Taxation in Portugal

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Taxes in Portugal are levied by both the national and regional governments of Portugal. Tax revenue in Portugal stood at 34.9% of GDP in 2018. [1] The most important revenue sources include the income tax, social security contributions, corporate tax and the value added tax, which are all applied at the national level.

Contents

Income tax

Employment income earned is subject to a progressive income tax, which applies to all who are in the workforce. Furthermore, a long list of tax allowances can be deducted, including a general deduction, health expenses, life and health insurance, and education expenses. The personal income taxation system is as follows: [2]

Taxable incomeApplicable Tax Rate
Portuguese mainland Flag of Portugal.svg Autonomous Region of Madeira Flag of Madeira.svg Autonomous Region of Azores Flag of the Azores.svg
Up to €7,47914.50%10.15%10.15%
€7,479 to €11,28421%14.70%14.70%
€11,284 to €15,99226.50%18.55%18.55%
€15,992 to €20,70028.50%19.95%19.95%
€20,700 to €26,35535%29.75%24.50%
€26,355 to €38,63237%33.67%25,90%
€38,632 to €50,48343.50%42.20%30.45%
€50,483 to €78,83445%43.65%31.50%
Above €78,83448%47.52%33.6%

Benefits available to former and first time tax residents

Under the Investment Tax Code, approved on September 23 2009, [3] a new type of residency, for tax purposes was created under the Personal Income Tax Code, called non-habitual residency (NHR). This new tax residency type was created in order to attract to Portugal high-skilled professionals and pensioners obtaining foreign income. [4]

Qualifying for NHR status

A person, regardless of their nationality, may apply for registration as a non-habitual resident if the following conditions are fulfilled: [3] [4] [5]

  • The person is considered, for tax purposes, to be resident in Portuguese territory, in accordance with any of the criteria set out in Personal Income Tax Code in the year for which that person wishes to be taxed as NHR;
  • That person as not been considered to be resident in Portuguese territory in any of the five calendar years preceding the year for which that person wishes to be taxed as a non-habitual resident.

Personal Income Taxation

Taxation for NHR status holders [3] [4] [5] [6] [7]
Type of IncomeSource of IncomeTaxation
Portuguese mainland Flag of Portugal.svg Autonomous Region of Madeira Flag of Madeira.svg Autonomous Region of Azores Flag of the Azores.svg
Employment IncomeForeignTaxation exemption on employment income is granted if the income is subject to taxation in the source country, in accordance with the applicable Double Taxation Agreement, or are considered not to be derived from a Portuguese source.
High-Added Value Job performed in PortugalFlat tax of 20%Flat tax of 16%
Any other job performed in PortugalNormal progressive tax rates
PensionsForeignPension income obtained by non habitual residents abroad, which is, for the same portion which was considered taxable, not considered tax deductible in Portugal, is taxed at a 10% flat rate.
PortugalNormal progressive tax rates
Self employment, obtained through high added value activities of a scientific, artistic or technical nature (see below), or from intellectual or industrial property, as well as, from providing information regarding an experiment carried out in the commercial, industrial or scientific areasForeignExempt from taxation if alternatively:
  • It can be taxed by the source State, according to the double taxation treaty signed between Portugal and the source State; or
  • It can be taxed in another country, in cases where the double tax treaty has not been entered into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as (i) it is not a territory subject to privileged tax systems (defined by an ordinance) and (ii), as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory, as per the Personal Income Tax Code.
PortugalFlat tax of 20%Flat tax of 16%
Capital IncomeForeignExempt from taxation if alternatively:
  • It can be taxed by the source State, according to the double taxation treaty signed between Portugal and the source State; or
  • It can be taxed in another country, in cases where the double tax treaty has not been entered into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as (i) it is not a territory subject to privileged tax systems (defined by an ordinance) and (ii), as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory, as per the Personal Income Tax Code.
PortugalFlat 28%
Real Estate IncomeForeignExempt from taxation if alternatively:
  • It can be taxed by the source State, according to the double taxation treaty signed between Portugal and the source State; or
  • It can be taxed in another country, in cases where the double tax treaty has not been entered into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as (i) it is not a territory subject to privileged tax systems (defined by an ordinance) and (ii), as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory, as per the Personal Income Tax Code.
PortugalFlat 28%
Capital GainsForeignExempt from taxation if alternatively:
  • It can be taxed by the source State, according to the double taxation treaty signed between Portugal and the source State; or
  • It can be taxed in another country, in cases where the double tax treaty has not been entered into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as (i) it is not a territory subject to privileged tax systems (defined by an ordinance) and (ii), as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory, as per the Personal Income Tax Code.
PortugalNormal progressive tax rates
High Added Value Jobs

