation

To gauge the appeal or not of a Portuguese investment, many French people instinctively compare the capital gains and rental regimes in France and Portugal.

In France, a non-resident who sells French real estate generally pays:

– 19% capital gains tax, after a deduction for holding period (full exemption from capital gains tax after 22 years);

– 17.2% social security contributions (full exemption after 30 years, with a special regime for EU/EEA residents who may only be subject to a solidarity levy of 7.5%);

– thus a total charge of 36.2% on short-term capital gains, decreasing gradually with the holding period.

Regarding rents, a non-resident renting out a property in France faces:

– 20% or 30% income tax (minimum rate for non-residents, depending on income level);

– 17.2% social security contributions (or 7.5% for certain EU/EEA residents under conditions);

– thus a combined rate of 27.5% for an EU/EEA resident, and up to 37.2% – 47.2% for a non-EU non-resident.

In Portugal, the situation is simpler: 25% to 28% flat rate on gross rents, with allowed expense deductions and, for residents, the option to subject these rents to the progressive schedule if more advantageous.

Key takeaways for a French investor in Portugal

In this dense landscape, a few structuring principles emerge for those wishing to invest or settle in Portugal while controlling their real estate taxation:

For a French person considering investing in Portugal, the challenge is therefore not only to choose the right neighborhood or the right ocean view, but also to define a coherent strategy: holding structure (directly or via a company), holding period, future use of the property (primary, secondary, rental), and potential change of tax residence to Portugal.

Cyril Jarnias

Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.

On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.

Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.

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