Portugal

Basic taxes (briefly)

Personal tax 14,5-48%
Corporate tax (in detail) The standard tax rate is 21%. In some regions and for small enterprises, the rate may be lower in terms of part of income.
Capital gains tax. Details Capital gains are included in the general tax base
VAT. Details Стандартная ставка НДС составляет 23%. В отношении некоторых товаров и услуг применяются пониженные ставки в размере 13% и 6%
Other taxes Social contributions, Municipal property tax, Property transfer tax
Government fee
Stamp duty Rates vary by transaction

International tax agreement

Tax treaties entered Algeria, Angola, Andorra, Austria, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Cote d'Ivoire, Denmark, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guinea-Bissau, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Korea (Republic of), Kuwait, Latvia, Lithuania, Luxembourg, Macao (China), Malta, Mexico, Moldova, Montenegro, Morocco, Mozambique, Netherlands, Nigeria, Norway, Pakistan, Panama, Peru, Poland, Oman, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Sao Tome and Principe, Timor-Leste, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, Vietnam
   
Tax Exchange Information Agreement (TEIA) Andorra, Antigua and Barbuda, Bermuda, British Virgin Islands, Cayman, Islands, Gibraltar, Liberia, St. Kitts and Nevis, St. Lucia, Turks and Caicos


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TAXES

General Info

The principal Portuguese taxes are Corporate Income Tax and Personal Income Tax. There are, in addition, certain indirect taxes levied on transactions entered into by individuals and businesses alike, such as value-added tax (VAT), real estate transfer tax and stamp duty.
The assessment and collection of direct taxes is administered by the Portuguese Tax Administration.

Personal tax

Personal income tax is charged on income of individual residents and non-residents. In general Portuguese resident individuals are assessed on their worldwide income, whereas non-residents are assessed on Portuguese sources of income, subject to the terms of double taxation treaties.
The tax is levied at progressive rates, varying according to bands of income:
Income, EUR Tax rate
Up to 7,000 14.5%
From more than 7,000 up to 20,000 28.5%
From more than 20,000 up to 40,000 37%
From more than 40,000 up to 80,000 45%
From more than 80,000 48%

Besides, since 2013 года a solidarity surcharge applies:
Income Rate
Over 6,790 3.5%
80,000 – 250,000 2.5%
Over 250,000 5%

There are 6 categories of income that are subject to personal income tax: employment income, business and professional income, investment income, real estate income, increases in net worth and pensions.
Deductions are available, including health and education expenses, health and pension plan contributions. There are also tax credits that depend on marital status, the number of children and income.
Tax year ends on December, 31. The tax return filing deadline is 31 March (30 April if filed electronically).

Corporate tax

Corporate income tax is levied on the taxable worldwide profits of Portuguese resident Companies including capital gains and on the Portuguese profits of branches and other permanent establishments located in the country.
Corporate income tax is levied at rate of 21%. Besides, there are municipal (1.5%) and state surcharges. The latter is charged at progressive rate:
Income, EUR Rate
First 1.5 million 0%
Next 6 million 3%
Remainder 5%

Together with the 1.5% municipal surcharge, the final maximum combined tax rate may now reach 31.5% (on profits over 7.5 million euro).

Tax year

In principle, the tax year corresponds to the calendar year. However, resident companies can request to the Finance Minister the adoption of a different tax year, based on economic reasons.
Corporation tax is declared and payable five months after the end of the tax year. A pre-payment of the final tax due must be made by the seventh, ninth and twelfth months of the tax year, based on the tax assessed in the precedent year.

Tax deductions

For tax period starting on or after January 1, 2013, a new limit on the tax deductibility of financing costs applies. Under this regime, the net financing costs are deductible up to the higher of the following limits:
  • Euro 3,000,000; or
  • 30% of earnings before depreciation, interest and taxes (EBITDA) – However, a transitional period applies, where this limit is 70% in 2013, 60% in 2014, 50% in 2015, 40% in 2016 and 30% for 2017 and subsequent years.

Capital gains tax

There is no capital gains tax in Portugal. All capital gains are included in taxable profits for corporate tax purposes. 50% of gains derived from the disposal of tangible fixed assets and financial assets held for at least one year may be excluded from taxation if the total disposal proceeds are reinvested within a prescribed period.

Losses

Operated losses may be carried forward five years, although losses used in any year may not exceed 75% of the taxable profits. If the nature of the activity of the company has changed or at least 50% of the capital or the majority of the voting rights has been transferred, carryforward is allowed only if authorized by the Minister of Finance. The carryback of losses is not allowed.

Dividends

Under Portugal’s participation exemption, dividends received by a resident company from another resident company are exempt from tax provided the recipient is not considered a transparent entity and has held directly at least 10% of the capital of the payer company for one year before the distribution takes place.

VAT

Value-added tax (VAT) is a sales tax charged on the supply of goods and services provided in the course of a business in Portugal. VAT is also charged on the importation of goods from non-EU countries into Portugal, receipt of some international services in Portugal, and acquisition in Portugal of goods from other EU Member States.
Standard rate of VAT is 23%, an intermediate rate is 13% and reduced rate is 6%.

VAT Registration

A reverse-charge mechanism may apply to local supplies made by nonresident entities, avoiding the registration obligation for the supplier. However, nonresident suppliers are generally required to register for VAT in Portugal on the transfer of their own stocks to Portugal for the purposes of their own undertakings or if they sell goods or supply services to private customers.

