EY
Edificio República
Avenida da República, 90 9th Floor 1649-024 Lisbon Portugal
Executive contacts
Anabela Silva +351 936-079-620
Fax: +351 226-066-398 Email: anabela.silva@pt.ey.com
António Neves +351 217-912-249
Fax: +351 217-957-592 Email: antonio.neves@pt.ey.com
Nuno Alves +351 937-912-795
Fax: +351 217-957-592 Email: nuno.alves@pt.ey.com
Susana Constantino +351 937-912-185
Fax: +351 217-957-592 Email: susana.constantino@pt.ey.com
João Pancadas +351 932-599-340 Fax: +351 217-957-592 Email: joao.pancadas@pt.ey.com
Bhavik Chunilal +351 936-105-838
Fax: +351 217-957-592 Email: bhavik.chunilal@pt.ey.com
Danilo Mariano +351 932-542-938 Fax: +351 217-957-592 Email: danilo.mariano@pt.ey.com
Joana Freitas +351 937-913-040 (resident in Oporto)
Fax: +351 226-066-398 Email: joana.aranda-freitas@pt.ey.com Joana Vivas +351 932-542-985 (resident in Oporto)
Fax: +351 226-066-398 Email: joana.vivas@pt.ey.com
Patrícia Almeida +351 937-912-137 (resident in Oporto) Fax: +351 226-066-398 Email: patricia.almeida@pt.ey.com
Immigration contacts
Anabela Silva +351 936-079-620 Fax: +351 226-066-398 Email: anabela.silva@pt.ey.com
Bhavik Chunilal +351 936-105-838
Fax: +351 217-957-592 Email: bhavik.chunilal@pt.ey.com
The personal income tax rules described in this chapter are in line with the current legislation and should be in force until 31 December 2020.
A. Income tax
Who is liable. Residents of Portugal are subject to tax on their worldwide income. Nonresidents are subject to personal income tax on income arising in Portugal.
An individual is considered resident in Portugal if, among other conditions, he or she meets either of the following conditions:
• He or she stays in Portugal for more than 183 days in any 12-month period, beginning or ending in the fiscal year con cerned.
• He or she has a dwelling in Portugal, in any day of the abovementioned period, which may imply his or her intention to use it as his or her habitual residence.
As a rule, individuals that meet the above conditions become tax residents in Portugal from the first day of permanence in Portugal and become nonresidents from the last day of permanence in Portugal. As a result of the above two conditions, it is possible to split the year for tax purposes.
Despite the possibility to split the year for tax purposes, some additional rules apply. The loss of the tax resident status occurs from the last day of permanence in Portugal unless the individual remains in Portugal more than 183 days in the departure year and, after the departure, derives any income that would otherwise be subject (and not exempt) to tax as a resident of Portugal. In such case, he or she will continue to be considered tax resident of Portugal for the whole year, unless certain conditions are met. If a tax resident leaves Portugal and returns in the following year (after becoming nonresident of Portugal), that individual is deemed Portuguese tax resident for the prior year (year in which he or she had previously been deemed a nonresident), according to the Portuguese domestic law.
The tax status (resident versus nonresident) should be updated within 60 days (that is, the taxpayer must communicate any change to the tax authorities within the mentioned period; other wise, penalties may be applied).
As a result of the elimination of the spouse attraction rule, tax residency is now determined with respect to each taxpayer separately.
Income subject to tax. The taxation of various types of income is described below.
Employment income. Personal income tax (IRS) is imposed on the earned income of employed individuals.
Business and professional income. Taxable income includes all earned income of a professional individual, including commis sions and profits from a trade. Business and professional income is taxed at the personal income tax rates listed in Rates and may be subject to one of the following two regimes:
• Simplified regime
• Organized bookkeeping regime
Income may be taxed under the simplified regime if the taxpayer does not choose to use, and is not required to use, organized bookkeeping and if the annual gross business and professional income of the taxpayer did not exceed EUR200,000 in the pre ceding year.
Directors’ fees. Directors’ fees are taxed in the same manner as employment income.
Investment income. A withholding tax of 28% is imposed on inter est income derived from public company bonds and state bonds and on bank interest. Dividends paid by resident companies are subject to a 28% final withholding tax. Withholding taxes are final with respect to the following:
• Dividends
• Bank interest
• Interest on shareholders’ loans
• Interest from public company bonds, bills or other paper
• Interest on public debt
The taxpayer may elect to include these items in taxable income in the tax return unless they are obtained within the scope of a business or trade activity (in which case it is mandatory). If the taxpayer makes the election, the income is taxed at the rates set forth in Rates, with a credit given for the tax withheld (a 50% relief applies to dividends received from resident companies subject to and not exempt from Portuguese corporate tax or from European Union [EU] companies or companies resident in European Economic Area [EEA]countries that have entered into an exchange-of-information agreement with Portugal concerning tax matters, provided that these companies fulfill the requirements of the EU Parent-Subsidiary Directive).