Under Ministerial Order issued by the Ministry of Finance, the follow jobs are subject to flat personal income tax of 20%: [5] [8] [9]

NHR status holders registered up to 2019NHR status holders registered from 2020
  • Architects
  • Engineers
  • Geologists
  • Artists of theater, ballet, cinema, radio and television and singers
  • Sculptors
  • Musicians
  • Painters
  • Auditors and Tax consultants
  • Medical analysts; Surgeon doctors; Doctors on board ships; General practitioners; Dentists; Stomatologists; Physiatrists; Gastroenterologists; Ophthalmologists; Orthopaedists; ENT doctors; Pediatricians; Radiologists; and Doctors from other specialties.
  • University professors.
  • Psychologists.
  • Liberal, technical and assimilated professions:
  • Archaeologists;
  • Biologists and specialists in life sciences;
  • Consultancy and computer programming and activities related to information technology and computer science;
  • Management and operation of computer equipment;
  • Information service activities; Data processing, hosting and related activities; Web portals; and Other information service activities;
  • News agency activities;
  • Scientific research and development activities;
  • Research and development on natural sciences and engineering;
  • Research and development in biotechnology;
  • Designers.
  • Investors, directors and managers:
  • Investors, directors and managers of companies promoting productive investment, provided that they are assigned to eligible projects and have concession contracts for tax benefits under the Investment Tax Code, approved by Decree-Law 249/2009 of 23 September; Senior managers of companies.
  • General Manager and Executive Manager of Companies
  • Directors of Administrative and Commercial Services
  • Production and Specialty Services Directors
  • Hotel, restaurant, trade and other service directors
  • Experts in the physical sciences, mathematics, engineering and related techniques
  • Doctors
  • Dentists and stomatologists
  • University and Higher Education Professors
  • Information and Communication Technology (ICT) Experts
  • Authors, journalists and linguists
  • Creative and performing arts artists
  • Intermediate science and engineering technicians and professions
  • Information and Communication Technology Technicians
  • Market-oriented farmers and skilled agricultural and livestock workers
  • Skilled, market-oriented forest, fishing and hunting workers
  • Skilled workers in industry, construction and craftsmen, including in particular skilled workers in metallurgy, metalworking, food processing, woodworking, clothing, crafts, printing, precision instrument manufacturing, jewelers, craftsmen, electrical workers and in electronics.
  • Plant and machine operators and assembly workers, namely stationary and machine operators

Corporate tax rate

The corporate tax rate applicable to companies in Portugal may vary, depending on which part of the Portuguese territory said companies are incorporated and domiciled. [10]

Type of entity Portuguese mainland Flag of Portugal.svg Autonomous Region of Madeira Flag of Madeira.svg Autonomous Region of Azores Flag of the Azores.svg
Resident entities and permanent establishments of non-resident entities21%14.7%14.7%
Resident entities characterized as a small or medium enterprises, on the first € 25 000 of taxable profit17%11.9%11.9%

Madeira International Business Centre

Companies incorporated and headquartered in Madeira can apply for an International Business Centre (MIBC) license and, granted that they comply with substance requirements, benefit from a corporate tax rate of 5% on the taxable profit derived from economic activities engaged with non-resident entities or entities duly licensed within the MIBC. [11] [12]

