Reports in Portugal claim Benfica are ready to bid 25 million euros for the defensive midfielder.
The proposed deal is expected to include 20 million euros paid up front, with a further five million euros in performance-related bonuses.
Another option being discussed is a loan agreement. Under that proposal, Benfica would pay a 10 million euro loan fee before completing a compulsory permanent transfer worth 15 million euros at the end of the season.
Palhinha is expected to leave Bayern after spending last season on loan at Tottenham Hotspur. The Premier League club decided against triggering their 30 million euro option to sign him on a permanent basis.
Sporting CP, where Palhinha began his professional career, have also been linked with the midfielder. However, reports suggest their interest has faded because they are unwilling to meet the player's salary demands.
