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Dividends in Portugal: 28% Flat Rate or Aggregation with the 50% Reduction
💶 What Are Dividends?
Dividends are distributions of profits by a company to its shareholders. For IRS purposes, category E also includes:
- Interim dividends and advances on profits
- Amounts made available to shareholders that don’t come from loans or capital (for example, amounts credited to their current account)
- Profit distributions by investment funds, in some cases
- Distributions on liquidation above the capital contributed (partly)
🧾 The Default: 28% Flat Rate
- Portuguese dividends: the company withholds 28% at source, and that’s the final tax — you don’t need to declare them, unless you opt for aggregation
- Foreign dividends: declared in Annex J and taxed at 28%, with a credit for foreign withholding tax within the limits of the tax treaty
- Tax havens: dividends from entities in blacklisted jurisdictions are taxed at 35%
⚖️ The Option: Aggregation with 50% Reduction
If you choose to aggregate (englobar) dividends with your other income:
- Dividends from companies with their seat or effective management in Portugal, or in another EU or EEA country, that are subject to and not exempt from corporate tax, are taxed on only 50% of their value
- The 50% is added to your other income and taxed at progressive rates
- The 28% withheld in Portugal (or the foreign tax) is credited against the final tax
The 50% reduction exists to mitigate double taxation — the profits have already been taxed in the company.
🧮 When Is Aggregation Worth It?
With only 50% taxed, the effective rate is half your marginal rate. Aggregation can be better when your marginal IRS rate is below 56% — which, in practice, means for most taxpayers… but there’s a catch:
- If you opt for aggregation, you must aggregate all income of the same nature (for example, all category E income, including interest, which doesn’t get the 50% reduction)
- Aggregated dividends push up the rate on your other income
Example: dividends of €10,000 and a marginal rate of 37%:
- 28% flat: €2,800
- Aggregation: €5,000 × 37% = €1,850 (before considering the effect on other income)
The IRS simulator on the Portal das Finanças shows the result of both options.
🌍 Foreign Dividends and Special Regimes
- Non-EU dividends (for example, from US or UK companies) don’t get the 50% reduction if aggregated
- IFICI and NHR: foreign dividends may be exempt (except from tax havens)
- Non-residents: Portuguese dividends are taxed at 28% (or the reduced treaty rate)
➖ Losses
Category E has no losses to carry forward — dividends are taxed on their gross amount, with no deductible expenses.
💡 Practical Tips
- Own a company? Compare salary, dividends and aggregation every year.
- Simulate both options before submitting your IRS.
- Keep the foreign withholding certificates to claim the credit.
- Check the treaty rate on foreign dividends — ask for a refund of excess withholding abroad.
🚀 Final Considerations
Dividends in Portugal are taxed at 28% by default — but the option to aggregate, with only 50% taxed for Portuguese and EU companies, can reduce the tax significantly. The best option depends on your total income.
📢 Expert Advice: If you receive dividends from your own Portuguese company, always simulate aggregation. The 50% reduction often makes it the cheaper option.
Receiving dividends in Portugal? Step Inside Portugal’s tax team can simulate the options 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. It reflects the rules as of October 2026.
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