The taxable profits of most small companies are charged as follows:
Companies licensed to operate in Madeira Free Trade Zone are subject to a 5% rate of taxation on profits (as explained under Offshore Legal Entities).
Tax losses generated from 1 January 2017 onwards can be carried forward for a 5-year period. Companies that are considered as micro, small or medium companies (so called “PME”) and are agricultural, commercial or industrial, may carry forward their tax losses for 12 years. Deduction of carry forward tax losses is capped at 70% of the taxable profit.
Companies with head offices or effective management located in Portugal are subject to pay tax on income.
Branches and permanent establishments are only liable to pay tax on income and capital gains attributed to that branch or permanent establishment.
Personal Income Tax is levied on income earned by individuals residing in Portugal as well on the income obtained in Portugal by non-resident individuals.
The resident individuals in Portugal are taxed by progressive tax rates, according to table below:
|Mainland – Portugal||Madeira||Azores|
|Income (€)||Tax Rate||Income (€)||Tax Rate||Income (€)||Tax Rate|
|0 – 7,091||14.5%||0 – 7,091||12.41%||0 – 7,091||10.15%|
|7,091 – 20,261||28.5%||7,091 – 20,261||28.5%||7,091 – 20,261||21.38%|
|20,261 – 40,552||37%||20,261 – 40,552||37%||20,261 – 40,552||29.60%|
|40,552 – 80,640||45%||40,552 – 80,640||45%||40,552 – 80,640||36%|
|Above 80.640||48%||Above 80.640||38.4%||Above 80.640||38.4%|
An extraordinary surtax will be applicable to income earned in 2017, according to the following table:
|Taxable Income||Tax Rate|
|More than Eur 20.261 and up to Eur 40.522||0,88%|
|More than Eur 40.522 and up to Eur 80.640||2,75%|
|More than Eur 80.640||3%|
Companies that do not have their head offices, effective place of management, or permanent establishment in Portugal are only subject to pay tax on income earned in Portugal.
Additionally, solidarity rate is applicable on income exceeding Euros 80,000, subject to the marginal tax rates. A rate of 2.5% is applicable to taxpayers with a taxable income exceeding €80,000 up to €250,000 and a rate of 5% is applicable to taxable income exceeding €250,000.
There is a special regime for Non-Habitual Residents:
The regime will apply to individual taxpayers who become Portuguese tax residents, under Portuguese domestic law, provided they have not been taxed as tax residents in Portugal in any of the previous five years. In these circumstances, individuals will be considered as nonhabitual residents upon their registration as such with the tax authorities.
The employment and self-employment income (net of expenses) obtained in “high value-added activities” is taxed at a flat rate of 20%.
Foreign-source income (e.g. pensions) may be exempt, under certain conditions.
The regime is applicable for a period of ten consecutive years.
The capital gains arising from the disposal of shares are tax free if obtained by nonresidents.
This exemption is not valid if:
If the above-mentioned exemption is not applicable, the capital gains from the disposal of shares are charged at the rate of:
The gains arising from the disposal of property are charged at the rate of 25% for non-residents.
VAT is an indirect tax, payable by suppliers of goods and services, who charge it in every supply they make within their respective activities, and afterwards pay the respective amount to the Tax Authorities.
The taxpayer has the right to deduct the value of the VAT payment when acquiring a product for which the seller has already paid VAT.
The municipal surcharge (“Derrama”) is a municipal tax, the revenue goes to the local municipality. The municipal surcharge may amount to up to 1,5% of taxable profit.
The Property Transfer Tax is a municipal tax which relates to the transmission of real property on Portuguese territory. Please note that these transmissions can be subject to stamp tax.
The acquisition of more than 75% of the share capital (“sociedades por quotas”) which owns real estate located in Portugal, is also subject to IMT (as well as of a privately placed closed-end Real Estate Investment Funds).
|Other urban properties and other acquisitions||6.5%|
|Acquirer is a tax resident offshore (except individuals)||10%|
The Property Tax is a tax calculated based on registration value of urban and rural properties located in Portuguese territory.
This tax is due with on the 31st December of the year that it concerns.
The registration value is determined by valuation, based on the type of property.
|Urban property||0.3% to 0.45%|
|Property owned by residents offshore (except individuals)||7.5%|
The AIMI is due by individuals and companies, as well as by structures or collective bodies without autonomous legal personality and undivided inheritances, that are owners, usufructuaries, or have the surface right of urban properties located in Portugal.
Urban Properties classified as “Housing” and “Construction Land” are subject to AIMI (except those which are exempt or have not been subject to IMI taxation in previous years).
Urban properties classified as “trade, industry, or services”, “others” and “Rustic properties” are not subject to AIMI.
The taxable amount corresponds to the sum of the Tax Registration Value (TRV) of all the urban properties held by each taxpayer, as reported on 1st of January each year.
For individuals and undivided inheritances, a deduction of EUR 600,000 is available from the taxable amount on the sum of the TRV of the buildings owned by them (or EUR 1,200,000 in the case of taxable persons who are married or in a joint-stock association who opt for joint taxation). For the properties exceeding this TRV, the rates to be applied will be 0.7% for TRV between 600,000 euros and 1,000,000 euros and 1.0% for what exceeds a TRV of 1,000,000 euros.
For companies, the rate to be applied is 0.4% on the TRV of real estate not related to the productive activity to which they are devoted. However, it should be noted that the value of buildings held by companies for the personal use of the owners of their capital, of the members of the governing bodies, or of any administrative, management, or supervisory bodies, or their spouses, ascendants and descendants, is subject to the rate of 0.7%, and is subject to the additional rate of 1.0% for the part of the value that exceeds 1,000,000 euros.
For buildings owned by entities subject to a more favourable tax regime, the rate is 7.5%.
Stamp duty is due on acts, contracts, documents, titles, books, papers and other facts foreseen in the General Table, which occur in Portugal and are not subject or exempt from VAT.
Transactions subject to VAT are exempt from Stamp Duty, but in the documents involved in the transaction, the duty is paid.
Portugal has signed double taxation agreements with 79 jurisdictions (until 24th April 2017), 76 in force and 3 signed but not yet in force. In addition, double tax treaties grant an exemption or a reduced rate of tax on certain receipts, such as interest, royalties, dividends, capital gains, and others in transactions carried out between parties associated. See Appendix I.
Commercial transactions between associated enterprises should be subject to identical terms and conditions to those that would be accepted and agreed between independent entities (arm’s length principle).
Taxpayers whose net sales and other operating incomes exceed EUR 3.000.000,00 in the previous year must prepare and maintain an annual transfer pricing documentation file, which must be prepared by the 15th day of the seventh month following the end of the tax year. The transfer pricing documentation file must be submitted upon request.
According to the Portuguese legislation, the documentation must be provided in Portuguese.