Taxation in Portugal
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Taxes in Portugal are levied by both the national and regional governments. Tax revenue in Portugal stood at 34.9% of GDP in 2018[1] The most important revenue sources include the income tax, Social security contributions, corporate tax and the value added tax, which are all applied at the national level.
Income tax
Employment income earned is subject to a progressive income tax, which applies to all who are in the workforce. Furthermore, a long list of tax allowances can be deducted, including a general deduction, health expenses, life and health insurance, and education expenses. In 2015 a tax of 3.5% was introduced on all employment and state pension income over €6,790. For the year of 2016, the personal income taxation system is as follows:[2][3]
| Taxable income | Tax on this income |
|---|---|
| Up to €7,091 | 14.5% |
| €7,091 to €20,261 | 28.5% |
| €20,261 to €40,522 | 37% |
| €40,522 to €80,640 | 45% |
| Over €80,640 | 48% |
Corporate tax rate
Mainland Portugal.
The corporate tax rate in Portugal is 21%[4] It was lowered by 2% from 23% in 2015 as a part of tax reforms, nevertheless profits of SMEs up to €15,000 are taxed at a special rate 17%.[5] Some corporate enterprises are exempt from corporation tax, including charitable foundations, Church institutions, and sports clubs.
Madeira
The Corporate Tax Rate in Madeira is 20%, nevertheless profits of SMEs up to €15,000 are taxed at a special rate 13%.[6]
Madeira International Business Centre
Companies incorporated and headquartered in Madeira can apply for an International Business Centre (MIBC) license and, granted that they comply with substance requirements, benefit from a corporate tax rate of 5% on the taxable profit derived from economic activities engaged with non-resident entities or entities duly licensed within the MIBC.
Azores
The Corporate Tax Rate in Azores is 16,8%.[7]
Value added tax
Mainland Portugal
Three different VAT rates apply: normal, intermediate and reduced. There is a general rate of 23% (normal rate) for luxury goods, decorative plants, cut flowers, utensils and other equipment for firefighting and fire prevention,[8] followed by a reduced rate of 13% for ordinary wine, spring, mineral, medicinal and carbonated water, and tickets for cultural events. This is followed by a further reduced rate of 6% on cereals, meat, shellfish, fruit, vegetables, and other essential foods, books, newspapers, medicines, passenger transport and hotel accommodation.[9] In 2014, the government introduced the fatura da sorte ("Lucky bill"), a lottery of tax-free cash and luxury cars awarded among consumers with VAT bills. The goal is to bring into the formal economy the many unregistered and untaxed purchases.[citation needed]
Madeira
The VAT rates in Madeira are 22% (normal rate), 12% (intermediate rate) and 5% (reduced rate).[10][11]
Azores
The Azores has lower applicable VAT rates of 18%, 10% and 5%.[12] Businesses with revenue of less than 10,000 Euros per year are exempt from VAT.
Social security contributions
All employment income is subject to social security contributions.[13]
General Social Security Regime
| Type of Employee | Contribution Supported by the Employer | Contribution Supported by Employee | Total Contributions |
|---|---|---|---|
| General Employee | 23,75% | 11% | 34,75% |
| Members Statutory Governing Bodies | 20,3% | 9,3% | 29,6% |
| Members Statutory Governing Bodies who exercise managing functions | 23,75% | 11% | 34,75% |
| Home workers | 20,3% | 9,3% | 29,6% |
| Professional Sportsmen | 22,3% | 11% | 33,3% |
| Very-Short Term Contract Worker | 26,1% | - | 26,1% |
| Worker suspended (by agreement) for pre-retirement purposes | 18,3% | 8,6% | 26,9% |
| Workers who are 65 years old and have been working for 40 years | 17,3% | 8% | 25,3% |
| Working Invalidity Pensioner | 19,3% | 8,9% | 28,2% |
| Working Old Age Pensioner | 16,4% | 7,5% | 23,9% |
| Civil Servant Invalidity Pensioner | 20,4% | 9,2% | 29,6% |
| Civil Servant Old Age Pensioner | 17,% | 7,8% | 25,3% |
| Agricultors | 22,3% | 11% | 33,3% |
| Local and Near Shore Fishery Workers | 21% | 8% | 29% |
| Ship owners who are crew members | |||
| Maritime Species Catchers | |||
| On foot fishermen | |||
| Workers of Private Social Security Institutions | 22,3% | 11% | 33,3% |
| Workers of other non-profit entities | |||
| Contracted Civil Servants | 23,75% | 11% | 34,75% |
| Appointed Civil Servants | 18,6% | 11% | 29,6% |
| Domestic Workers without unemployment coverage | 18,9% | 9,4% | 28,3% |
| Domestic Workers with unemployment coverage | 22,3% | 11% | 33,3% |
| Deficient Workers with a working capacity below 80% | 11,9% | 11% | 22,9% |