In general, other investment income is subject to a final withhold ing tax of 28%.
Rental income and royalties are subject to withholding tax at rates of 25% and 16.5%, respectively. Most of the costs effectively borne by the landlord to obtain the rental income, except financial costs, depreciation, the purchase of furniture, domestic appliances and decorations, and the additional to the municipal real estate tax (the additional to the municipal real estate tax is levied on the total amount of the property tax values of residential properties and plots of land held by individuals and companies [exempt mini mum thresholds apply for individuals]), are deductible from the rental income. Expenses related to maintenance and repair of the property incurred and paid in the 24 months before the beginning of the lease are also deductible from the rental income under cer tain conditions. The landlord must keep the supporting documen tation and present it, if requested. The expenses can be deducted only against the income of each property and carryforward of losses is allowed for a six-year period under certain conditions.
Rental income is subject to a 28% flat tax rate. However, the tax payer may elect to include rental income in the taxable income in the tax return. If the taxpayer makes the election, the income is taxed at the rates set forth in Rates, with a credit given for the tax withheld. Royalties are taxed at the personal income tax rates set forth in Rates, with a credit available for the withholding tax. Long-term rentals are subject to the following reduced rates, according to the term of the contract:
• More than 2 years and less than 5 years: 26%. For each renew al of equal term, the flat tax rate is reduced by 2 percentage points up to 14% (that is, the reduced flat tax rate cannot be lower than 14%).
• Equal or more than 5 years and less than 10 years: 23%. For each renewal of equal term, the flat tax rate is reduced by
5 percentage points up to 14% (that is, the reduced flat tax rate cannot be lower than 14%).
• Equal or more than 10 years and less than 20 years: 14%
• 20 years or more: 10%
Capital gains and losses. Taxable capital gains that are not spe cifically exempt or taxed separately are taxed at the ordinary rates listed in Rates. No withholding tax applies. In general, gains derived from sales of the following assets are taxed at the per sonal income tax rates set forth in Rates:
• Real estate and associated rights
• A taxpayer’s property transferred to the taxpayer’s business (how ever, this gain may be deferred; see below)
Capital gains derived from sales of the following assets are exempt from tax:
• Securities acquired before 1 January 1989
• Real estate, except land for construction, owned prior to 1 Jan uary 1989
• A personal residence if, among other conditions, the proceeds are reinvested in another personal residence in Portugal (or in other EU member states or EEA countries that have entered into an exchange-of-information agreement with Portugal con cerning tax matters) within 36 months after the sale or 24 months before the sale
• A personal residence if the proceeds are invested in a life insurance contract, individual membership in an open pension fund or contributions to the capitalized public scheme, and if the following conditions are met:
— The taxpayer or the respective spouse are retired or are, at least, 65 years old on the date of the sale of the personal residence.
— The purchase of the insurance contract, individual membership in an open pension fund or contributions to the capital ized public scheme, occur within six months after the sale.
— In the case of the purchase of an insurance contract or indi vidual membership in an open pension fund, the applica tions entitle exclusively the taxpayer or the respective spouse, to a periodic payment of a maximum annual amount equal to 7.5% of the value invested.
Additional conditions may have to be met for the abovemen tioned exclusions from taxation to apply.
The following capital gains benefit from special tax treatment:
• Gains derived from the sale of real estate or associated rights, excluding real estate used in a trade or business, are taxed only to the extent of 50% of the gain.
• Gains derived from transfers of real estate from the taxpayer’s business to the taxpayer’s own property are not deemed a taxable event. However, when this transfer occurs, in the case of organized accounting, if depreciation or impairments have been booked, the corresponding expenses for tax purposes that have been deducted during the period of allocation of the property to the business activity must be added, in equal fractions, to the income of the year in which the transfer occurs and in each of the following three years.
• Gains derived from the transfer of real estate that has been allocated to the taxpayer’s business are taxed as business or professional income if the transfer occurs less than three years following the transfer of the real estate to the taxpayer’s own property.
• Gains derived from transfers of other assets (other than real estate) from the taxpayer’s own property to the taxpayer’s busi ness are deferred until a subsequent disposition of the property occurs or another event results in the ending of the deferral, if certain conditions are met, and only 50% of the gain is taxed.
• Gains derived from the sale by non-original owners of copy rights, patents and various other types of intellectual property are taxed only to the extent of 50% of the gain.
• Gains derived from disposals of securities (including disposals of autonomous warrants, redemptions of bonds and other debt securities, redemptions of participation units of investment funds, receipts of liquidation proceeds, assignments of credits and assignments of supplementary capital contributions or ancillary contributions) and derivative financial products are subject to tax at a rate of 28% (a 50% exclusion from tax applies to gains from shares in unlisted micro and small com panies) if an exemption does not apply. An exemption may apply to nonresidents under domestic rules or an applicable double tax treaty.
