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Last partial update, October 2011
- Portugal's tax rates for individuals is progressive. The 2011 tax rate is 11.5%-46.5%.
- Exemptions are granted to taxpayers with specific types of income.
- The 2011 rate of tax for a corporation in Portugal is 12.5% for income of up to EUR 12,500 and 25% for income exceeding EUR 12,500, with the addition of 2.5% surtax for income exceeding EUR 2 million and a local tax of up to 1.5%, maximum of 29% in total.
Portugal Income Tax for an Individual
- An individual in Portugal is liable for tax on his income as an employee and on income as a self-employed person. In the case of an individual who answers the test of a "permanent resident" of Portugal, tax will be calculated on his income earned in Portugal and overseas.
A foreign resident who is employed in Portugal pays tax only on his income in Portugal.
- To be considered a Portuguese resident, the requirements must be met of residency in Portugal of at least 183 days in any calendar year, and occasionally also if residency is less than 183 days. If the individual has a home in Portugal that is his main residence, he will be considered a Portuguese resident.
- An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance due from a salaried worker.
- Certain payments are deducted from taxable income as detailed below.
Portugal Individual Income Tax Rates 2011
| Tax % |
Tax Base (Euro) |
| 11.5%
| up to 4,898 |
| 14% |
4,899-7,410 |
| 24.5% |
7,411-18,375 |
| 35.5% |
18,376-42,259 |
| 38% |
42,260-61,244 |
| 41.5% |
61,245-66,045 |
| 43.5% |
66,046-153,000 |
| 46.5% |
153,001 and over |
Note: Following Law no.49/2011 there is an additional 3.5% surtax for most types of personal income exceeding EUR 6,790 per year.
Corporate Tax in Portugal
Portugal Corporate Tax
- In Portugal the standard corporate tax in 2011 is 25% for income exceeding EUR 12,500 with the addition 2.5% surtax for income exceeding EUR 2 million and of up to 1.5% municipal tax making a total of 29%.
- Companies in the free trade zone of Azores and Madeira are eligible for a reduced tax rate depending on the type of company and the year in which the company was set up in the free trade zone.
Portugal Capital Gains
- A company capital gain in Portugal is usually added to regular income.
- For companies, under certain conditions, When the proceeds of the sale of shares and realestate which were held for more than 1 year. Only 50% of the gain is taxable if the proceeds are reinvested. Under certain conditions.
- There is a participation exemption for dividend income, subject to terms.
- Capital gains of holding companies are tax exempt, subject to terms.
- On the sale of individual's real estate that was used as the vendor's residence, If the proceeds are invested in the purchase of alternative real estate for a residence in Portugal or EU/EEA country within a short period as defined in law, the capital gain is exempt from tax.
- For individuals, a capital gain on the sale of shares is taxed at 20%.
The tax rate is 10% for sale of shares of micro or non listed companies.
Portugal Reporting Dates and Payment
The tax year in Portugal is the year ending on December 31.
Advance payments of tax are made as specified below.
- 3 advance payments based on the tax paid in the previous year. The advances are paid in July, September and December.
- A fourth advance payment of 1% of turnover must be paid by the date of filing the report. There are minimum and maximum amounts for the advance payment.
- Individuals and companies are obligated to file financial statements by May 31 for companies, and by April 30 for individuals.
Portugal Deduction of Tax at Source
Taxation of Employee
An employer is obligated to deduct tax at source from an employee and to make additional contributions to social security.
Portugal Social Security
- An employee: the employer's contribution is 23.75% of the salary.
The employee's contribution is 11% of the salary.
- The insurance covers pension, unemployment and care insurance.
Other deductions in Portugal
Tax must be deducted at source from the following payments to non-residents on the basis of the following:
- Dividend - standard deduction of 21.5%.
- Interest - the standard rate of tax deducted at source - 21.5%.
- Royalties - the standard rate of tax deducted at source - 15%.
- Services - the tax deducted at source is 15%.
- Salary -20%.
Comment:
Tax deducted at source in respect of foreign residents is subject to the Double Taxation Prevention Treaty.
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