Taxes in Europe Database v2
IRS Code, enacted by Decree Law 442-A/88 of 30 November 1988, as amended; Tax Incentives Statute (EBF), enacted by Decree Law 215/89 of 1 July 1989, as amended; Decree Law 42/91 of 22 January 1991; Law 85/98 of 16 December 1998; Regional Legislative Decree 2/99/A of 20 January 1999; Decree Law 74/99 of 16 March 1999; Regional Legislative Decree 3/2001/M of 22 February; Law 16/2001 of 22 June; Decree Law 198/2001 of 3 July; Law 26/2004 of 8 July; Decree Law 193/2005 of 7 November; Law 2/2007 of 15 January; Decree Law 108/2008 of 26 June; Law 12-A/2010 of 30 June; Law 55-A/2010 of 31 December; Law 49/2011 of 7 September; Law 64-B/2011 of 30 December; Law 66-B/2012 of 31 December; Law 83-C/2013 of 31 December; Law 82-E/2014 of 31 December.
Resident individuals are subject to tax on their worldwide income (including capital gains) while non resident individuals are subject to tax only on income derived in the Portuguese territory. Individuals are generally deemed to be resident if they stay in Portugal for more than 183 days a period of 12 months or if they have a place of abode available on the last day of a a period of 12 months and it can be inferred from the circumstances that they have an intention to keep it and occupy it as their permanent residence. Married taxpayers can either fil a seperate or a joint tax return.
Income falling within the following categories:
Category A: Income from dependent employment
Category B: Income from self employment (business and professional activities)
Category E: Investment income
Category F: Income from immovable property
Category G: Capital gains and other increases in wealth (e.g. winnings from lotteries)
Category H: Pensions.
The household coefficient, by which income is divided, considers "1" for each taxpayer and "0.3" for each dependent or ascendant.
The following allowances are specific to each income category:
Income from business and professional activities may be taxed under the ‘simplified regime', according to which, net income is assessed by applying a coefficient of 0.15 to sales, hotel and restaurant businesses, a coefficient of 0.75 to income from activities falling under art. 151, a coefficient of 0.35 to income from activities not included in the former two items, a coefficient of 0.95 coefficient to income from royalties,a 0.3 to subsidies or grants not related with production and 0.1 to subsidies related to production and other income from cat. B. This ‘simplified regime' is applicable for renewable three-year periods, if the taxpayer is not required by law to apply the standard accounting system and does not opt for it and if in the previous year gross income falling within this catgory does not exceed € 200,000.
If this threshold is exceeded for two consecutive years or if it is exceeded by 25% in a given year, taxation under the ‘simplified regime' ceases to apply and the taxpayer is required to introduce the standard accounting system in the following year.
The basic credit for an individual was replaced by a credit relative to household expenses per liable individual, 35% of household expenses with a limit of €250 per taxpayer, in single parent households the percentage is increased to 45% and the limit to €335.
Personal credits further consider:
Total tax credits and tax benefits (except for credits for disability and double taxation) are limited, except for the lowest bracket. However, limits are increased by 10% for each dependant not liable to PIT.
5% of VAT paid for certain services (restaurants, hotels, hairdressers, car repair) up to a limit of €250 (not included in tax benefits limits).
Deduction is limited to 75% of profit.
Last income bracket has a surtax of 2.5% for taxable income between €80,000 and €250,000, 5% for taxable income above €250,000;
Surtax of 3.5% for taxable income above the annual minimum wage, with a credit of 2.5% of the monthly minimum wage for each dependant non liable to PIT.
Income from ommovable property (rents) can be autonomously taxed, at a rate of 28%.
31st July. For taxpayers deriving income from self-employment, three advance payments may be due on the 20th of July, September and December. Withholding tax is generally due by the payer of the income on the 20th day of the month following the day in which the taxable event took place (i.e. payment date in most cases).
The tax is assessed and collected annually by the Tax and Customs Authority (AT) generally on the basis of the tax return submitted by the taxpayers. Advance payments due on income from self‑employment (category B), as well as withholding tax, are credited against the final tax liability.
Non taxable limits
There are no thresholds for the other income categories. However, for taxpayers whose income stems primarily from paid employment (category A) and pensions (category H), the application of the tax rates may not result in after-tax income under € 8,500. (Article 70 of IRS Code)
10% if disabled taxpayers income up to € 2,500.
Non resident individuals not acting through a permanent establishment or a fixed base situated in Portugal are taxable only on Portuguese sourced-income. In the absence of a Double Taxation Agreement: