Taxation in Portugal
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[edit]
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[edit]
Mainland Portugal.[edit]
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[edit]
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[edit]
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[edit]
The Corporate Tax Rate in Azores is 16,8%.[7]
Value added tax[edit]
Mainland Portugal[edit]
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[edit]
The VAT rates in Madeira are 22% (normal rate), 12% (intermediate rate) and 5% (reduced rate).[10][11]
Azores[edit]
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[edit]
All employment income is subject to social security contributions.[13]
General Social Security Regime[edit]
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[edit]
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[edit]
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[edit]
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[edit]
References[edit]
- ^ "Carga fiscal foi revista em baixa, mas 2018 continua a ser recorde". www.jornaldenegocios.pt (in 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 Portuguese). Retrieved 2020-02-05.
- ^ "Conheça as taxas de IRC que se aplicam aos rendimentos empresariais". Ekonomista (in Portuguese). 2019-07-02. Retrieved 2019-11-15.
- ^ "Taxes - VAT 23%". Economias (in Portuguese). Archived from the original on 2018-12-17. Retrieved 2018-12-17.
- ^ "KPMG". Vat rates in portugal.
- ^ "Taxa de IVA na Madeira". Economias (in Portuguese). Archived from the original on 2018-12-17. Retrieved 2018-12-17.
- ^ "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. Check date values in:
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