Taxes in Portugal

Corporate income tax (CIT)

All companies earning income in Portugal are subject to CIT.

CIT rates:

• 21% in mainland Portugal;
• 20% in the Autonomous Region of Madeira;
• 16.8% in the Autonomous Region of the Azores.

The reduced CIT rate of 12.5% applies to companies meeting standards, like:

• carrying out business for a period of less than ten years;
• employing less than 250 employees;
• having an annual turnover not exceeding € 50 million;
• the company should not result from a corporate reorganization of a non-qualifying company;
• the company should not be held, in more than 50%, by a non-qualifying company.

The following requirements also must be met:

• new start-ups are innovative companies with a high growth potential; or the National Agency of Innovation recognized that they develop competent R&D activities or certification of the process of recognition of companies in the technology sector;
• have completed at least one round of venture capital financing or have had contributions of equity or quasi-equity from business angels;
• have been granted funds from the Portuguese Development Bank, or funds managed by this entity, or by its subsidiaries, or from one of its equity or quasi-equity instruments.

For small or medium-sized enterprises which have an agricultural, commercial or industrial economic activity as their main activity, a rate of 17% applies to the first € 25 000, and the standard rate to the remainder.

Companies with no registered office or permanent establishment in Portugal are subject to a rate of 25%, except for the following income where the rate is 35%:

• prizes from draws, lotteries, lottery games, or in any draw or competition;
• income paid or made available in accounts opened in the name of one or more holders but on behalf of unidentified third parties;
• income earned by companies established in a country, territory or region subject to a significantly more favorable tax scheme.

Personal income tax (PIT)

Personal income tax applies to the income of citizens resident in Portuguese territory and non-residents who earn income in Portugal.

PIT rates for residents:

• up to €7,703 - 13.25%;
• €7,703 – €11,623 - 18%;
• €11,623 – €16,472 - 23%;
• €16,472 – €21,321 - 26%;
• €21,321 – €27,146 - 32.75%;
• €27,146 – €39,791 - 37%;
• €39,791 – €51,997 - 43.5%;
• €51,997 – €81,199 - 45%;
• over €81,199 - 48%.

Non-residents are taxed at a flat rate of 25% on their taxable remuneration (e.g. employment, self-employment, and pension income).

Value-added tax (VAT)

VAT in Portugal is payable by all businesses with a turnover of more than €14,500 on taxable goods and services.

In Portugal, there are three rates of VAT:

• a reduced rate of 6% in mainland Portugal, 4% in the Autonomous Region of the Azores and 5% in the Autonomous Region of Madeira for goods and services in List I of the Value Added Tax Code;
• an intermediate rate of 13% in mainland Portugal, 9% in the Autonomous Region of the Azores and 12% in the Autonomous Region of Madeira for goods and services in List II of the Value Added Tax Code;
• a standard rate of 23% in mainland Portugal, 16% in the Autonomous Region of the Azores and 22% in the Autonomous Region of Madeira for all remaining goods and services.

Double taxation avoidance agreements in Portugal: Algeria, Andorra, Angola, Austria, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark, East Timor, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guinea-Bissau, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Ivory Coast, Japan, Kenya, Korea, Kuwait, Latvia, Lithuania, Luxembourg, Macau, Malta, México, Moldova, Montenegro, Morocco, Mozambique, Netherlands, Norway, Pakistan, Panama, Peru, Poland, Qatar, Romania, Russia, San Marino, Sao tome and Principe, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, South Africa, Sultanate of Oman, Switzerland, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uruguay, Venezuela, Vietnam.