Taxes

As in any country, in Portugal you will have taxes to pay and tax obligations to fulfill

Framework

The Portuguese Tax System is composed of the following tax groups:
  • Income Taxes: On the income of natural persons (IRS) and legal persons (IRC) – businesses
  • Consumption Taxes: Value Added Tax (VAT) and Special Taxes on Consumption (IEC)
  • Taxes on Heritage – Property Tax (IMI), Municipal Tax on Onerous Transmissions of Real Estate (IMT) and Stamp Duty (IS)

Tax Residence

Regarding income taxes, these relate to income earned by natural and legal persons (businesses) with residence or fiscal headquarters in Portugal or, when it doesn't, on income that non-tax residents have from a source (origin) in Portugal

Tax residence in Portugal is verified, in relation to natural persons, When:

i) Stay, in Portugal, for more than 183 days (followed or interpolated), in any period of 12 months beginning or ending in the year in question; or
ii) Staying for less time, have, at any time during the period referred to, an accommodation that can be considered as habitual residence in Portugal

In relation to legal persons, their “tax residence” is verified when a company has its head office or effective management in Portugal

IRS - Tax on Individual Income

Natural persons who qualify as residents, for tax purposes, in Portugal, are subject to taxation on their worldwide earned income and the tax is calculated individually by each taxpayer, regardless of their marital status. However, individuals who are married or in civil partnership can opt for joint taxation when filing the income tax return, what, in most cases, allows to achieve a greater tax balance within the household

The IRS focuses on the following categories of income, after making the corresponding deductions and rebates:

  • Category A – Income from dependent work
  • Category B – Business and professional income (usually defined by self-employed workers)
  • Category E – Capital income (for example. financial investment, interest, dividends)
  • Category F – Property income
  • Category G – Heritage increases (for example. gains)
  • Category H – Pensions

Taxable income (€)

Continent

Rate (%)

Portion to be slaughtered

Up to 7.112

14,5

+ 7.112 to 10.732

23

604,54

+ 10.732 to 20.322

28,5

1.194,80

+ 20.322 to 25.075

35

2.515,63

+ 25.075 to 36.967

37

3.017,27

+ 36.967 to 80.882

45

5.974,54

+ 80.882

48

8.401,21

Natural persons not resident in Portugal are subject to taxation only on income obtained in Portugal

Special tax regimes (IRS)

Notwithstanding the general rules mentioned above, in Portugal, there are two special tax regimes applicable to natural persons:

i) Non-habitual residents regime: Created with the objective of attracting qualified professionals to Portugal in activities with high added value or intellectual property, industrial ou know-how, as well as beneficiaries of pensions obtained abroad

ii) Ex-Residents' Regime: Its intention is to captivate the return of generations of citizens who, before 2015, were tax residents in Portugal and chose to emigrate abroad

Non-Habitual Residents

It is a special regime that provides that any citizen, regardless of their nationality, who has not been taxed as a tax resident in Portugal in the last 5 years and register as a tax resident in Portugal, can benefit from this scheme for 10 consecutive years

The application for registration as a non-habitual resident should only be made after the individual is registered as a tax resident in Portuguese territory

In general terms,, the special regime referred provides for the following:

Portuguese Source Income: Income is included and taxed according to the general rules established, except, income from dependent and self-employment from high value-added activities, with scientific character, artistic or technical, which are taxed at the special rate of 20%

Foreign Source Income:

  1. Income from dependent work will be exempt from taxation in Portugal as long as they are effectively taxed in the country of origin, in accordance with the convention to eliminate double taxation entered into by Portugal with that country
  2. Income from independent work from high added value activities or intellectual or industrial property, or of know-how, shall be exempt from taxation in Portugal if, under the double taxation convention or the OECD model convention, it is foreseen a possibility of taxation by the other country
  3. Capital income, property income and income derived from capital gains will be exempt from taxation in Portugal if, under the double taxation convention or the OECD model convention, it is foreseen a possibility of taxation by the other country
  4. Pension income will be subject to a flat rate of 10%, with the possibility of deducting tax credit for international double taxation. This rule was introduced in 2020
  5. Other income will be taxed according to the rules set out in the convention to eliminate double taxation and, in case it does not exist, under the unilateral domestic rule for the elimination of international double taxation

Ex-Residents' Regime

Its application is carried out automatically and without the prior approval of the Tax Authority, despite the need to complete certain formalities, by the beneficiary, with the employer.