Value added tax

Mainland Portugal

Three different VAT rates apply: normal, intermediate and reduced. There is a general rate of 23% (normal rate) for luxury goods, decorative plants, cut flowers, utensils and other equipment for firefighting and fire prevention, [13] followed by a reduced rate of 13% for ordinary wine, spring, mineral, medicinal and carbonated water, and tickets for cultural events. This is followed by a further reduced rate of 6% on cereals, meat, shellfish, fruit, vegetables, and other essential foods, books, newspapers, medicines, passenger transport and hotel accommodation. [14] In 2014, the government introduced the fatura da sorte ("Lucky bill"), a lottery of tax-free cash and luxury cars awarded among consumers with VAT bills. The goal is to bring into the formal economy the many unregistered and untaxed purchases.[ citation needed ]

Madeira

The VAT rates in Madeira are 22% (normal rate), 12% (intermediate rate) and 5% (reduced rate). [15] [16]

Azores

The Azores has lower applicable VAT rates of 16%, 9% and 4%. [17] Businesses with revenue of less than 10,000 Euros per year are exempt from VAT.

Social security contributions

All employment income is subject to social security contributions. [18]

General Social Security Regime

Type of EmployeeContribution Supported by the EmployerContribution Supported by EmployeeTotal Contributions
General Employee23.75%11%34.75%
Members Statutory Governing Bodies20.3%9.3%29.6%
Members Statutory Governing Bodies who exercise managing functions23.75%11%34.75%
Home workers20.3%9.3%29.6%
Professional Sportsmen22.3%11%33.3%
Very-Short Term Contract Worker26.1%-26.1%
Worker suspended (by agreement) for pre-retirement purposes18.3%8.6%26.9%
Workers who are 65 years old and have been working for 40 years17.3%8%25.3%
Working Invalidity Pensioner19.3%8.9%28.2%
Working Old Age Pensioner16.4%7.5%23.9%
Civil Servant Invalidity Pensioner20.4%9.2%29.6%
Civil Servant Old Age Pensioner17.5%7.8%25.3%
Farmers22.3%11%33.3%
Local and Near Shore Fishery Workers21%8%29%
Ship owners who are crew members
Maritime Species Catchers
On foot fishermen
Workers of Private Social Security Institutions22.3%11%33.3%
Workers of other non-profit entities
Contracted Civil Servants23.75%11%34.75%
Appointed Civil Servants18.6%11%29.6%
Domestic Workers without unemployment coverage18.9%9.4%28.3%
Domestic Workers with unemployment coverage22.3%11%33.3%
Deficient Workers with a working capacity below 80%11.9%11%22.9%
Religious Workers (with protection in sickness, parenthood, professional related diseases, invalidity, old age and death)19.7%8.6%28.3%
Religious Workers (with protection in invalidity, and death)16.2%7.6%23.8%
Portugal Telecom workers who started their career with CTT Correios de Portugal, S.A. 7.8%-7.8%
Young people on school vacations26.1%-26.1%

Closed Social Security Regimes

Type of EmployeeContribution Supported by the EmployerContribution Supported by EmployeeTotal Contributions
Teachers hired until 31 December 2005 not covered by Civil Servants Pension Fund21%8%29%
Teachers hired until 31 December 2005 working for private schools7.8%-7.8%
Foreign Teachers hired until 31 December 2005 who opted not to enroll with Civil Servants Pension Fund7.8%-7.8%
Teachers hired until 31 December 2005 working for public schools4.9%-4.9%
Non-specialized works of the Autonomous Region of Azores in the sectors of agriculture, forestry or cattle farming21%8%29%
Worker suspended (by agreement) for pre-retirement purposes with more than 37 years of contributions7%3%10%
Worker suspended (by agreement) for pre-retirement purposes with less than 37 years of contributions14.6%7%21.6%
Members of the Armed Forces in voluntary and contractual regime3%-3%
Specialized farmers23%9.5%32.5%
Non-specialized farmers21%8%29%
Specialized farmers of the Autonomous Region of Madeira20.5%8.5%29%
Non-specialized farmers of the Autonomous Region of Madeira18.1%6.9%25%
Banking workers formally covered by the Family Allowance Fund of the Baking Workers from profit entities23.6%3%26.6%
Banking workers formally covered by the Family Allowance Fund of the Baking Workers from non-profit entities22%3%25.4%
Additional Contributions
Type of EmployeesAdditional Contribution Supported by the Employer
Beneficiaries of the Social Security Special Fund for the Workers of the Whool Industry0.5%
Beneficiaries of the Special Fund for Insurance Brokers1%

