Income Tax and Sales Taxes are much higher in Portugal than in Canada, however there is a program called NHR that can greatly reduce your tax burden. There are also some “gotchas” when moving from Canada to Portugal, namely Canada’s vicious “departure tax”.
Disclaimer: I am not an accountant. Please verify your personal situation with a qualified accountant in both Portugal and Canada and do your own research. This document is meant only as a starting point for research to your own specific situation.
Income Tax
| Income before Tax | Canada + Ontario + CPP + EI | Portugal IRS + Social Security |
| $50,000 | 20.6% | 35.2% |
| $100,000 | 26.49% | 43.77% |
| $150,000 | 28.9% | 47.80% |
| $200,000 | 28.6% | 49.85% |
| $250,000 | 30.8% | 51.53% |
Non-Habitual Resident Tax Rate (NHR)
The Portuguese government lures immigrants here with a reduced tax rate, however, once you have moved, they will change it.
2009–2023
NHR allowed foreign sourced income (digital nomad income) to be taxed at a flat rate of 20%, making it highly competitive. For digital nomads employed in countries with a tax treaty like Canada, you don’t pay tax twice. For example, if you earn $100,000 from an Ontario employer, you pay your 26.49% to Canada + Ontario + CPP + EI, and then you file in Portugal at 20%. Because you have already payed 26.49% in Canada, you’d pay 0 in Portugal because 26.49% > 20 %. Without NHR, you’d file in Portugal at 43.77%, so you’d owe an additional 17.28% to Portugal.
NHR did not tax CPP or other pension income at all. (0%)
2024
Portugal changed everything by introducting the IFICI, then rebranded it the ITS, and now colloquially calls it the NHR2.0?
- CPP or other pensions are now taxed at 10%
- In order to get the 20% income tax rate, you have to qualify as a “highly skilled individual”, and I suspect the bureacracy on providing that proof to be eggregious
- At least people who were previously granted NHR can keep the previous rules for the full 10 years as promised
The future
These benefits apply for 10 years starting from the moment you apply, either to the original NHR or the new one, but everything is subject to change on short notice, as we are finding out this week with their changes to their citizenship laws. The current law today is no promise of what the law will be tomorrow.
Sales Tax
| Ontario | Portugal | |
| Basic Sales Tax | 13% | 23% |
| “Basic” Groceries | 0% | 6% |
| Medicine | 0% | 6% |
That said, wine is considered “basic groceries” here, so if you are an alcoholic, you could see significant savings over shopping at the LCBO! But in general, electronics, furniture and other big ticket items that one needs when relocating will cost you significantly more in Portugal than in Canada
Dividends
So this is an anecdotal example of how capital gains taxes work here, but I was surprised when I bought my first stock from an App my Portuguese bank provided me and received my first dividend. I got a statement that said something like this:
Quantidade de Títulos 200
Valor Unitário Bruto 0,450000 EUR 90.00
Imp.Ret.no Pais da Fonte 25% 0,112500 EUR = 22.50
IRS/IRC 28% 0,126000 EUR 25.50
Valor Unitário Líquido 0,211500 EUR 42.30
Valor Antes de Encargos 42.30
Comissão Bancária 1,25 EUR
So after doing some research, what this meant was that I held 200 stocks that paid a dividend of €90. France has a withholding tax of 25%, and because the European banking system doesn’t synchronize these things, the bank withheld an additional 28%. So of my €90 dividend, France and Portugal got 48.00 and I was allowed to keep €42.00. Compare that with investing in a Hong Kong or London based stock within my TSFA, where I would keep 100% of my dividend!
Buying a car
Here is a comparison for buying a 2025 VW Golf 1.5 TSI from a dealer in Canada and in Portugal
| Ontario | Portugal |
| MSRP: $36,495.00 Freight & PDI: + $2,050.00 Dealer fee: $500.00 HST 13%: $ 5,076.00 Registration/licensing: $ 200.00 | MSRP: ~€29,420 ($47,137.52) Vehicle Tax (ISV): €6,500 ( $10,414.48) VAT (23%): €8,262 ($13.237.69) Note: VAT is applied to MSRP + ISV, so Portugal is taxing the tax. |
| Total: $44,321.00 | Total: $70,789.69 |
In addition, this is not apples to apples, you get a better car for your money in Canada, but this is the best comparison I could find. For example, most of the features I have on my car don’t exist in Portugal, at least not at this price point. Kiss your heated seats and sunroof good-bye!
There are other taxes that we just don’t have in Canada, like the annual road tax. For a 220 HP car from 2018 with a 2.0L engine, I pay about €640 ($1025). There are also biannual mandatory vehicle inspections, which will prevent all but the most patient individual from importing their car from elsewhere.
Buying a home
Don’t buy a home in Portugal until you have lived here a few years and understand how real estate works here.
Honorable Mention
- IMI (Property tax)
- IMT (Real estate tax, like Ontario Land Transfer Tax)
- Stamp Duty (A tax on documents?)
- Wealth tax on property worth more than €600,000.00
- Inheritance taxes (Not taxable in Ontario)
- Capital gains is 28%, where as in Ontario, its 50% of your marginal income tax rate, or much lower for the average person
- Crypto (favourable to Portugal if you hold for > 1 year, but staking and day trading are heavily taxed)
Canada Departure Tax
I saved the best for last. When CRA finds out that you have left Canada, as happens when you file your first tax return in Portugal and become a Portugal tax resident you are subject to a Canadian departure tax. That means that all property, including your primary residence, and all assets held outside of your RRSP or TSFA are taxed at 25% of the total value, not just the gain.
For example, if you bought a one bedroom condo in Toronto for $400,000, and it is now worth $600,000, and you wanted to rent it out when you moved to Portugal, when CRA deems you a non-resident, you could be liable for 25% of the full $600,000, or $150,000.00 immediately! There are ways to mitigate this risk, but if you own property in Canada and do not plan on disposing of it before your move, make sure your accountant is competent!
RRSP & TSFA Contributions for Digital Nomads
You may continue to contribute to your RRSP while you live in Portugal, but do not contribute or withdraw funds from your TSFA. Do not touch your TSFA!
In Conclusion
Understanding taxation in one country is difficult enough. Taxation across two countries is even more challenging, especially when the rules change constantly, and never for the better! I would strongly advise against a “move first, and figure it out as you go along” approach to tax planning, especially if you own significant assets in Canada. Canada’s departure tax is brutal.
Tax systems evolve slowly, and have been built around the assumption that a person lives and works in the same location. Technology and the pandemic have decoupled where we work from where we live, but the tax systems have not caught up with the new reality. Where there is ambiguity in tax regulation, the bureaucrat who is interpreting your case will rarely rule in your favour. Being a digital nomad means charting new territory no matter where you go, and 99% of accountants and lawyers will have little to no experience with your particular situation. You will have to do significant research on your own in order to avoid the worst pitfalls. In most cases, a digital nomad will require a competent accountant in both the country of employment and the country of residence, and competence comes with a cost. Hopefully this document will help get you started on the right track.