Taxation in Portugal
Portugal’s taxation framework is an intricate system that plays a vital role in the country’s economic strategy, balancing the need for revenue with incentives to promote growth and investment. It includes various taxes, each regulated by a detailed array of rules and rates. For businesses, investors, and individuals, a thorough comprehension of this landscape is crucial for effective financial management and adherence to regulations.
Taxation system
Portugal’s taxation system aims to harmonize with local fiscal policies and international commitments, providing a systematic yet flexible approach to taxes. It may include a mix of flat rates, progressive brackets, and specific exemptions that mirror the nation’s economic goals and social aims. Grasping the complexities of these tax structures is crucial for maximizing financial results, maintaining compliance, and taking advantage of opportunities permitted by law.
Capital gains tax
In Portugal, capital gains typically incur a standard tax rate of 28%. For residents, only half of the gain is subject to taxation. There are also distinct relief options available for those who reinvest into another primary home or for retirees who are investing in a pension or insurance policy.
Corporate taxation
The typical corporate income tax rate is 21%, but additional surcharges can increase the overall rate to 31.5% depending on the levels of taxable profit. In Portugal, resident companies are taxed on their global income, while non-resident companies are taxed on income sourced from Portugal. Certain tax rates may be applicable to small and medium-sized enterprises, as well as to oil and gas firms and organizations in specific industries. There are numerous incentives and exemptions for eligible investments and activities.
Personal income taxation
In Portugal, personal income tax (PIT) operates on a progressive scale, with rates varying from 13.25% to 48%, based on income levels. Higher income earners are subject to an extra solidarity surcharge. The tax is levied on global income for residents and on income sourced from Portugal for non-residents. Certain tax regimes might be available for non-habitual residents and expatriates, providing lower rates on eligible income.
Dividend taxation
In Portugal, individuals receiving dividends are taxed at a fixed rate of 28%. Resident taxpayers have the choice to combine their dividend income with other income, which allows them to be taxed at progressive rates. Additionally, for dividends coming from Portuguese or EU companies, only 50% of the income may be taxable under specific conditions.
Property tax
In Portugal, property tax (IMI) is assessed each year based on the taxable value of the property. The applicable rate differs based on the property’s classification, such as urban, rural, or properties held by entities in tax havens. This tax is remitted to the local municipality. In addition, there is an extra property tax (AIMI) that is levied on residential properties and building land, with rates starting at 0.7% and increasing progressively.
Inheritance taxation
Portugal does not impose an inheritance tax; however, it does apply a stamp duty of 10% on gifts and inheritances involving assets situated in Portugal. This tax is applicable to the transfer of both movable and immovable property and is charged to the person receiving the inheritance.
International taxation
Portugal employs a progressive tax rate structure for personal income tax, which spans from 13.25% to 48%. Corporate income tax rates can reach up to 31.5%, factoring in additional levies. For non-residents, the tax is typically a flat rate of 25% on income from employment. Different tax rates are set for other income types, such as dividends and interest, both taxed at 28%. The rates that apply can be affected by provisions for double taxation relief and particular tax treaties.
Cryptocurrency taxation
In Portugal, gains from cryptocurrency are taxed at a flat rate of 28% for assets held for under 365 days. Assets held for over 365 days are not subject to taxation. If cryptocurrency trading and mining are performed regularly, they are classified as business and professional income, and the income from these activities is taxed accordingly.
VAT system
In Portugal, VAT is levied on the supply of goods and services as well as on imports. There are three distinct rates: the standard rate is 23% for the mainland, 22% for Madeira, and 16% for the Azores. The reduced rates are 6% and 13% for the mainland; 0%, 5%, and 12% for Madeira; and 0%, 4%, and 9% for the Azores, varying based on the specific goods or services involved. Some supplies, such as exports and financial services, may be exempt from VAT. Businesses are required to meet VAT registration criteria, and a reverse charge mechanism is in place for non-established entities engaged in B2B transactions. Businesses must also adhere to VAT reporting standards, which involve submitting monthly or quarterly VAT returns based on their turnover.
Our taxation solutions
In a tax landscape that is continuously changing, expert advice is essential. Our company provides a range of specialized tax solutions customized to address the various requirements of individuals, corporations, and investors in Portugal. Our offerings are aimed at effectively managing the intricacies of the tax code, reducing liabilities, and guaranteeing complete regulatory compliance.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
Navigating the intricate realm of taxation can greatly benefit from professional guidance. Get in touch with us today to arrange a consultation with our tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to Portugal’s regulatory framework.
Disclaimer
Tax laws and regulations are continuously evolving and can differ depending on personal situations. The information shared here serves as general guidance and might not represent the latest updates. It is strongly advised to seek the assistance of a qualified tax professional for precise and current advice tailored to your circumstances.