Portugal Tax Laws and Regulations
Portugal Tax Laws
Dealing with tax, payroll, and employment regulations for your staff from overseas is always a difficult process and poses complications that demand expert guidance. Portugal is no exception, with layers of taxation at corporate levels and for individuals, whose liability is assessed on different types of income, plus property.
With over 20 years’ experience in the front rank of international payroll providers, Bradford Jacobs ensures our clients comply with every level of taxation and employment law across the globe. Our ‘knowledge’ is vital for foreign companies expanding into Portugal. Employers must stay up to speed with changing regulations of the Portugal Tax and Customs Authority (Autoridade Tributária e Aduaneira,AT) as well as social insurance requirements of the Social Security Institute (Instituto de Segurança Social).
Overview of Taxes in Portugal
Residents’ Income Tax: Portugal’s state budget announced nine tax bands for 2022, stretching from 14.5% for income up to €7,116 (US$8,060), through a fourth band of 28.5% for the excess over €15,216 (US$17,250) up to 48% for income over €75,009 (US$85,028). Additionally, those earning above that rate are liable for a solidarity rate between 2.5% and 5%.
Non-Residents’ Income Tax: A flat rate of 25% applies.
Social Insurance Taxes: Contributions are made based on employees’ gross remuneration. Employers remit the equivalent of 23.75% of their employees’ salaries to the revenue, while employees contribute 11%, which is withheld and remitted by their employer.
Value Added Tax (VAT): The standard rate is 23% on goods and services with a reduced rate of 13%, for example, on foodstuffs, publications, pharmaceutical products, transportation, hotel accommodation and agricultural products.
Capital Gains Tax (CGT): Non-residents are taxed at 28% and companies at 25% on their gains. Residents’ capital gains are taxed at the relevant personal tax rate between 14.5% and 48%, with 50% of the capital gains included in the calculation. EU citizens can opt to be taxed as Portuguese residents but must declare their worldwide income.
Property and Rental Taxes: Rental income is generally taxed at 28% but payers can opt for being taxed at progressive rates as part of general income. Property transfer tax can be levied between 5% and 10%.
Dividends and Interest: Taxed at 28% unless payers opt to be taxed on progressive personal income rates.
Portugal Individual Tax – Single, Married
Tax liability depends largely on residency. Residents pay tax at progressive rates on their worldwide income in six categories – employment income, self-employed income, investment income, rental income, capital gains and pensions. Non-residents pay at a flat rate of 25% on income earned in Portugal. Individuals become tax residents by spending 183 days – not necessarily consecutive – in any 12-month period, or by owning or maintaining a property in Portugal, regardless of how many days are spent in-country. Married couples or registered couples can make either joint or individual returns, but in the latter case both must name dependents on their returns.
Residents’ Income Tax:
There is a tax-free allowance of €4,104 (US$4,657) and earnings below this do not attract tax.
| From | To | Percentage Tax |
|---|---|---|
| 0 | €7,116 (US$8,060) | 14.5% |
| €7,116 | €10,736 (US$12,170) | 23.0% |
| €10,736 | €15,216 (US$17,248) | 26.5% |
| €15,216 | €19,626 (US$22,326) | 28.5% |
| €19,626 | €25,076 (US$28,425) | 35.0% |
| €25,076 | €36,567 (US$41,450) | 37.0% |
| €36,567 | €48,033 (US$54,450) | 43.5% |
| €48,033 | €75,009 (US$85,028) | 45.0% |
| €75,009 | 48.0% |
Those earning above €75,009 are liable for a solidarity surcharge of between 2.5% and 5.0%.
Non-residents’ Income Tax:
Non-residents are generally taxed at a flat rate of 25%.
Employees’ Social Insurance Contributions: Employees contribute 11% of their gross remuneration to the social security system. Foreign residents may be exempt if they pay into the social security system of a fellow European Union member nation.