Programa Regressar: how the tax benefit works for those returning to Portugal

Thinking about returning to Portugal?

Returning to the country after several years abroad raises many questions, especially when it comes to taxes.

One of the most relevant measures for those returning is the tax benefit provided under the Programa Regressar ("Return Programme"). In certain situations, this regime allows a significant part of employment income to be excluded from taxation for five years.

However, since 2024 new rules have applied, including an annual cap of €250,000 on the exempt income, which has caused some confusion.

In this article I explain, in simple terms:

• who can benefit;
• how the 50% income exclusion works;
• the new €250,000 cap;
• when the solidarity surcharge may apply;
• the practical steps to apply the regime.

What is the Programa Regressar tax benefit?

The tax benefit under Article 12-A of the Personal Income Tax Code (IRS) is designed to encourage former residents to return to Portugal.

In practice, it allows 50% of employment income and business or professional income to be excluded from taxation, provided certain requirements are met.

The benefit applies for five consecutive years, corresponding to the year of return and the following four years.

Who can benefit?

You can benefit from this regime if you cumulatively meet the following requirements:

• You were previously a tax resident in Portugal before emigrating.
• You have not been a tax resident in Portugal during the five years prior to your return.
• You become a tax resident in Portugal again by 2026.
• You earn employment income or income from a business or professional activity.

Which types of income are covered?

The benefit applies to the following types of income:

Other types of income do not benefit from this regime.

How does the 50% exclusion work?

The benefit is neither a tax credit nor a deduction.

It works by excluding 50% of eligible income from taxation.

However, since the 2024 State Budget, a maximum cap now applies to this exclusion.

The new €250,000 cap

Since the 2024 State Budget, the maximum amount of income that can benefit from the exclusion is capped at €250,000 per year.

This means that even if 50% of the income exceeds that amount, the exclusion can never exceed €250,000.

Worked examples

What about high incomes?

Taxpayers with high incomes can still benefit from the regime.

However, that does not mean they are automatically exempt from the solidarity surcharge (adicional de solidariedade).

This surcharge is not specific to the Programa Regressar. It applies to taxpayers whose taxable income exceeds certain thresholds.

Currently, it corresponds to:

• 2.5% on the portion of taxable income between €80,000 and €250,000;
• 5% on the portion of taxable income exceeding €250,000.

So, if taxable income after applying the exclusion exceeds these thresholds, the surcharge remains due.

How to apply the regime?

Once you have confirmed that you meet the requirements, you should make sure the regime is correctly reflected throughout the year.

In practice:

• inform your employer, for withholding tax purposes;
• if you are self-employed, indicate the application of Article 12-A in line with the applicable guidance;
• select the regime on your Modelo 3 IRS tax return.

Conclusion

The Programa Regressar tax benefit can represent a significant reduction in personal income tax (IRS) for those returning to Portugal.

In summary:

• it allows 50% of eligible income to be excluded from taxation;
• it applies for five consecutive years;
• since 2024, the exclusion is capped at €250,000 per year.

For higher incomes, the solidarity surcharge may still apply, as it is levied on taxable income after the exclusion has been applied.

Frequently asked questions