In calculating the capital gain derived from the sale of real estate or securities, the purchase price is indexed by an official govern ment coefficient to account for inflation if the sale occurs more than 24 months after the purchase.
Capital losses may offset capital gains only. In certain conditions, capital losses may be carried forward five years.
Taxation of employer-provided stock options. Income derived from employer-provided stock options is taxed in the same manner as employment income (see Employment income).
Taxation of residents in EU member states and EEA countries that have entered into an exchange-of-information agreement with Portugal concerning tax matters. Residents of EU member states and EEA countries that have entered into an exchangeof-information agreement with Portugal concerning tax matters may opt to be taxed as if they were tax residents of Portugal. This option is available for certain capital gains and other income that are not attributable to a permanent establishment and are not liable to definitive taxation, as well as for rental income. It may also apply if the individual’s Portuguese-source income is at least 90% of his or her worldwide income derived during the relevant tax year. In determining the tax rate applicable to the income mentioned above, worldwide income must be considered and reported.
Taxation of non-habitual residents. A special regime applies to individuals who become tax residents of Portugal and have not been taxed as such in any of the previous five years. Non-habitual resident status applies for up to 10 years and requires the tax payer to be registered as non-habitual resident with the tax authorities. Principal aspects of this regime are summarized below.
Employment income and business or professional income derived from high-value-added activities of a scientific, artistic or technical nature (including, among others, general managers and executive managers; heads of administrative, commercial and production departments; specialists or technicians working in the fields of physical sciences, mathematics, engineering and similar technical fields; doctors and dentists; teachers at universities; artists; specialists in information and communication technolo gies; and certain qualified industrial workers, construction workers and craftspersons) are taxed at a flat rate of 20% on net income.
On 23 July 2019, a new list of high value-added activities was published. New activities have been added and others (such as auditors and tax advisors) have been eliminated. The new list is applicable from 1 January 2020, but there is a transitory regime applicable to individuals who were already registered as such or with pending registrations up to 1 January 2020 or who requested such registration up to 31 March 2020 (with effects for the 2019 tax year).
Foreign-source income, such as employment income, income from certain business or professional activities (as listed above), income from copyrights, industrial property rights or transfer of know-how, investment income, rental income and capital gains, is exempt from tax in Portugal if such income is effectively taxed (for employment income) or may be taxed (for other types of income) in either of the following countries:
• A tax treaty country, in accordance with the terms of the treaty.
• A non-tax treaty country in accordance with the Organisation for Economic Co-operation and Development (OECD) Model Tax Convention rules, provided that the country is not a terri tory considered a tax haven (not applicable to employment income) and that the income cannot be deemed sourced in Portugal under domestic tax law.
According to the rules in force until the 2020 State Budget Law, foreign-source pension income not resulting from contributions that had been claimed as a tax deduction in Portugal was exempt from tax in Portugal if such income was taxed in a tax treaty jurisdiction or was not deemed sourced in Portugal under domes tic tax law. According to the new rules introduced by the 2020 State Budget Law, foreign-source pension income not originating from contributions that have been claimed as a tax deduction in Portugal is subject to tax at the special tax rate of 10%, applicable to the net taxable income of pensions, including the income qualified under Category H – pension income, as well as amounts qualified as employment income, such as those made before the holder is placed in a situation equivalent to retirement, and as well as lump-sum payments when the contributions were not subject to taxation. A transitional regime has been introduced, under which the prior rules granting the exemption may still apply in certain conditions.
Income benefiting from the exemption method is considered to determine the tax rate applicable to the remaining income (except capital gains from securities, dividends, interest and other investment income sourced abroad, rental income and employment and business or professional income subject to the 20% rate
mentioned above, which are taxed at special flat rates). Taxpayers may opt to apply the credit method (rather than the exemption method) to this income. In such case, such income is aggregated with the remaining income and taxed at the normal IRS rates.
Favorable regime for returning individuals. A 50% exclusion on employment and self-employment income applies to individuals that become Portuguese tax residents in 2019 or 2020, provided that the individuals were not tax residents of Portugal in the three years prior to their return and were tax residents of Portugal prior to 31 December 2015. The individuals must have their tax affairs up to date. This regime is not cumulative with the non-habitual residents’ regime and is applicable in the year of the return and in the four following years.
Exemption for outbound expatriates working abroad. An exemp tion for outbound expatriates (working abroad) has been appli cable since 2015. The exemption applies to employment income, in the part corresponding to the compensation for travel and stay abroad that exceeds the legal limits foreseen in the Personal Income Tax Code, earned by tax resident individuals temporarily assigned abroad, in the respective tax year, for a period of not less than 90 days (of which 60 should be consecutive days).
The exempt amount cannot exceed the higher of the following:
• The difference between the annual employment income subject to tax of the individual, including compensation, and the total amount of his or her regular employment income subject to tax in the preceding year (excluding any compensation paid in the previous year under this regime)
• EUR10,000
This regime operates as an exemption with progression. The exemption also applies to nonresident individuals with a limit of three years from the date of the assignment, under certain condi tions.