Social Security Regime for Freelancers

FreelancersContributions Supported
Freelancers in general and their respective spouses, or equivalent, with whom they jointly do the freelancing activity on a regular basis.21.4%
Self-employed businessmen/businesswomen and holders of sole-proprietor of limited liability entity and their respective spouses, or equivalent, with whom they jointly do the freelancing activity on a regular basis25.2%
Hiring entity from which the freelancer obtains more than 80% of his income.10%
Hiring entity in other situations.7%
Notaries who, on 31 December 2010, were covered by the freelancers' regime and opted for the maintenance of the Civil Servants' regime.2.7%

Voluntary Social Security Insurance Scheme

People Covered by the Voluntary Social Security SchemeContributions Supported
General Situations26.9%
Cooperation Agents
High Performance Sportsmen
Crew Members of ships registered in the Madeira's International Shipping Registry
National Maritime Workers and Watchmen who perform their job in ships owned by foreign companies29.6%
National Maritime Workers and Watchmen who perform their job in ships owned by common fishing companies
Research Fellows
Voluntary Firefighters27.4%
Social Voluntaries

See also

Related Research Articles

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<span class="mw-page-title-main">Non-Habitual Resident</span>

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References

  1. ↑ "Carga fiscal foi revista em baixa, mas 2018 continua a ser recorde". www.jornaldenegocios.pt (in European Portuguese). Retrieved 2019-11-15.
  2. ↑ "Portugal - Individual - Taxes on personal income". taxsummaries.pwc.com. Retrieved 2023-11-08.
  3. 1 2 3 "Decreto-Lei 249/2009, 2009-09-23". Diário da República Eletrónico (in Portuguese). Retrieved 2021-02-05.
  4. 1 2 3 "IRS - Regime Fiscal para o Residente Não Habitual" (PDF). Portal das Comunidades. May 2016. Retrieved February 5, 2021.
  5. 1 2 3 "Non-Habitual Resident (NHR) Regime - MCS" . Retrieved 2021-02-05.
  6. ↑ "Omissões Orçamentais". JM Madeira (in European Portuguese). 2020-02-13. Retrieved 2021-02-05.
  7. ↑ "Código Do Imposto Sobre O Rendimento Das Pessoas Singulares". info.portaldasfinancas.gov.pt. Retrieved 2021-02-05.
  8. ↑ "Portaria 12/2010, 2010-01-07". Diário da República Eletrónico (in Portuguese). Retrieved 2021-02-05.
  9. ↑ "Portaria 230/2019, 2019-07-23". Diário da República Eletrónico (in Portuguese). Retrieved 2021-02-05.
  10. ↑ PricewaterhouseCoopers. "Guia Fiscal 2023 – IRC". PwC (in European Portuguese). Retrieved 2023-11-08.
  11. ↑ "Madeira International Business Center - MCS" . Retrieved 2021-02-05.
  12. ↑ "Benefícios Fiscais". www.ibc-madeira.com. Retrieved 2021-02-05.
  13. ↑ "Taxes - VAT 23%". Economias (in Portuguese). Retrieved 2018-12-17.
  14. ↑ "KPMG". Vat rates in portugal. 31 August 2021.
  15. ↑ "Taxa de IVA na Madeira". Economias (in Portuguese). Retrieved 2018-12-17.
  16. ↑ "The tax system in Portugal". Expatica. Retrieved 2022-10-18.
  17. ↑ PricewaterhouseCoopers. "IVA". PwC (in European Portuguese). Retrieved 2022-09-27.
  18. ↑ "Taxas Contributivas". Segurança Social. Retrieved 15 November 2019.
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