Portugal: Who pays tax in Portugal?August 2023
Residents in Portugal for tax purposes are taxed on their worldwide income at progressive rates varying from 14.5% to 48% for 2023.
Portugal has a PAYE (pay as you earn) system for employed workers, where taxes are automatically deducted. Personal Income Tax (PIT) is known as Imposto sobre o rendimento das pessoas singulares (IRS).
Azores V.A.T. UpdateAugust 2021
Starting July 1, 2021 the standard V.A.T. rate in the region of Azores is reduced from the previous 18% rate to 16%.
The previous medium rate of 9% and reduced rate of 4% remain unchanged.
Portugal Senegal Tax TreatyApril 2016
The 2014 double tax treaty, DTA, between the two countries entered into force on March 20, 2016 applying from January 1, 2017.
The tax withholding rates according to the DTA are 5%/10% for dividends, depending on the percentage of holding by the recipient company.
The tax withholding rate for payment of interest and royalties is 10%.
Portugal Japan Tax TreatyAugust 2013
The double tax treaty of 2011 between the two countries entered into force on July 28, 2013.
According to the tax treaty the tax withholding rate for payments of dividends is 5%/10% depending inter-alia on the percentage of shareholding in the paying company.
The tax withholding rate for interest is 5%/10%.
For royalties the rate is 5%.
In general double tax treaties between two countries are boosting mutual investments between the countries offering reduced tax withholding rates from payments of dividends, interest and royalties.
The tax treaty often includes an exchange of tax information clause and definition of a permanent establishment for activities carried in the other country.
It also clarifies certain cross border tax issues.
E.g the treaty would define in what country tax is to be paid when a service supplier/consultant from country A provides services in country B.
In some treaties there is a tax credit under certain terms. e.g. an exemption to a consultant from country A of X dollars per each day of staying in country B in order to supply the taxable services.
Madeira New V.A.T. RatesApril 2012
Starting April 1, 2012 there are new increased V.A.T. rates in Madeira.
The standard V.A.T rate is 22% compared to the previous 16% rate.
The new medium V.A.T. rate is 12% compared to the previous 9% rate.
The new reduced rate is now 5% compared to the previous 4% rate.
Portugal's New 3.5% SurtaxOctober 2011
Following Law no. 49/2011 of September 7 there is a new 3.5% surtax for individuals.
The surtax which applies to income in 2011 is imposed on most types of personal income when exceeding EUR 6,790 per year.
Including the new surtax the top marginal income for individuals is now 50% compared to the previous 46.5% rat.
Portugal's V.A.T. RiseJanuary 2011
Starting January 1, 2011 the new standard V.A.T rate in Portugal is 23%, an increase of two per cent compared to the previous 21% rate.
The standard V.A.T. rate in Madeira and Azores increased by one per cent from 15% to 16%.
Portugal V.A.T. RiseOctober 2010
The Portuguese government intends to increase the standard V.A.T. rate by two points, from the current 21% to 23%.
The rise which is expected to be effective on January 1st, 2011 is the second V.A.T. rise in the last six months, following the previous 1% rise to 21% on July 1st, 2010.
Portugal's Rating Cut by Moody'sJuly 2010
Moody's credit rating agency downgraded on July 13, 2010 Portugal's long term credit ranking by two steps, from the previous Aa2 to A1.
The downgrading follows concerns about Portugal's economy medium term growth potential.
Portugal's Personal Income Tax RatesMay 2010
The Portugese parliment approved in April the personal tax rates for 2010.
The rates are 10.5%-42% as in 2009, yet there are some slight changes in the tax brackets.
The 42% tax rate in 2010 relates to income exceeding EUR 64,634, compared to EUR 64,111 in 2009.
Portugal's Credit Ranking DowngradedMarch 2010
Fitch credit agency, one of the major three global credit rating agancies, downgraded on March 24, 2010 Portugal's credit rating from the previous AA to AA-.
The downgrade presents increasing concern about the high level of debts and may result in more expensive interest rates for Portugal's borrowings.
Portugal Tax Rates 2009September 2009
In 2009 there is a new reduced corporate tax rate of 12.5% for income of up to EUR 12,500. For income exceeding EUR 12,500 the corporate tax rate is 25% same as in 2008.
Individual income tax rates are 10.5%-42%, unchanged compared to 2008, with slight changes in the tax brackets.
Portugal Tax Rates 2008July 2008
There are no significant changes in Portugal 2008 tax rates, compared to 2007.
Individual income tax rates are 10.5%-42%. The basic corporate tax rate is 25%, plus a local tax of up to 1.5%, making a total of 26.5%.
The standard VAT rate from July 1, 2008 is 20% (previous rate -21%). There are also reduced rates of 12% and 5%.
In the Azores and Madeira the standard rate is 15%, with reduced VAT rates of 8% and 4%.
Portugal TaxesJanuary 2007
There are no significant changes in the 2007 tax rates for companies and individuals, compared to 2006.
Portugal TaxesNovember 2006
According to the proposed 2007 budget, Portugal's individual income tax rates would remain the same as in 2006,10.5% to 42%, with slight changes in the tax brackets.
In 2007, 70% of professional income would be taxable, compared to 65% in 2006.
Handicapped individuals would get in 2007 a tax deduction of 3 times the national minimum wage
Note: The information in this site is for general guidance only. Users of this site are advised to take professional advice before taking practical tax decisions.
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