Deductions
Personal deductions and allowances. For 2020, employees may deduct an amount of EUR4,104. Compulsory social security contributions in excess of EUR4,104 are deductible without limitation. Union contributions and indemnities paid to employers may also be deducted, subject to applicable limits.
Business and professional deductions. Professionals and indi viduals carrying on a business may be taxed under one of the following two regimes:
• Simplified regime
• Organized bookkeeping regime
Business and professional income may be taxed under the simpli fied regime if the taxpayer does not choose to use and is not required to use organized bookkeeping and if the annual gross business and professional income for the preceding year did not exceed EUR200,000.
Under the simplified regime, taxable income is calculated by applying the following predefined coefficients, which vary depending on the activity’s sector, to gross income:
• 0.15 on sales of goods and products, as well as hotel and similar services (except the operation of local accommodation units
consisting of apartments or dwellings), food and beverages activities
• 0.75 on income from professional activities (that is, services rendered) listed in the table referred to in Article 151 of the Personal Income Tax Code and 0.35 for the remaining activities
• 0.95 on income from intellectual or industrial property, royal ties, investment income from a trade or business and other income from capital gains, rentals and net worth increases
• 0.30 on non-operating subsidies or grants, such as subsidies or grants for the purchase of equipment
• 0.10 on operating government subsidies (for example, grants for personnel training) and other business and professional income not mentioned above
• 0.5 on income from the operation of local accommodation units consisting of apartments or dwellings located in restricted areas
• 1 on income derived from services rendered by partners to a company taxed under the tax transparency regime and to com panies in which, during more than 183 days in the respective tax year, either of the following circumstances exists:
The taxpayer holds, direct or indirectly, at least 5% of the shareholdings or voting rights.
The taxpayer, spouse or life partner, ascendants or descen dants hold together, directly or indirectly, at least 25% of the shareholding or voting rights.
The deduction to the taxable income that derives from the coeffi cients of 0.75 for income from professional activities and 0.35 for the remaining service rendering activities is partially conditioned on the expenses effectively borne by the taxpayer, as it is added to the taxable income, which is the positive difference between 15% of gross income derived from such activities and the sum of certain expenses mentioned specifically in the law.
Taxpayers earning income from professional activities or other ser vices rendered can deduct from taxable income compulsory social security contributions, in excess of 10% of the gross business and professional income, which have not been claimed as deductions for any other purpose.
Coefficients on the taxable income for services rendered and oper ating subsidies are reduced by 50% and 25%, in the first and sec ond years of activity, if certain requirements are satisfied. This benefit does not apply if the entrepreneurs have ceased their activ ity in the last five years.
The simplified regime ceases to apply if the qualifying limit is exceeded for two consecutive years or by more than 25% during a single year.
The organized bookkeeping regime provides for the deduction of activity-related expenses. Taxable income is calculated using the corporate tax rules, with additional limitations imposed on the deduction of the following expenses:
• Amounts booked as remuneration paid to the self-employed individual are not deductible.
• Amounts booked as per diem allowances, kilometer allowanc es, meal allowances and other remuneration allowances are not deductible.
If a professional’s house is partially used as an office, the profes sional may deduct certain expenses, including rent, electricity, water and telephone costs, and depreciation, up to 25% of the total amount of expenses incurred.
Certain expenses borne by professionals or other individuals who have or should have an organized bookkeeping regime are taxed autonomously, triggering an additional tax burden. These expens es include the following:
• Undocumented expenses are not tax-deductible and are subject to a surcharge of 50%.
• Entertainment expenses that are deductible from gross business or professional income are subject to a 10% surcharge.
• Expenses deductible from gross business or professional income that are related to cars (except electric cars) are subject to a 0%, 10% or 20% surcharge, depending on the nature and acquisition cost of the vehicle (reduced rates apply in the case of plug-in hybrid vehicles or liquefied petroleum gas [LPG]/natural gas vehicles).
• Per diems and expenses related to the use of a personal car by the employee for the company’s business are taxed at a rate of 5% if such expenses were not charged to clients or taxed as employment income.
• Payments to nonresident entities that are subject to a favor able tax regime are not tax-deductible and are subject to a 35% surcharge if it cannot be proved that these expenses relate to operations effectively performed, that the payments are normal for the type of activity and that the amount is not unreasonable.
Rates. The following personal income tax rates apply for 2021.
Taxable income Tax on Rate on Exceeding Not exceeding lower amount excess EUR EUR EUR %
0 14.50
10,732 1,031 23.00 10,732 20,322 1,863 28.50 20,322 25,075 4,597 35.00 25,075 36,967 6,261 37.00 36,967 80,882 10,661 45.00 80,882 30,422 48.00
For married taxpayers, the progressive tax rate is determined by dividing taxable income by two.
