How Portugal’s Tax Blacklist Hits Expat Investors With 35% Tax and How to Avoid It

Portugal tax blacklist exists to discourage the use of low-tax jurisdictions. It does this by applying tougher rules to any income or transactions linked to those places. For residents and investors, this can make a big difference to the tax paid on dividends, interest, and capital gains.

In this guide, you will see why Portugal uses a blacklist, which jurisdictions appear on it, how it affects investment income, what changes from 2026, and what practical steps expats can take.

Why does Portugal have a blacklist?

Portugal uses the blacklist to combat tax avoidance and to promote transparency in international taxation. A jurisdiction can appear on the list if it meets any of the following conditions:

• It imposes little or no corporate tax (below 12%).
• It uses tax rules that diverge significantly from global standards.
• It offers special regimes or exemptions that reduce tax to unusually low levels.
• It restricts the exchange of tax or financial information.

Importantly, Portugal applies these rules without exceptions. Regulated entities such as pension funds or sovereign wealth funds still face penal treatment if they sit in a blacklisted jurisdiction.

As a result, the regime often goes further than international or EU standards. In some cases it even overrides tax treaties. Despite regular criticism from businesses and advisers, the blacklist remains a central part of Portugal’s anti-avoidance strategy.

Portugal tax blacklist in 2025 and 2026

This list is current as of September 2025. Hong Kong, Liechtenstein, and Uruguay are scheduled to leave the list on 1 January 2026.

How does this affect investment income?

Portugal applies some of its harshest tax rules when any part of an investment links back to a blacklisted jurisdiction. For residents, this affects the tax treatment of dividends, interest, capital gains, fund withdrawals, trust distributions, and even the design of their portfolio.

Higher tax on investment income

Under normal rules, foreign investment income pays a flat 28% tax. This rate covers dividends, interest, royalties, and other passive returns.

However, the rate rises to 35% when the payer sits in a blacklisted jurisdiction. The law focuses on the legal source of the income, not just how it looks from an investor’s point of view. Therefore, it does not matter whether the investment is regulated, longstanding, or professionally managed. Once the source sits in a blacklisted location, the 35% penal rate applies.

Higher tax on capital gains

Capital gains on shares, bonds, fund units, and similar assets follow the same pattern. The standard Portuguese rate for foreign gains is 28%.

Yet when the gain comes from an asset that is located in, routed through, or paid out by a blacklisted jurisdiction, the tax rate moves up to 35%. This rule can affect:

• Direct shareholdings
• Offshore investment funds
• Structured products and notes
• Trusts and other wrappers

In short, if the legal domicile or structure ties back to a blacklisted territory, the higher rate applies.

No protection under NHR or NHR 2.0

Portugal’s NHR and NHR 2.0 regimes give favourable treatment to many types of foreign income. They can reduce or even remove Portuguese tax where certain conditions apply.

Income from blacklisted jurisdictions sits outside those advantages. Any dividend, interest payment, capital gain, or profit linked to a blacklisted jurisdiction becomes fully taxable in Portugal at 35%.

Lawmakers designed this rule to stop taxpayers from using NHR to sidestep the blacklist penalties. As a result, even new arrivals who planned their move carefully can run into problems if they still hold “legacy” offshore assets in blacklisted locations.

Why expats are caught out

Many expatriates hold investments in offshore centres for entirely practical reasons. They may have:

• Lived and worked in different countries
• Used international banks with offshore booking centres
• Followed advice from non-EU financial advisers

Because of this, it is common to see bank accounts, platforms, and funds based in Jersey, Guernsey, the Isle of Man, Bermuda, Cayman Islands, and similar hubs.

These centres tend to be well regulated and familiar to international investors. Even so, Portugal treats them as “tax havens” where they appear on the blacklist. As a result, any income they generate can face the 35% tax rate once the investor becomes resident in Portugal.

Many expats only discover this after they have moved. By that point, restructuring may still be possible, but the first taxable event can already be very expensive.

How to avoid blacklist penalties

Investors can eliminate the blacklist connection and reduce their overall tax exposure by restructuring their portfolio into a Portuguese Compliant investment solution. The most common approach is using an EU-based life insurance bond domiciled in a jurisdiction recognised and approved under Portuguese law, such as Ireland or Luxembourg.

These compliant structures offer several key advantages:

• The investment is no longer legally connected to a blacklisted jurisdiction, removing the 35% penalty.
• Tax is deferred within the structure, allowing the portfolio to grow without annual taxation.
• Withdrawals benefit from reduced tax rates the longer the bond is held.
• After eight years, only a fraction of the gain is taxable, resulting in an effective tax rate of around 11.2%.

This makes compliant bonds one of the most efficient ways for residents to hold international investments while keeping both tax liability and regulatory risk under control. For many expats, restructuring is not just beneficial but essential for avoiding unnecessary tax erosion on their returns.

Next steps for investors in Portugal

If you are resident in Portugal and hold investments, accounts, funds or structures in any of the blacklisted jurisdictions, it is important to review your position before a taxable event occurs.

• Check where your investments are legally domiciled, not just where they are marketed.
• Identify any links to blacklisted jurisdictions that could trigger the 35% rate.
• Consider whether a Portuguese-compliant investment bond or other onshore structure would be more tax efficient and suitable for your long-term plans.

Taking advice early can help you avoid unexpected tax bills and align your portfolio with both Portuguese law and your wider financial objectives.

Disclaimer: While care has been taken to ensure the information in this article is accurate at the time of publication, laws and regulations may change. This content should not be relied upon as a substitute for personalised professional advice. Always seek guidance based on your specific circumstances.