Portugal: Business Environment
Donations to authorised charitable institutions are allowable at up to 0.8% of turnover, with the possibility for an increase of the amount actually spent up to 150%, same as for donations of computers, software equipment, training, and consultancy in the area of computers granted to the national government, municipalities, foundations, museums and other charitable institutions. Donations to authorised educational, sport and environmental institutions are allowable at up to 0.6% of turnover, with the possibility for an increase of the amount actually spent up to 140%. Contributions made to the state, municipalities, and foundations in which the state or municipalities have an initial capital stake can be fully deducted, and there is also a potential to increase the deductible cost by up to 140%.
Pension, invalidity, and health schemes are tax-deductible up to a rate of 15% of annual staff expenses, only if, among other conditions, they are available to all employees and the management and disposition of the benefits are outside the control of the taxpayer. Companies may only deduct net financing expenses up to the higher of the following limits: EUR 1 million or 30% of the earnings before depreciation, amortisation, taxes, and net financing expenses, adjusted for tax purposes.
A tax credit covering 32.5% of research and development expenditure is available for the year in which these expenses are incurred and can be carried forward for a period of eight years. Companies can claim an additional tax credit of 50% of R&D expenditure if their expenditure exceeds the average in two fiscal years (capped at EUR 1.5 million). Other tax incentives are available for qualifying new investment projects, fixed-asset investments, intellectual property, and the creation of jobs.
Costs incurred by SMEs in 2021 and 2022 with joint external promotional activities are tax deductible for 110% of the respective amount.
For the assessment of the 2022 taxable profit, costs and losses associated with the consumption of electricity and natural gas, exceeding the amount from the previous tax year and excluding any received funding, can be considered for 120% of their respective value. Similarly, costs and losses incurred or borne in acquiring specific goods used in agriculture can be considered for 140% of their respective amount for the purpose of assessing the 2022 taxable profit.
Net operating losses can be carried forward (up to 65% of taxable profits) without time limitation. The carryback of losses is prohibited.
A standalone tax of 35% is levied on indemnities and compensation as well as bonuses paid to members of the board and managers (if exceeding 25% of their annual remuneration and EUR 27,500). Certain deductible expenses are subject to a standalone tax, including entertainment expenses (10%), undocumented expenses (taxed at 50%, or 70% in the case of taxpayers enjoying a partial or total tax exemption), expenditures on private cars (taxed at rates from 5% to 35% depending on the acquisition price of the car), daily allowances and employees' travelling costs (taxed at 5%).
A special contribution is levied on companies operating in the financial sector, with two different tax bases: the contribution is applicable at a maximum of 0.11% on base I and at 0.00030% on base II.
Social security contributions paid by the employer amount to 23.75% of the monthly gross remuneration.
A carbon tax due by the user in the amount of EUR 2 applies on air, sea and river travel. A levy amounting to EUR 0.30 per package applies to disposable plastic and aluminium packages (the latter contribution shall not apply to single-use beverages and will come into force as of September 2023).
Special taxation rules apply to entities engaged in activities such as oil exploration, prospecting, and production, and to those operating in the gaming industry.
Portugal | OECD | United States | Germany | |
Number of Payments of Taxes per Year | 8.0 | 10.1 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 243.0 | 163.6 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 39.8 | 41.6 | 36.6 | 48.8 |
Source: Doing Business, Latest available data.
Personal income tax (IRS) | Progressive rate from 14.5% to 48% |
Up to EUR 7,479 | 14.5% |
EUR 7,479 - 11,284 | 21% |
EUR 11,284 - 15,992 | 26.5% |
EUR 15,992 - 20,700 | 28.5% |
EUR 20,700 - 26,355 | 35% |
EUR 26,355 - 38,632 | 37% |
EUR 38,632 - 50,483 | 43.5% |
EUR 50,483 - 78,834 | 45% |
Over EUR 78,834 | 48% |
Additional solidarity rate | |
EUR 80,000 - 250,000 | 2.5% |
Over EUR 250,000 | 5% |
Non-residents | 25% flat rate (on Portuguese-source income) |
Non-habitual Residents | Flat rate of 20% 10% for pension income from 1 April 2020 (exempt for those already registered as NHRs by 31 March 2020 or as Portuguese residents) A foreign tax credit for international double taxation is available against any foreign tax paid on such incomes. The taxpayer may opt-out of this regime and be taxed at normal progressive rates |
A taxpayer who has become tax-resident in Portugal for a certain year and has not been taxed as resident in Portugal for any of the previous five years may apply for the special tax regime for "non-habitual tax residents". Non-habitual residents are taxable on worldwide income, but may be exempt from tax on certain foreign-source income. In general terms, non-habitual residents are taxed at a flat rate of 20% in respect of employment income (Category A) and self-employment income (Category B) arising from high-value activities of a scientific, artistic, or technical nature. Entrants in the regime that became Portuguese tax residents as from 1 April 2020 are liable to a 10% tax rate on pension income. For further information, click here.
A tax exemption also applies to outbound expatriates, who are resident individuals assigned abroad for a period longer than 90 days.
Foreign residents may be exempt from social security in Portugal if they contribute to a compulsory social security system in a European Union country or a country that has a bilateral social security agreement with Portugal.
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Latest Update: November 2023