For 2021, taxable income exceeding EUR80,000 but not exceeding EUR250,000 is subject to an additional solidarity tax of 2.5%, and taxable income exceeding EUR250,000 is subject to an additional solidarity tax of 5%.
Credits. For 2021, individuals may credit the following amounts against their tax liability:
• EUR600 for each child (EUR726 for the first child in case he or she is younger than three years old or EUR900 for the second child and following, as long as he or she is younger than three years old, independently from the age of the first child).
• EUR300 for each child (EUR363 for the first child in case he or she is younger than three years old or EUR450 for the second
child and following, as long as he or she is younger than three years old, independently from the age of the first child) for each taxpayer with parental responsibilities, whenever the agreement for the exercise of parental responsibility establishes joint responsibility and alternating residency.
• EUR525 for each ascendant who lives with the taxpayer and does not receive income above the minimum social security retirement pension. This credit is increased to EUR635 if only one ascendant complies with the abovementioned requirements.
• 35% (45% for single-parent families) of general expenses borne by any member of the household, with the limit of EUR250 (or EUR335 for single-parent families) per taxpayer.
• For health expenses that are exempt from value-added tax (VAT) or are subject to VAT at a rate of 6%, 15% of unreim bursed medical expenses, and health insurance premiums of the taxpayer or any member of the household. The tax credit cannot exceed EUR1,000.
• 15% of interest on certain loans and financial leasing rent for the acquisition or improvement of a residence in Portugal or a country in the EU or EEA (with which Portugal has entered into an exchange-of-information agreement concerning tax mat ters), limited to EUR296, and 15% of the rental payments made to the owner of a residence in Portugal or a country in the EU or EEA (with which Portugal has entered into an exchange-ofinformation agreement concerning tax matters), limited to EUR502. These limits may be increased for taxpayers with lower levels of income.
• 30% of education expenses of the taxpayer or any member of the household, limited to EUR800 (this limit can be increased to EUR1,000 in case the difference relates to rents for members of the family household, younger than 25 years old [inclusive], who are attending schools that are more than 50 kilometers away from the permanent residence of the family household).
• 25% of expenses incurred on retirement homes and similar homes, limited to EUR403.75.
• 15% of the VAT borne in the following sectors, limited to EUR250: — Maintenance and repair of motor vehicles — Maintenance and repair of motorcycles — Accommodation and food services — Hairdressers and beauty salons — Services rendered by veterinarians — Sport and recreational teaching, sport clubs, and gyms and fitness
• 100% of the VAT borne by any member of the household with monthly passes for use of collective public transport (concurrent with the EUR250 ceiling applicable to the VAT borne in the sectors mentioned in the preceding bullet; this means that the EUR250 ceiling applies to the sum of 15% of the VAT borne in such sectors and 100% of the VAT borne with respect to the monthly passes).
• 20% of pension fund contributions that meet certain conditions, limited to EUR300, EUR350 or EUR400 per taxpayer, depending on the taxpayer’s age.
• 25% of donations to the state or municipalities, increased by 20%, 30%, 40% or 50%, depending on the type of the benefi ciary entities.
• 25% of donations to religious institutions, public utility collec tives, schools, museums, libraries, cultural associations, and philanthropic and charitable institutions, increased by 30%, with the credit limited to 15% of the total tax liability.
• 20% of alimony payments, in certain conditions.
• 20% of investments made by business angels (individual ven ture capital investors), provided certain conditions are satisfied, limited to 15% of the total tax liability.
• Advance personal income tax payments and taxes previously withheld at source.
To benefit from the credits, these expenses must be reported (generally by the suppliers) to the Portuguese tax authorities.
The tax credits concerning medical expenses, education expens es, alimony payments, retirement homes and expenses related to residential property, as well as 15% of the VAT borne in some sectors (100% for monthly transportation passes) and tax bene fits, are also capped as a whole in accordance with the taxpayer’s level of income, as shown in the following table.
Taxable income Limit
Up to EUR7,112 None More than EUR7,112 and less than EUR80,882 EUR1,000 + (1,500 x [EUR80,882 – taxable income] ÷ [EUR80,882 – EUR7,112]) EUR80,882 or more EUR1,000
Each of the above limits is increased in 5% for each dependent, in families with three or more dependents.
Relief for losses. Losses from business or professional activities may be carried forward and offset against profits from activities of the same type in the following 12 years. Losses may not be carried back.
B. Inheritance and gift taxes
Inheritance and gift taxes were eliminated, effective from 1 January 2004. However, stamp duty at a rate of 10% applies if the beneficiary is an individual (except for the spouse or life partner, ascendants and descendants who benefit from an exemp tion). For a beneficiary that is a collective person, a corporate tax applies at a maximum rate of 21%, plus the following surcharges: • Municipal surcharge of up to 1.5% for residents or permanent establishments
• A state surcharge of 3% on taxable income between EUR1,500,000 and EUR7,500,000, 5% on taxable income between EUR7,500,000 and EUR 35,000,000, and 9% on taxable income exceeding 35,000,000
Specific rules apply to determine whether an asset is deemed to be located in Portugal for stamp duty purposes.
