Does the 85/15 rule apply to selling property in Portugal?

No. Property capital gains have their own regime with a different headline number: since 1 January 2023, 50% of the gain on a Portuguese property enters the tax base and is taxed at the progressive rates, for residents and non-residents alike, with worldwide income counted only to set the bracket. The 85/15 rule appears under property searches only because the same people, foreign retirees in Portugal, ask both questions. If you are selling, the numbers you need are in our selling guide.

Does the 85/15 rule apply to my US 401(k) or IRA?

Usually not, on the reasoning discussed in professional practice: the split requires the capital portion to be your own already-taxed contributions, and a traditional 401(k) or IRA is funded with pre-tax money, so there is no already-taxed capital to return. Roth-type accounts, funded with taxed contributions, raise a different analysis. This is exactly the kind of classification that turns on the individual scheme and on the Portugal-US treaty position, so treat any blanket internet answer, including this one, as a starting point for a conversation with a Portuguese tax adviser, not a conclusion.

Explainer · verified 19 August 2026

The 85/15 rule in Portugal, explained

By Matan Gvili, Real Estate Advisor

The question "what is the 85-15 rule in Portugal?" appears under property searches constantly, and every answer that ties it to real estate is wrong, because it is a pension rule. This short guide states what the rule actually does, who it applies to, and what the real property numbers are, so the two stop getting mixed up.

Quick answer

The 85/15 rule is a Portuguese pension rule, not a property rule: where a private pension payment mixes your own already-taxed contributions with investment growth and the two cannot be separated, 15% is taxed as income and 85% is a tax-free return of your capital. For property sales the number is different: 50% of the gain enters the tax base. Verified 19 August 2026.

One question, two different rules

If you are asking about a pension: 15% of each mixed pension payment is taxable and 85% is treated as your own capital coming back, where the two cannot be separated and the pension was funded with your own already-taxed contributions. If you are asking about selling a property: there is no 85/15 anywhere in that calculation; 50% of the gain enters the tax base at progressive rates, and the details, from the inflation uplift to the 12-year works deduction, are a different page. The question keeps appearing under property searches because the same audience, foreign retirees who own Portuguese homes, asks both.

How the pension split actually works

A private pension or annuity payment is usually two things at once: a return of the money you paid in over the years, and the investment growth earned on it. Portugal only wants to tax the growth. Where a scheme can show exactly how much of each payment is capital and how much is income, that split is used. Where it cannot, which is the common case, the default takes over: 15% of each payment is treated as taxable income, 85% as a non-taxable return of capital. The conditions discussed in practice are that the contributions were genuinely yours, not an employer's, and that they were already taxed when made, which is why the rule matters so much to retirees with taxed-contribution schemes and so little to holders of pre-tax accounts.

Two honest limits on this page. First, the split's statutory article number is deliberately not cited here, because it was not verified to primary-source standard when this page was checked; the substance is stated consistently across the professional literature. Second, whether your specific scheme qualifies is a classification question that depends on the scheme's funding history and the relevant tax treaty, and it is exactly what a licensed Portuguese tax adviser is for. Portugal Property Invest is an independent property advisory, not a tax adviser, and pensions are the one subject on this site where we will always tell you to take advice before acting.

The property numbers, for contrast

For a Portuguese property sale the operative numbers are: 50% of the gain enters the tax base, taxed at progressive rates since the start of 2023 for residents and non-residents alike, computed after an inflation uplift on the purchase price and deductions for documented works from the last 12 years and the costs of buying and selling. Nothing is withheld at completion. The full walk-through, including the disputed reinvestment relief and the three-year trap after Alojamento Local use, is in the selling guide, and the annual costs of holding the home are in the Annual Cost of Owning data page.

Sources

Professional literature on Portuguese pension taxation - the 15%/85% mixed-payment split and its taxed-contribution conditions, stated consistently across expat tax practice; substance verified, statutory article number deliberately not cited pending primary-source confirmation (19 August 2026).
CIRS art. 43.º and Oficio Circulado 20255/2023 - the property contrast: 50% inclusion at progressive rates. portaldasfinancas.gov.pt

Frequently asked questions

What is the 85/15 rule in Portugal?: It is a pension rule. Where a private pension or annuity payment mixes the recipient’s own contributions with investment growth and the two components cannot be separated, Portuguese practice applies a default split: 15% of each payment is treated as taxable income and 85% as a tax-free return of the recipient’s own capital. The logic is that most of each payment is simply your own money coming back to you, and Portugal only taxes the growth component. The conditions discussed in professional practice: the pension must have been funded by your own contributions, and those contributions must already have been taxed, which is why pre-tax vehicles such as a US 401(k) funded with untaxed salary are generally said not to qualify. Confirm your own pension’s treatment with a licensed Portuguese tax adviser; the classification depends on the specific scheme.
Does the 85/15 rule apply to selling property in Portugal?: No. Property capital gains have their own regime with a different headline number: since 1 January 2023, 50% of the gain on a Portuguese property enters the tax base and is taxed at the progressive rates, for residents and non-residents alike, with worldwide income counted only to set the bracket. The 85/15 rule appears under property searches only because the same people, foreign retirees in Portugal, ask both questions. If you are selling, the numbers you need are in our selling guide.
Does the 85/15 rule apply to my US 401(k) or IRA?: Usually not, on the reasoning discussed in professional practice: the split requires the capital portion to be your own already-taxed contributions, and a traditional 401(k) or IRA is funded with pre-tax money, so there is no already-taxed capital to return. Roth-type accounts, funded with taxed contributions, raise a different analysis. This is exactly the kind of classification that turns on the individual scheme and on the Portugal-US treaty position, so treat any blanket internet answer, including this one, as a starting point for a conversation with a Portuguese tax adviser, not a conclusion.
Where does the 85/15 rule come from?: From the Portuguese IRS Code’s treatment of annuity and pension payments that mix capital and income, as applied in professional practice. We deliberately do not cite a specific article number here: the provision’s numbering was not verified to primary-source standard when this page was checked on 19 August 2026, and quoting the wrong article would be worse than quoting none. The substance, the 15% taxable and 85% capital-return split where the components cannot be separated, is stated consistently across the professional literature.

Here about the property side?

The real numbers for selling as a non-resident: the 50% inclusion, the deductions, and what changed in 2026.

Selling as a non-resident Rental income tax 2026