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Category H Pensions in Portugal: What Counts as a Pension and How It’s Taxed
👵 What Is Category H Income?
Under Article 11 of the IRS Code, category H includes:
- Retirement pensions (pensões de reforma ou aposentação) — from Social Security, the civil service or foreign public schemes
- Disability and survivors’ pensions
- Private pensions paid by pension funds or insurance companies, including occupational pension plans
- Annuities (rendas temporárias ou vitalícias)
- Alimony (pensões de alimentos) received
- Pre-retirement payments (pré-reforma) in some situations
The pensions can be Portuguese or foreign.
🧮 How Pensions Are Taxed
- Specific deduction: €4,587.09 per pensioner in 2026 (the same amount as for employment income), or the compulsory contributions to health schemes, if higher
- Progressive rates: the remaining income is added to your other income and taxed at the general rates (up to 48%, plus solidarity surcharge on very high pensions)
- Withholding at source: Portuguese pensions have monthly withholding, according to the official tables
- Deductions from tax (deduções à coleta): pensioners benefit from the general personal deductions, plus deductions for health, housing and other expenses
Alimony is taxed at a special rate of 20%, unless you choose to aggregate it with other income.
Annuities: only the portion that exceeds the capital you paid in is generally taxed.
🌍 Foreign Pensions
If you’re a Portuguese tax resident, foreign pensions are taxed in Portugal — subject to the tax treaty with the paying country:
- Private pensions: in most treaties, taxed only in the country of residence (Portugal)
- Government pensions (civil servants, military, etc.): usually taxed only in the paying country, unless you’re a national of the country of residence
- Social Security pensions: depend on the treaty
Foreign pensions are declared in Annex J, with credit for foreign tax when the treaty allows the other country to tax.
✨ Special Regimes
- NHR (for beneficiaries still within their 10 years): foreign pensions taxed at 10% for those registered since April 2020, or exempt for those registered before, under the transitional rules
- IFICI: foreign pensions are not exempt — they’re taxed at progressive rates
- Non-residents receiving Portuguese pensions are taxed at 25% (with a specific deduction), and may opt to be taxed as residents under certain conditions
📋 How to Declare
- Portuguese pensions: Annex A (pensions are shown in the same annex as employment income)
- Foreign pensions: Annex J
- Alimony received: Annex A, unless taxed at the special rate
💡 Practical Tips
- Check the tax treaty before moving — government pensions are often taxed only in the paying country.
- Keep pension statements and proof of foreign tax withheld.
- Lump sums vs annuities: the tax treatment of a lump sum from a foreign pension fund can be very different from monthly payments — get advice before choosing.
- Retiring with NHR? Check how much time is left in your 10-year period.
🚀 Final Considerations
Category H covers all forms of pensions — public and private, Portuguese and foreign — as well as annuities and alimony. With the end of NHR for new applicants, most new retirees pay IRS on their pensions at progressive rates, so understanding the treaties and deductions is more important than ever.
📢 Expert Advice: Before moving to Portugal in retirement, check how each of your pensions is treated under the tax treaty. Government pensions are often taxed only at source.
Retiring to Portugal? Step Inside Portugal’s tax team can analyse your pensions and prepare your IRS — find out more about our tax services here. ✨
This article is for general information only and doesn’t constitute tax advice. Treaties vary by country; each case should be analysed individually.
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