C. Social security
Contributions. Social security contributions are payable on all salaries, wages, bonuses and other regular income, excluding lunch subsidies. No ceiling applies to the amount of wages sub ject to social security contributions for employers or employees, including members of the board. The employer’s share is 23.75%,
and the employee’s share is 11%, of salaries. An employer must deduct an employee’s contribution and pay the total amount by the 20th day of the following month.
A self-employed individual engaged in a business or professional activity is subject to monthly social security contributions. The basis for contributions corresponds to 70% of the total amount of services provided (20% for income from production and sale of goods) in the three preceding months, with a monthly cap of EUR5,265.72 (12 times EUR438.81). If the individual is taxed under the organized accounting, the relevant income is deter mined based on the profit of the previous year. Social security contributions are first due on the first day of the 12th month after the beginning of activity.
Self-employed individuals should file a return to the social secu rity authorities in the months of April, July, October and January, for the income earned in the previous three months.
The following are the contribution rates for self-employed indi viduals:
• 21.4% in general
• 25.2% for specific situations
Entities contracting service providers may be subject to a 10% (when more than 80% of the services are rendered to the same entity) or 7% (when more than 50% but less than 80% of the services are rendered to the same entity) social security contribution rate levied on the amount paid for the services.
Members of a company’s governing bodies (management, super visory and general meeting) are usually subject to social security contributions based on actual compensation. For contribution purposes, the actual compensation base must equal at least one monthly notional salary. This limit does not apply if members of the board are not remunerated and simultaneously carry on another remunerated activity that is liable to mandatory social security contributions and if the tax base is equal to or higher than EUR438.81, or in the case of pensioners.
For management, the rates are 11% for individuals and 23.75% for companies. For other governing bodies, the rates are 9.3% for individuals and 20.3% for companies.
Totalization agreements. Foreigners who work temporarily (gener ally up to two years) in Portugal and who contribute to a compul sory social security scheme in their country of origin may not be subject to Portuguese social security contributions. To provide relief from double social security contributions and to assure ben efit coverage, Portugal has entered into totalization agreements, which apply to different periods (up to 60 months), with the fol lowing jurisdictions.
Andorra Estonia Norway
Angola* Finland Philippines
Argentina France Poland Australia Germany Quebec
Austria Greece Romania Belgium Guinea*
São Tomé and Brazil Hungary Príncipe*
Bulgaria Iceland Slovak Republic Canada India Slovenia
Cape Verde Ireland Spain
Channel Islands Italy Sweden (Alderney, Latvia Switzerland Guernsey, Herm, Liechtenstein Tunisia Isle of Man, Lithuania Turkey Jersey and Jethou) Luxembourg Ukraine
Chile Malta United Kingdom
Croatia Moldova United States
Cyprus Morocco Uruguay Czech Republic Mozambique Venezuela Denmark Netherlands
* This agreement is not yet in force.
Portugal has also entered into a multilateral Ibero-American social security agreement covering the following jurisdictions.
Andorra* Cuba* Nicaragua*
Argentina* Dominican Republic* Panama* Bolivia Ecuador Paraguay
Brazil El Salvador Peru Chile Guatemala* Spain Colombia* Honduras* Uruguay
Costa Rica* Mexico* Venezuela*
* The agreement with these jurisdictions is not yet in force.
D. Tax filing and payment procedures
Tax on income shown in the table below is withheld at source. The withholding taxes for residents are considered advance payments of tax, except for the withholding taxes on dividends and on inter est derived from specified sources (see footnotes).
Withholding tax rates
Type of Residents Nonresidents taxable income % %
Employment income (a) 25 (b) Directors’ fees and similar fees (a) 25 (b)
Business and professional services income 11.5/25 25 (b) Royalties and copyright income 16.5 25 (b) Commissions 25 25 (b)
Employment income and professional income derived by non-habitual residents from high value-added activities 20 Bank deposit interest 28 (c) 28 (b) Income from life insurance policies 28 (c) 28 (b) Interest from state bonds 28 (c) 28 (b) Dividends 28 (c) 28 (b)
Gains arising on “swaps,” other credit operations and other financial instruments 28 (c) 28 (b)
Withholding tax rates
Type of Residents Nonresidents taxable income % %
Income from the use or concession of equipment
16.5 25 (b)
Rentals 25 25
Pension (a) 25 (b)
Other investment income (including other interest)
16.5 28 (b)
Certain indemnities 16.5 25 (b)
Investment income if beneficial owner is not disclosed 35 (b) 35 (b) Investment income obtained by residents in tax havens 35 (b)
(a) Withholding taxes deducted at progressive rates according to levels of income. (b) This is a final withholding tax; income need not be declared. An exclusion up to the amount of the monthly minimum wage is available under certain condi tions.
