Portugal is perceived as being one of the most generous European countries in regards to the tax system, in particular when it comes to non-residents and those who may qualify as non-habitual residents (Portuguese tax residents with special rights). It is an especially favorable tax system for high-net worth individuals, and is becoming more and more popular among expats. Nevertheless, despite its advantages and apparent straight-forwardness, the Portuguese tax system is complex and we therefore recommend you to contact our Portuguese law firm in order to better take advantage of all the favorable tax opportunities.
Non-residents are taxed at 25% on employment income and 28% on capital gains and various investment incomes. Moreover, the Portuguese NHR regime is meant to attract individuals with high value added activities and those with a high net worth. In this sense, certain professions are incentivized through a 20% tax rate on Portuguese income, and, in accordance with certain conditions, a tax exemption on income of a foreign source. Qualifying professionals are:
- those with technical professions: architecture, engineering etc.;
- artistic: actors and musicians;
- health and educational: doctors, dentists, lecturers;
- those working in the IT field;
- business investors and managers.
Nevertheless, one needs not to be involved in a high value activity in order to receive exemption on other sources of income. The NHR scheme is for individuals who are not considered to have been residing in Portugal in the five years immediately preceding application.
The standard corporate tax is 21%, an additional surtax being added for income exceeding 1.5 million euros, as well as of up to 1.5% municipal tax adding up to a total of 29.5%. In the Azores free trade zone, a reduced tax rate of 17.5% may be available to companies.
Investment income, consisting of capital gains, interest and dividends, currently has a tax rate of 28%.
In Portugal, capital gain is generally added to regular income. In the case of gains originating in the sale of an individual’s real estate which served as the vendor’s residence, they are exempt from tax if they are invested in purchasing alternative residential real estate in Portugal or an EU/EEA country within a short period defined by law.
For any further details regarding Portuguese taxation, our lawyers in Portugal await your contact.
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