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%.
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).
Costs incurred by SMEs in 2021 and 2022 with joint external promotional activities are tax deductible for 110% of the respective amount.
Net operating losses can be carried forward (up to 70%) for a period of five years (12 years for SMEs - capped at 70% of the taxable income, increased to 80% for tax losses incurred in 2020 and 2021 due to the COVID-19 crisis). 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), expenditure 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. In an effort to mitigate the economic effects of the Russia-Ukraine conflict, employers and self-employed persons active in specific sectors listed in Ordinance No. 141/2022 were allowed to defer payment of social security contributions due for the months of March, April, May, and June 2022, as follows: one-third of the contributions shall be paid normally in the month due; and the remaining two-thirds shall be paid in up to six equal installments beginning in August 2022 (no interest applies). However, if contributions had been paid in full for the month of March, no contributions were due for the months of April and May.
A carbon tax due by the user in the amount of EUR 2 applies on air, sea and river travels. A levy amounting to EUR 0.30 per package applies on disposable plastic packages (from 2023, the same rate will apply on aluminium packages).
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 7,112 | 14.5% |
EUR 7,112 - 10.732 | 23% |
EUR 10.732 - 20.322 | 28.5% |
EUR 20.322 - 25.075 | 35% |
EUR 25.075 - 36.967 | 37% |
EUR 36.967 - 80.882 | 45% |
Over EUR 80.882 | 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 partial exemption is available on employment income earned by taxpayers aged between 18 and 26 (28 in case of conclusion of a PhD) that do not qualify as dependents and earn a yearly gross income equal or lower than EUR 29,179. The taxable income is reduced by 30% of the income earned in the two first years; 20% in the two following years; 10% in the last year (ceilings apply).
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 resident 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: March 2023