(c) Income may be declared at the option of the taxpayer.
Married taxpayers who are not legally separated, as well as joint couples (in some cases), can opt for joint taxation. Under Portuguese law, joint couples are taxpayers who are not married but live together for at least two years.
The tax year in Portugal is the calendar year. However, it is pos sible to split the year for tax purposes. Residents, as well as nonresidents who have filing obligations, must file their personal income tax returns between 1 April and 30 June of the following year. Any balance of tax due or excess tax paid is payable or refundable when the Portuguese tax authorities issue the respective tax assessment.
An extension to the filing of personal income tax returns with foreign tax credit is granted until 31 December of the year fol lowing the tax year. For that purpose, individuals must report the nature of the income and the country of source by the standard deadline for the personal income tax return filing (through Form 49) and subsequently file the return when the foreign tax assess ment is available.
The foreign tax credit may be carried forward for five years.
Nonresidents who receive rental income from Portugal or who realize a capital gain in Portugal that is not excluded from taxa tion must file tax returns between 1 April and 30 June of the year following the year of receipt.
E. Double tax relief and tax treaties
Residents who receive foreign-source income are generally enti tled to a tax credit equal to the lower of the foreign tax paid or the Portuguese tax payable on such income. The credit applies to income derived from treaty and non-treaty countries; however, for treaty countries, the credit is limited to the amount of tax payable in the country of source in accordance with the treaty.
Brokers resident in countries with which Portugal has entered into double tax treaties are exempt from tax on commissions received from Portuguese entities. This exemption also applies to
income from business and professional services. Specific forms are required to qualify for the exemption.
Compulsory social security contributions and other deductible expenses (see Sections A and C) incurred overseas may be deducted if properly documented.
Portugal has entered into double tax treaties with the following jurisdictions.
Algeria Hong Kong SAR Qatar
Andorra Hungary Romania
Angola Iceland Russian
Austria India Federation Bahrain Indonesia San Marino Barbados Ireland
São Tomé and Belgium Israel Príncipe
Brazil Italy Saudi Arabia
Bulgaria Japan Senegal
Canada Korea (South) Singapore
Cape Verde Kuwait Slovak Republic
Chile Latvia Slovenia China Mainland Lithuania South Africa Colombia Luxembourg Spain
Côte d’Ivoire Macau SAR Sweden
Croatia Malta Switzerland
Cuba Mexico Timor-Leste (a) Cyprus Moldova Tunisia Czech Republic Montenegro Turkey
Denmark Morocco Ukraine
Estonia Mozambique United Arab Ethiopia Netherlands Emirates
Finland (b) Norway United Kingdom France Oman United States
Georgia Pakistan Uruguay Germany Panama Venezuela Greece Peru Vietnam Guinea-Bissau Poland
(a) This tax treaty is not yet in force. (b) Finland unilaterally revoked this treaty on 20 December 2018.
F. Short-stay visas and temporary visas
Short-stay visas (vistos de curta duração) in Portugal may be issued for several reasons, mainly for tourist and business pur poses. They entitle non-EU citizens to spend up to 90 days in Portugal. This visa does not allow its holder to work in Portugal.
Nationals of Visa Waiver Program countries do not require a visa to enter Portugal for short-term visits. However, their stay cannot exceed 90 days within any 180-day period.
Foreign nationals who expect to stay in Portugal up to one year should apply for temporary-stay visas. This type of visa can be applied for various purposes, such as medical purposes, intra company transfers and the exercise of high qualified activity or research.
G. Residence visas
Non-EU nationals must enter Portugal with the proper visas if they intend to carry out professional activities. The type of work permit and visa required and the required procedures to obtain these items differ depending on how the work relationship is clas sified (for example, as a self-employment activity, an employ ment activity or an activity considered to be a high qualified activity or research).
The procedure for obtaining an employment visa for a foreign national is initiated by the prospective Portuguese employer (or the Portuguese entity for which the employees are assigned to work), which must first request a declaration to the Instituto de Emprego e Formação Profissional proving that the job offer is covered by the quota limits and has not been filled by a worker who enjoys preference. The approval and issuance of such decla ration usually requires up to three months. This procedure is usually followed to fill available vacancies within the quota lim its, which are established by a resolution taken by the Council of Ministers.
The initial residence visa is issued for four months. As soon as the holder of the visa arrives in Portugal, he or she should apply to the immigration authorities in Portugal for a residence card (autorização de residência). The initial residence card is issued for two years and can be renewed for successive periods of three years.
Portugal is one of the countries that has implemented the EU Blue Card Directive, which enables companies to locally hire executives and high-skilled workers. To obtain the EU Blue Card, an individual must prove the following:
• For regulated professions specified in the employment contract, the adequate professional certification document, if applicable
• For professions that are not regulated, proof of higher profes sional qualifications in the occupation or sector specified in the employment contract
The application for the EU Blue Card should be submitted by a national of a third state or by the employer with the regional offices of the immigration authorities.
