“Portugal has no inheritance tax” — I must hear that sentence a dozen times a month, usually from someone who has just read it on an expat forum and is feeling rather pleased with themselves.

And they are half right. Portugal genuinely scrapped inheritance tax back in 2004. But there is a quieter cousin that picks up the slack, and it catches plenty of UK expats off guard: Imposto do Selo, or stamp duty. In my work advising British families across the Algarve, this is one of the most misunderstood taxes there is. So let’s clear it up properly.

What Is Imposto do Selo (Stamp Duty)?

Imposto do Selo is Portugal’s stamp duty — a tax on certain documents, transactions, and transfers of wealth. It is one of the oldest taxes in the country and it turns up in more places than most people realise: when you buy a house, when you take out a loan, and crucially, when assets are passed on as a gift or inheritance.

For UK expats, the part that matters most is how stamp duty replaced traditional inheritance tax. When Portugal abolished inheritance and gift tax two decades ago, it didn’t simply wave goodbye to the revenue. Instead, free transfers of wealth — gifts and inheritances — were folded into the stamp duty regime. The result is a system that feels generous to close family and noticeably less so to everyone else.

The Big Myth: “No Inheritance Tax”

Here is the honest version. There is no inheritance tax in Portugal in the British sense — no 40% levy on estates above a threshold, no nil-rate bands, none of that machinery you may be used to from the UK. What exists instead is a flat stamp duty of 10% applied to the transfer of certain Portuguese assets, and it only bites when the person receiving the asset is not a close relative.

Spouses, civil partners, children, grandchildren, parents and grandparents — what the Portuguese system calls direct ascendants and descendants — are completely exempt from this 10% charge. So if you leave your Portuguese villa to your spouse or your children, the stamp duty on that transfer is zero. That is the kernel of truth behind the “no inheritance tax” claim.

The problem arises with everyone else. Leave assets to a sibling, a niece, a nephew, a stepchild you never formally adopted, a close friend, or an unmarried partner who is not a registered civil partner, and that 10% stamp duty applies to the value of the Portuguese assets they receive. For a family that assumed the whole estate would pass tax-free, that can be an unwelcome surprise.

Stamp Duty on Gifts and Inheritances

The rules for gifts during your lifetime and inheritances on death are broadly the same, which is sensible — otherwise everyone would simply gift everything the day before they died. The key points:

• Direct family are exempt. Transfers to a spouse, civil partner, children, grandchildren, parents or grandparents attract 0% stamp duty.
• Everyone else pays 10%. Gifts or inheritances to anyone outside that direct line are taxed at a flat 10% on the value of the Portuguese assets.
• Only Portuguese assets count. Stamp duty on free transfers applies to assets situated in Portugal — property here, Portuguese bank accounts, shares in Portuguese companies. Assets held outside Portugal generally fall outside its scope.
• Property carries an extra layer. When the asset being transferred is real estate, there is an additional 0.8% property stamp duty on top. So a non-exempt person inheriting a Portuguese house faces 10% plus 0.8%, a total of 10.8%.

In my experience, the people most exposed are unmarried couples and blended families. A long-term partner who is neither married nor in a registered união de facto (de facto union) recognised for tax purposes can be treated as a stranger by the tax authority — meaning the full 10% applies to anything they inherit. It is heartbreaking and entirely avoidable with a little planning.

Stamp Duty When You Buy Property

Buying a home in Portugal triggers stamp duty too, though at a far gentler rate. The purchase of property attracts Imposto do Selo at 0.8% of the higher of the purchase price or the property’s official tax value (the Valor Patrimonial Tributário).

This sits alongside the much larger property transfer tax, IMT (Imposto Municipal sobre as Transmissões), which is charged on a sliding scale and is usually the bigger bill. I’ve written a fuller breakdown of the property taxes in my Portugal property tax guide, but the short version is this: budget for around 6–8% of the purchase price in combined taxes and fees, and don’t let the modest stamp duty figure lull you into forgetting IMT.

Stamp Duty on Loans and Mortgages

The third place stamp duty appears is on credit. If you take out a mortgage or a personal loan in Portugal, Imposto do Selo is charged on the amount borrowed. The rate depends on the term of the loan — longer mortgages (over five years) are charged at 0.6%, shorter loans at 0.5%, and very short-term credit is charged monthly at a small fraction of a percent.

It is rarely a deal-breaker, but it is a real cost that should sit in your calculations when you compare financing a purchase against paying cash. Your bank will normally collect it automatically and pass it to the tax authority, so you won’t have to file anything yourself.

Practical Planning for UK Expats

None of this needs to be frightening, but it does reward a bit of forethought. Here is what I tend to walk clients through:

1. Get your relationships formally recognised. If you are in a long-term partnership but not married, look into formalising a união de facto or marriage so your partner qualifies for the exemption. The difference between 0% and 10% on a Portuguese estate is enormous.
2. Think about where assets sit. Because stamp duty on transfers only applies to Portuguese-situated assets, the location of your wealth matters. This interacts with UK inheritance tax too, which can still apply to your worldwide estate if you remain UK domiciled — so cross-border advice is essential.
3. Don’t forget the UK side. Leaving Portugal out of the picture for a moment, the UK can still tax your estate. HMRC’s rules on domicile and inheritance tax are a separate and significant consideration. Treating the two systems in isolation is where people go wrong.
4. Review your will — both of them. Many expats benefit from having a Portuguese will for Portuguese assets alongside a UK will. Getting the two to work together, rather than accidentally revoking each other, is a job worth doing properly.

Frequently Asked Questions

Does Portugal have inheritance tax?

Not in the traditional sense — it was abolished in 2004. Instead, a 10% stamp duty (Imposto do Selo) applies to inheritances and gifts of Portuguese assets, but only when the recipient is not a spouse, civil partner, child, grandchild, parent or grandparent. Direct family inherit free of this charge.

Do I pay stamp duty if I inherit a house in Portugal from my parents?

If you are a direct descendant — a child or grandchild — you are exempt from the 10% transfer stamp duty. You would, however, still pay the 0.8% property stamp duty that applies to real estate transfers.

My partner and I aren’t married. What happens to them if I die?

This is the big one. An unmarried partner who is not in a tax-recognised de facto union can be treated as unrelated, meaning a full 10% stamp duty applies to any Portuguese assets they inherit. Formalising the relationship usually solves it. It’s worth taking advice before assuming you’re protected.

Does Portuguese stamp duty apply to my UK assets?

Generally no. Stamp duty on free transfers applies to assets situated in Portugal. Your UK pensions, UK property and UK accounts fall outside it — though they may well be within the reach of UK inheritance tax, which is a different question entirely.

How much is stamp duty when buying a Portuguese property?

Stamp duty on a property purchase is 0.8% of the price or tax value, whichever is higher. Remember this sits on top of IMT property transfer tax, which is usually the larger cost.

What to Do Next

The takeaway is simple: Portugal’s “no inheritance tax” reputation is real for close family, but the 10% stamp duty on transfers to everyone else is just as real — and it quietly catches unmarried partners and wider family most of all. A little planning around how your assets are held and who is set to inherit them can save your loved ones a great deal.

If you’d like to discuss how this affects your personal situation, get in touch with our team. We specialise in helping UK expats in Portugal make the most of their pensions, investments and estate planning across both tax systems. You can confirm the current rates directly with the Portuguese tax authority at the Portal das Finanças, and check UK inheritance tax rules at gov.uk.

Matthew Renier is a Chartered Financial Adviser at Arthur Browns Wealth Management, based in the Algarve, Portugal. He has over 20 years of experience helping British expats manage their pensions and financial planning across borders.

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