| Religious Workers (with protection in sickness, parenthood, professional related diseases, invalidity, old age and death) | 19,7% | 8,6% | 28,3% |
| Religious Workers (with protection in invalidity, and death) | 16,2% | 7,6% | 23,8% |
| Portugal Telecom workers who started their career with CTT Correios de Portugal, S.A. | 7,8% | - | 7,8% |
| Young people on school vacations | 26,% | - | 26,1% |
Closed Social Security Regimes
| Type of Employee | Contribution Supported by the Employer | Contribution Supported by Employee | Total Contributions |
|---|---|---|---|
| Teachers hired until 31 December 2005 not covered by Civil Servants Pension Fund | 21% | 8% | 29% |
| Teachers hired until 31 December 2005 working for private schools | 7,8% | - | 7,8% |
| Foreign Teachers hired until 31 December 2005 who opted not to enroll with Civil Servants Pension Fund | 7,8% | - | 7,8% |
| Teachers hired until 31 December 2005 working for public schools | 4,9% | - | 4,9% |
| Non-specialized works of the Autonomous Region of Azores in the sectors of agriculture, forestry or cattle farming | 21% | 8% | 29% |
| Worker suspended (by agreement) for pre-retirement purposes with more than 37 years of contributions | 7% | 3% | 10% |
| Worker suspended (by agreement) for pre-retirement purposes with less than 37 years of contributions | 14,6% | 7% | 21,6% |
| Members of the Armed Forces in voluntary and contractual regime | 3% | - | 3% |
| Specialized farmers | 23% | 9,5% | 32,5% |
| Non-specialized farmers | 21% | 8% | 29% |
| Specialized farmers of the Autonomous Region of Madeira | 20,5% | 8,5% | 29% |
| Non-specialized farmers of the Autonomous Region of Madeira | 18,1% | 6,9% | 25% |
| Banking workers formally covered by the Family Allowance Fund of the Baking Workers from profit entities | 23,6% | 3% | 26,6% |
| Banking workers formally covered by the Family Allowance Fund of the Baking Workers from non-profit entities | 22% | 3% | 25,4% |
| Type of Employees | Additional Contribution Supported by the Employer |
|---|---|
| Beneficiaries of the Social Security Special Fund for the Workers of the Whool Industry | 0,5% |
| Beneficiaries of the Special Fund for Insurance Brokers | 1% |
Social Security Regime for Freelancers
| Freelancers | Contributions Supported |
|---|---|
| Freelancers in general and their respective spouses, or equivalent, with whom they jointly do the freelancing activity on a regular basis. | 21,4% |
| Self-employed businessmen/businesswomen and holders of sole-proprietor of limited liability entity and their respective spouses, or equivalent, with whom they jointly do the freelancing activity on a regular basis | 25,2% |
| Hiring entity from which the freelancer obtains more than 80% of his income. | 10% |
| Hiring entity in other situations. | 7% |
| Notaries who, on 31 December 2010, where covered by the freelancers' regime and opted for the maintenance of the Civil Servants' regime. | 2,7% |
Voluntary Social Security Insurance Scheme
| People Covered by the Voluntary Social Security Scheme | Contributions Supported |
|---|---|
| General Situations | 26,9% |
| Cooperation Agents | |
| High Performance Sportsmen | |
| Crew Members of ships registered in the Madeira's International Shipping Registry | |
| National Maritime Workers and Watchmen who perform their job in ships owned by foreign companies | 29,6% |
| National Maritime Workers and Watchmen who perform their job in ships owned by common fishing companies | |
| Research Fellows | |
| Voluntary Firefighters | 27,4% |
| Social Voluntaries |
See also
References
- ^ "Carga fiscal foi revista em baixa, mas 2018 continua a ser recorde". www.jornaldenegocios.pt (in European Portuguese). Retrieved 2019-11-15.
- ^ "KPMG". Income tax in Portugal. Retrieved 18 June 2017.
- ^ http://europa.eu/youreurope/citizens/work/taxes/income-taxes-abroad/portugal/index_en.htm
- ^ "KPMG". Corporate tax in portugal rate.
- ^ "Qual é a taxa de IRC para PME's?". Economias (in Portuguese). Retrieved 2019-11-15.
- ^ PricewaterhouseCoopers. "IRC". PwC (in European Portuguese). Retrieved 2020-02-05.
- ^ "Conheça as taxas de IRC que se aplicam aos rendimentos empresariais". Ekonomista (in European Portuguese). 2019-07-02. Retrieved 2019-11-15.
- ^ "Taxes - VAT 23%". Economias (in Portuguese). Retrieved 2018-12-17.
{{cite web}}: Check|archive-url=value (help) - ^ "KPMG". Vat rates in portugal.
- ^ "Taxa de IVA na Madeira". Economias (in Portuguese). Retrieved 2018-12-17.
{{cite web}}: Check|archive-url=value (help) - ^ "Guide to taxes in Portugal". www.expatica.com. Archived from the original on 2018-12-17. Retrieved 2018-12-17.
- ^ "Meridian". New VAT rates on the Azores.
- ^ "Taxas Contributivas". Segurança Social. Segurança Social. Retrieved 15 November 2019.
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