The EU Blue Card is issued for an initial term of validity of one year, renewable for successive periods of two years. The renewal of the EU Blue Card must be requested by the interested party within 30 days before the expiration of its validity.
H. EU, EEA and Swiss nationals
EU, EEA and Swiss nationals do not need any permits to enter and work in Portugal. An EU, EEA or Swiss national who intends to reside and work in Portugal must register with the local city hall if his or her stay exceeds 90 days. In principle, the EU regis tration is valid for a period of 5 years, after which EU, EEA and Swiss nationals should apply for a permanent residence permit, which is valid for 10 years.
I. Golden Visa
The rules governing the granting of a Residence Permit for Investment (known as an ARI/Golden Visa), which entered into force on 8 October 2012, enable third-country nationals to obtain a temporary residence permit to conduct business activities with visa waiver to enter Portugal.
The beneficiaries of an ARI/Golden Visa are entitled to the fol lowing:
• Residence visa waiver for entering Portugal
• The right to live and work in Portugal, on the condition that they stay in Portugal for a period of 7 or more days in the first year and 14 or more days in the subsequent years
• Visa exemption for traveling within the Schengen Area
• Family reunification
• The right to apply for permanent residence after five years
• The right to apply for Portuguese citizenship, by naturalization, provided all other requirements set out by the Nationality Act are fulfilled after five years
Eligible individuals are all third-country citizens who conduct an investment activity in Portugal, as individual businesspersons or through a company set up in Portugal or in another EU member state and who are stably settled in Portugal, provided that these citizens fulfill the quantitative requirements and the time require ments set out by the relevant legislation, by one of the following actions:
• Capital transfer with a value equal to or above EUR1 million (EUR1.5 million from 2022)
• The creation of at least 10 job positions
• The purchase of real estate property with a value equal to or above EUR500,000 (from 2022, the investment will only be possible in properties in low-density areas in Portugal)
• The purchase of real estate property that has construction dat ing back more than 30 years or that is located in urban regen eration areas, for refurbishing for a total value equal to or above EUR350,000
• Capital transfer with a value equal to or above EUR350,000 (EUR500,000 from 2022) for investing in research activities conducted by public or private scientific research institutions involved in the national scientific or technological system
• Capital transfer with a value equal to or above EUR250,000 for investing in artistic output or the support of the arts for the reconstruction or refurbishment of the national heritage, through local and central authorities, public institutions, the public corporate sector, public foundations, private foundations of public interest, networked local authorities, local corporate sector organizations, local associations and public cultural associations, if these entities are pursuing activities of artistic output and reconstruction or maintenance of the national heritage
• Capital transfer with a value equal to or above EUR350,000 (EUR500,000 from 2022) for the acquisition of units of invest ment funds or venture capital funds of funds dedicated to the capitalization of companies, if the capital is injected under the Portuguese legislation, the maturity at the moment of the investment is at least five years and at least 60% of the
investments is realized in commercial companies with a head office in Portugal
• Capital transfer with a value equal to or above EUR350,000 (EUR500,000 from 2022) for the establishment of a commer cial society with its head office in Portugal and the creation of five permanent working jobs, or for the reinforcement of the share capital of an existing commercial society with its head office in Portugal and the creation or maintenance of a mini mum of five permanent jobs, for a minimum period of three years
J. Family and personal considerations
Family members. Family members who accompany a non-EU foreign national to Portugal or wish to join a foreign national in Portugal must request special visas from the Portuguese consul ate in their last country of residence. These visas (visto de residência para efeitos de reagrupamento familiar) allow family members to work in Portugal after the relative residence permit for family purpose is obtained (see below).
After the competent consulate abroad issues the visa, within four months after their arrival in Portugal, family members accompanying a foreign national must request their residence permits for the purpose of family reunion (autorização de residência para reagrupamento).
If the primary applicant holds a temporary stay visa, his or her family is granted a short-stay visa.
Applications for family reasons residence permits can made for children up to 18 years old. If the children are more than 18 years old, they need to be studying in Portugal.
Driver’s permits. In general, foreign nationals may drive legally in Portugal for a period of 185 days using their home-country driver’s licenses or if they possess international driver’s licenses. If the individual becomes resident in Portugal, he or she should carefully investigate if he or she may continue to drive legally without any action (specific rules apply depending on the coun try that issued the driver’s license). Portugal has driver’s license reciprocity with all EU member countries and certain non-EU countries, including, for example, with the United States.
To obtain a Portuguese driver’s license, foreign nationals must fulfill certain conditions, namely proceeding with physical and medical examinations. In addition, after obtaining a residence permit, a foreign citizen has 60 days to exchange the driver’s license without undertaking any written or practical tests. After two years, the foreign citizen may be required to undertake a practical test. For both situations, all foreign citizens are asked to undertake physical and medical examinations.