Portugal Tax Deductions

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Portugal Tax Deductions

Portugal Tax Deductions

  • All forms of tax relief relate to the income of an individual in Portugal.
  • Tax relief is granted in the form of a tax credit, that is, a reduction of the tax itself, and sometimes the relief is in the form of a deduction, that is a reduction, on the amount of taxable income.
  • The following amounts are subject to the definitions and limits in Portuguese law.

Personal Tax Relief Comments
Personal tax credits Depending on the family status of the individual and the number of dependent family members.
Disability Credit EUR 1,900 per year.
Interest on the purchase of an apartment. Up to 15% for a permanent place of residence bought before 31.12.2011.
Educational costs Up to 30% of the cost.
Medical expenses 15% of the cost subject to certain conditions.
Insurance & Pension Up to 20%.
Alimony Payment 20% If paid by court ruling.
Donations Tax credit of 25%, up to a limit.

Portugal Business Deductions

In addition to the reductions/credits specified above, reductions and business expenses may be sought as follows:
  • Offset of losses - A loss may be offset up to five years forward, in SMEs up to twelve years, up to 70% of the current year income.
    In certain cases of changing the company's ownership or change of the nature of activity, the carry forward is not allowed.
    Carryback of losses is not allowed.
  • Consolidated statements - The possibility exists for resident companies in Portugal to offset a loss in one company in a group against the profit of another company in the group, subject to terms.
  • Financing costs - Interest on suppliers credit is allowable for tax, interest on loans obtained from shareholders are recognized to the higher, 30% of the EBITDA or 1 million.
  • Doubtful debts - Provisions are made for overdue debts at rates of 25%-100%, depending on the time length of the amounts overdue.

Portugal Depreciation of Fixed Assets

  • The depreciated balance or the straight-line method are the accepted method of depreciation in Portugal.
  • A table of the rates of depreciation according to the straight line method is as below:

Class of Asset Annual Depreciation (%)
Office buildings 2
Industrial buildings 5
Machinery & equipment & office equipment 12.5% - 25%
Computers and Software 33.3%
R&D Expenses 100%
Cars (subject to a limit) 4-25

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