Under this regime, eligible individuals who become tax residents in Portugal between 1 January 2019 and 31 December 2020, if:

  1. Have not been resident in Portuguese territory in any of the 3 years prior to the year of his return
  2. Have been resident in Portuguese territory before 31 December 2015
  3. Have the tax situation regularized; and
  4. Do not apply for registration as non-habitual residents

The current regime provides for the exclusion of taxation of 50% income from dependent work and income from self-employment, so, the respective withholding tax applies only to half of the income paid or made available

The scheme is applicable to income earned between the years of 2019 and 2023 or between the years of 2020 and 2024

Declarative obligations

  • Taxable persons (individuals) wishing to live in Portugal must register with the Portuguese Tax Authority, requesting, for the purpose, the respective tax identification number, for which they must indicate their current tax address - either in Portugal or, eventually, still, abroad at the time of registration
  • If there is a change is the tax residence status or tax address, taxable persons must communicate this change to the Tax Authority, within 60 days. If this deadline is not met, a fine will be due for the delay
  • Non-resident taxpayers and residents who are absent for periods longer than 6 months outside the European Union or the European Economic Area (EEE), must identify a natural or legal person, with residence or headquarters in Portugal, to represent them
  • Taxpayers who are tax residents in Portugal, as well as non-residents who earn income that has not been taxed, subject to withholding tax, at liberatory rates, will be required to submit the annual income tax return, whose period is between 1 April and 30 of June, regardless of the nature of the income earned

IRC - Corporate Income Tax

IRC focuses on legal persons (companies or entities) of public or private law with headquarters or effective management in Portuguese territory

As a rule, when these entities are engaged in the exercise of activities of a commercial nature, establishment, with a business character, are taxed on the respective worldwide earned income

Non-resident entities but with a permanent establishment in Portugal are, also, subject to taxation on profit attributable to the permanent establishment. In general terms,, a fixed establishment through which a commercial, industrial or agricultural activity is carried out is considered a permanent, establishment. It is included in the notion of stable establishment, namely, a driving place, a branch, an office, a factory or a workshop, as well as acting in Portuguese territory as a dependent agent

Non-resident entities without a permanent establishment are taxed only on income from Portuguese sources

The normal rate of corporate income tax for resident entities that primarily carry out an activity of a business nature or for permanent establishments of non-resident companies that carry out these activities, it's of 21%, added to, in most cities, municipal surcharge at the maximum rate of 1,5%

Notwithstanding, in the case of an entity qualifying as a small or medium-sized enterprise, the IRC rate applicable to the first taxable € 15.000 amount is 17%, being applicable the rate of 21% to the surplus

The Portuguese Government has created certain tax benefits applicable to entities, of this type, that relocate their headquarters to the interior of the country, and then develop their activity, in order to foster the entrepreneurial community

VAT - Value Added Tax

It is a tax that is levied on expenditure or consumption and taxes the added value of transactions carried out by the subject.

This is a multi-phase tax, because it is settled in all phases of the economic circuit, from the producer to the trader. Being multi-phase, it is not cumulative, because their payment is split by the various players in the economic circuit, through the tax credit method.