VAT tax period and returns

Monthly returns must be filed when annual turnover exceeds EUR 650,000, otherwise, quarterly returns are permitted. Payment is required at the time of filing. Monthly VAT returns should be filed by the 10th day of the second month following the end of the relevant month. Quarterly returns should be filed by the 15th day of the second month following the end of the relevant quarter.

Withholding tax

Withholding tax is levied on certain types of income paid to companies in Portugal.
Tax rate varies depending on the type of income and tax status of income recipient:
Type of Income Rate
Dividends paid to a nonresident company 25%
Dividends paid to a resident of a listed tax haven 35%
Interests paid to a nonresident company 25%
Interests paid to a resident of a listed tax haven 35%
Royalties paid to a nonresident company 25%
Technical services fee 25%

Withholding tax may be avoided or reduced under the terms of a EU Directive or of a Double Tax Treaty in force.

Other taxes and duties

Real property tax levied annually by the municipalities at a rate of 0.3% to 0.8% of the taxable value of the property.
Transfer tax levied by the municipalities at a maximum rate of 6% on the transfer of residential property, 5% on the transfer of rural property, 6.5% fro transfers of urban property and 10% if the purchaser is located in a listed low-tax jurisdiction.
Social security contribution the employee contributes 11% of monthly gross salary and employers contribute 23.75%.

Stamp duty

Stamp duty is a tax levied on a wide range of operations and documents, such as loans, bank interest, written contracts, insurance premiums, gifts and inheritances. The tax rates depend on the type of operation concerned.

Government fee

There is no annual government fee for Portuguese companies in Portugal.

Foreign exchange control

There are currently no exchange controls in force in Portugal.

Double Tax Agreements

Portugal has tax treaties with 94 countries:
79 DTCS: Algeria, Andorra, Austria, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Côte d'Ivoire, Denmark, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guinea-Bissau, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kuwait, Latvia, Lithuania, Luxembourg, Macao (China), Malta, Mexico, Moldova, Montenegro, Morocco, Mozambique, Netherlands, Norway, Pakistan, Panama, Peru, Poland, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, São Tomé and Príncipe, Timor-Leste, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, Viet nam.
16 TIEAs: Andorra, Anguilla, Antigua and Barbuda, Belize, Bermuda, Cayman Islands, Dominica, Gibraltar, Guernsey, Isle of Man, Jersey, Liberia, Saint Kitts and Nevis, Saint Lucia, Turks and Caicos Islands, Virgin Islands (British).

Anti-Avoidance rules

Transfer pricing: Portugal’s transfer pricing rules generally follow the OECD transfer pricing guidelines. The tax authorities may make pricing adjustments if special relations exist between the parties. Companies must prepare documentation to support their transfer pricing policies.
Thin capitalization: the thin capitalization rules were abolished since 1 January 2013; the rules are replaces by specific limitations on the tax deductibility of interest expense. Under the new rules, net financial costs are deductible only up to the greater of the following thresholds:
Percentage Year
70% 2013
60% 2014
50% 2015
40% 2016
30% 2017 and subsequent years

The amount exceeding the threshold in a given year may be carried forward to the following five years up to the 30% threshold.
Controlled foreign companies: under the CFC regime, undistributed profits of a nonresident company resident in a low-tax jurisdiction may be attributed to Portuguese resident participators with a substantial interest therein and taxed in proportion to their holdings. A substantial interest is a direct or indirect ownership (including beneficial interest) of at least 25% of the capital, voting rights or rights to income or assets or a 10% stake where more than 50% of the capital, voting rights or rights to income or assets is owned by Portuguese resident participators. The CFC regime is not applicable in an EU member state or in a EEA member state with which an agreement for administrative cooperation in tax matters equivalent to that established for the EU has been concluded.
Disclosure requirements: taxpayers or their agents are obliged to disclose to the Portuguese tax authorities certain corporate restructurings or transactions in which they are involved that may lead to substantial tax benefits.

ACCOUNTS

Financial statements

The General Assembly must approve the annual financial statements within 3 months from the close of the fiscal year to which it relates. The publication of company’s accounts is not mandatory but they should be submitted online through the IES, annually until the end of June. The financial statements of a company must be submitted via internet by a registered accountant.
Accounts must be prepared in accordance with the Portuguese Chart of Accounts. Financial statements must include a balance sheet, income statements, a cash flow statement and related notes.
Accounts are publicly accessible.

Audit

As a rule, limited companies are exempt from audit of financial statements. However, Lda. companies that exceed two of the following three limits during two consecutive years are required to appoint a registered auditor (“Revisor Oficial de Contas»):
  • income amount: 3 million euros;
  • total net assets:1,5 million euros;
  • number of employees:50.

Annual Return

Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
  • Incorporation information (registration date, registered address);
  • Information about directors and their resignation;
  • Information about secretaries and their resignation;
  • Information about registered capital, nominal value of shares and amount of issued shares;
  • Information about shareholders and share transfer.

In Portugal companies are not obliged to prepare or file Annual Return.

Tax returns

In principle, the tax year corresponds to the calendar year. However, resident companies can request to the Finance Minister the adoption of a different tax year, based on economic reasons.
Corporation tax is declared and payable five months after the end of the tax year. A pre-payment of the final tax due must be made by the seventh, ninth and twelfth months of the tax year, based on the tax assessed in the precedent year.

    Taxes of Portugal

    Min. rate for corporate tax 21%
    Capital gains tax Regular rate
    VAT 23%
    Withholding tax 25%/25%/25%
    Exchange control No
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