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.

Taxation
An aspect of fiscal policy

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.

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%
Additional Contributions
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
  1. "Carga fiscal foi revista em baixa, mas 2018 continua a ser recorde". www.jornaldenegocios.pt (in Portuguese). Retrieved 2019-11-15.
  2. "KPMG". Income tax in Portugal. Retrieved 18 June 2017.
  3. http://europa.eu/youreurope/citizens/work/taxes/income-taxes-abroad/portugal/index_en.htm
  4. "KPMG". Corporate tax in portugal rate.
  5. "Qual é a taxa de IRC para PME's?". Economias (in Portuguese). Retrieved 2019-11-15.
  6. PricewaterhouseCoopers. "IRC". PwC (in Portuguese). Retrieved 2020-02-05.
  7. "Conheça as taxas de IRC que se aplicam aos rendimentos empresariais". Ekonomista (in Portuguese). 2019-07-02. Retrieved 2019-11-15.
  8. "Taxes - VAT 23%". Economias (in Portuguese). Archived from the original on 2018-12-17. Retrieved 2018-12-17.
  9. "KPMG". Vat rates in portugal.
  10. "Taxa de IVA na Madeira". Economias (in Portuguese). Archived from the original on 2018-12-17. Retrieved 2018-12-17.
  11. "Guide to taxes in Portugal". www.expatica.com. Archived from the original on 2018-12-17. Retrieved 2018-12-17.
  12. "Meridian". New VAT rates on the Azores.
  13. "Taxas Contributivas". Segurança Social. Segurança Social. Retrieved 15 November 2019. Check date values in: |date= (help)
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