This tax is present in:

  • Transmissions of goods (day-to-day shopping, restaurants, etc.) and the provision of services (independent professional activity) carried out in the national territory, under a cost
  • Imports of goods
  • Intra-Community transactions carried out in the national territory

Although they are subject to VAT rules, some transactions are exempt from VAT

  • Provision of medical and educational services or vocational training
  • Transmission and lease of real estate
  • Certain services rendered by non-profit organizations
  • Certain financial transactions
  • Insurance and reinsurance operations
  • Food and beverage services provided by employers to their employees
  • Portuguese Sign Language Interpretation Services

Services rendered are also exempt from VAT (and closely related transmissions of goods) by:

  • Public legal persons or private institutions of social solidarity or whose social utility is, in any case, recognized by the competent authorities, related to daycare centers, kindergartens, leisure activity centers, residential homes, work houses, establishments for disabled children and young people, rehabilitation centers for the disabled, nursing homes, day centers and social centers for the elderly, summer camps, youth hostels
  • Public legal persons and non-profit bodies, related to congresses, colloquia, conferences, seminars, similar courses and manifestations of a scientific nature, cultural, educational or technical

IEC - Special Consumption Taxes

These are indirect taxes on products that harm consumers' health or pollute the environment. Taxes increase the price paid by the consumer, thereby seeking to reduce consumption or waste of the products concerned. Examples of products subject to these taxes:

  • Tobacco
  • Alcohol and alcoholic beverages
  • Beverages with added sugar or other sweeteners
  • Petroleum and energy products

Property Tax (IMI)

The IMI is a tax that is governed by the principles of equivalence or benefit and that is levied on the equity value of buildings registered with the Tax Authority (VPT) regardless of whether they are rustic or urban buildings, provided they are located in Portuguese territory

The applicable rates are defined by each Municipality. Find here the rate applicable to your property

This tax is due by the individual who is registered as the owner of the building at 31 December of the year to which the tax relates

Municipal Tax on Transfer of Real Estate (IMT)

IMT is a municipal tax levied on onerous transfers of real estate located in Portuguese territory. These transfers may also be subject to Stamp Duty

The acquisition of more than 75% of the share capital of a private limited company (as well as a closed private investment fund) that owns properties located in Portuguese territory also determines the incidence of IMT

The tax is due, usually, by the purchaser of the good

Rustic buildings5%
Other urban buildings and other costly acquisitions6,5%
Tax haven resident buyer (except natural persons)10%

Some exemptions are provided by law, conditional on the verification of certain requirements:

  • Acquisition of buildings for resale by real estate companies
  • Acquisition of urban buildings for urban rehabilitation
  • Restructuring operations or cooperation agreements
  • Acquisition of buildings classified as of national, public or municipal, interest
  • Exemption or reduction of IMT in relation to the acquisition of buildings that constitute relevant applications, under the Investment Support Tax Regime

Stamp Duty

Stamp Duty is levied on acts, contracts, documents, titles, books, papers and other facts, provided for in Portuguese Law, that occur in Portugal and are not subject to or exempt from VAT

They will also be subject to Stamp Tax when, occurred outside Portugal, but are presented for legal purposes in Portugal

IncidenceRate (%)
Onerous acquisition or donation of real estate0,8
Free acquisition of goods by natural persons (successions and donations)10
Rental or sublease (over a month's income)10
Guarantees (unless ancillary and simultaneous to specially provided contracts)Term < 1 year - for each month or fraction0,04
Term >= 1 year0,5
No deadline or deadline >= 5 years0,6
Credit usageTerm < 1 for each month or fraction0,04
Term >= 1 year0,5
Term >= 5 years0,6
Deadline not determined 0,04
Consumer creditTerm < 1 for each month or fraction0,128
Term >= 1 year1,6
Term >= 5 years1,6
Deadline not determined 0,128
Operations carried out by financial institutionsInterest, including discount letters4
Commissions for guarantees provided3
Other fees for financial services, including fees for card-based payment transactions4
Insurance mediation fees2
Letters and promissory notes on the value with a minimum of € 10,5
Business transfer5
Bingo Prize 25
Other awards (raffles, lotto games, sweepstakes or contests)35
State social games: included in the sale price of the bet4,5
State social games – on the portion of the premium that exceeds € 5.00020
Collective investment bodies investing, exclusively, in money market instruments and deposits 0,0025

Single Circulation Tax:

It falls on all vehicles from categories A to G, who are registered or registered in Portugal

The tax is due by the owner, on whose behalf, the vehicle is registered