Taxation of ETFs, Shares, Bonds and Crypto Assets in Portugal

António Pratas Nunes | Lawyer

In recent years, Portugal has consolidated its position as an attractive destination for international investors — combining a high quality of life and favourable residency regimes with a tax framework that, while evolving, continues to offer relevant opportunities for efficient investment structuring.

As investment products diversify and digital assets gain relevance, understanding how different categories of income are taxed has become essential for both resident and non-resident investors.

This insight provides a practical overview of the Portuguese tax treatment applicable to income derived from Exchange-Traded Funds (ETFs), shares, bonds and crypto assets, highlighting the key distinctions between capital income and capital gains, the applicable tax rates, and the implications for residents under the general and preferential  (IFICI+ / NHR) regimes.

1.  Capital Income (Category E – “Rendimentos de Capitais”)

As a preliminary note, capital income comprises all returns and other economic benefits, of any kind or designation, whether monetary or in kind, arising directly or indirectly from movable assets, rights or legal relationships, as well as from their modification, transfer or cessation — except for gains and other income taxed under different categories.

In practice, the following are typically classified as Category E income:

• Interest, such as income from deposits, loans or bonds.
• Dividends from Portuguese or foreign companies.
• Royalties when not received by the original author or rights holder.
• Income derived from ETFs or investment funds when distributed to investors.
• Returns from derivative contracts, such as swaps.
• Crypto income.

Capital income is generally characterised as passive income — it arises by virtue of owning an asset, rather than through an active economic activity.

Capital gains correspond to profits realised upon the sale, redemption or exchange of assets, including shares, fund units, bonds and crypto assets. They are considered occasional or fortuitous gains, distinct from regular business income.

Examples include:

• Sale of shares or ETF units.
• Redemption of bonds before maturity.
• Disposal of crypto assets.
• Transfers of other assets not related to a business activity.

The fundamental distinction between capital income and capital gains is that capital income arises from holding, while capital gains arise from disposing — a key factor in determining taxation, applicable rates and exemption rules.

3.  Taxation of Capital Income and Capital Gains

3.1. Capital Income (Category E)

Capital income — such as interest, dividends, royalties and other passive distributions — is generally subject to a flat tax rate of 28%  in Portugal.

Taxpayers may opt for aggregation (“englobamento”), subjecting the income to progressive rates up to 53%.

This can be beneficial for taxpayers with lower overall income, or where certain income items (e.g. dividends) are only partially included in the taxable base. Each case should be assessed individually to understand the benefits that each type of investment may offer.

If the income originates from a blacklisted jurisdiction, an aggravated rate of 35%  applies.

For foreign-source capital income and considering Portugal’s extensive Double Taxation Treaty (DTT) network, withholding tax in the source country may usually occur at limited to reduced rates (5%–15%).

Capital gains derived from movable assets — such as shares, bonds, ETFs, fund units or crypto assets — are generally subject to a flat tax rate of 28% in Portugal.

The applicable treatment depends on the holding period and the origin of the income:

• Short-term gains (held < 365 days): If total income exceeds €83 696, the gain is taxed at progressive rates up to 53%; otherwise, the flat 28% applies.
• Long-term gains (held > 365 days): Taxed at 28% flat.
• Aggregation option: An option to consider for taxpayers with low income. 
• In case of a capital loss in a specific year, the regime allows the loss to be carried forward for five years if the income is aggregated in that period.
  

An important exception applies to crypto assets:

• When crypto assets are held for more than 365 days before being sold, the resulting gain is exempt from taxation.

Nevertheless, taxpayers remain legally required to report such transactions in their annual tax return.

Two specific tax incentives apply to shares and participations in companies:

• Disposal of participations in micro or small companies: Where the legal requirements are met, only 50% of the capital gain is considered for taxation and is subject to the 28% rate.

• Disposal of securities admitted to trading on a regulated market or of units in open-ended collective investment undertakings: In certain cases, part of the gain may be excluded from taxation depending on the holding period of the asset:

1. 10% exclusion if held for more than 2 years and less than 5 years.
2. 20% exclusion if held for more than 5 years and less than 8 years.
3. 30% exclusion if held for 8 years or more.

Blacklisted jurisdictions: Gains from securities or funds located in blacklisted jurisdictions are taxed at 35%.

Foreign-source capital income is exempt in Portugal if it may be taxed in the other country under an applicable DTT, or, in the absence of one, under the OECD Model Tax Convention, provided that the income does not originate from a blacklisted jurisdiction.

In practice, most treaties grant taxing rights to the country of residence, so this exemption is rarely applicable and acceptable to the tax authorities.

The exemption method also applies to foreign-source capital income, without requiring that the income be taxable abroad. Exempt foreign income must still be included for rate-determination purposes.

However, if derived from a blacklisted jurisdiction, the exemption does not apply, and the income is taxed at 35%.