Income Tax in Portugal
Income Tax in PortugalUpdated on Wednesday 06th January 2021
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Resident corporate taxpayers in Portugal are subject to a general income tax rate of 21%. There is also a reduced rate for small and medium companies, but all the details in this matter can be explained by one of our Portuguese lawyers. Our specialists can help international entrepreneurs start a business in Portugal by providing comprehensive legal advice and assistance.
The income tax rates in Portugal
As mentioned above, the standard income tax rate is set at 21% in mainland Portugal. Yet, a reduced rate of 17% applies to the first EUR 25,000 and in most cases involves small and medium companies in Portugal. Moreover, resident corporate taxpayers in Portugal must pay the municipal surcharge of up to 1.5%, plus the state surcharge of 3% rate for incomes ranging between EUR 1,5 million and 7.5 million.
Non-residents in Portugal with incomes derived from rentals are subject to a corporate income tax of 25% rate. In the case of a commercial lease, the withholding tax ranging between 25% and 28% applies to non-resident companies and individuals in Portugal. If you need to know more about the income tax in Portugal, feel free to discuss it with one of our Portuguese lawyers and ask for legal advice.
Taxation of real estate investments (REIFs) in Portugal
Real Estate Investment Funds in Portugal are subject to a new tax regime since 2015. For instance, non-residents in Portugal without a permanent establishment must pay a withholding tax rate of 10%. REIFs are subject to a 21% general tax rate and exempt from the municipal surcharge. In specific cases, REIFs are not subject to a withholding tax. All the legal aspects about taxation in Portugal can be offered by our Portuguese lawyers, so make sure you address your inquiries to our specialists. We have a dedicated team of advisors who can support entrepreneurs in starting a company in Portugal and align with the requirements imposed by the law. The registration process is straightforward and can be sustained by our specialists.
Who is considered a tax resident in Portugal?
A tax resident in Portugal is a person who lives in Portugal for more than 183 days and companies with establishments in the country. The generated incomes in Portugal are subject to taxation, and in the case of natural persons, the salaries, capital gains, and rental incomes are levied.
Other taxes in Portugal
The VAT is an important tax in Portugal. This is set at a standard rate of 23% to most of the goods and services available for sale purposes. A reduced VAT of 13% rate applies to household services, agricultural services, fishing products, and more. As for the 12% VAT rate in Portugal, this applies to the same services, but in Madeira. Here are other taxes in Portugal:
- 10% is the inheritance tax in Portugal.
- Properties worth between EUR 1 million and EUR 2 million are subject to a wealth tax of 1%.
- In Portugal, the standard corporate tax is set at a 21% rate.
- Sole traders in Portugal must pay a tax rate of 29.6% imposed on profits of at least EUR 2,573.
Interested in more details about the taxation in Portugal? We invite you to talk to our team of lawyers in Portugal and find out more. The registration for taxation in Portugal can be made with our complete support and guidance.
Starting a business in Portugal
Portugal is a competitive and highly appreciated business destination in the world and home to a large number of foreign entrepreneurs and companies. The business climate provides the necessary support for foreign investments and development, allowing international entrepreneurs to generate large profits in sectors like tourism, agriculture, financial and insurance services, pharmaceuticals, and many more. Besides an appealing tax system and a series of incentives provided by the Portuguese government to foreigners, the skilled and multilingual workforce is also a great advantage, especially for those who relocate their companies here or start a new one from scratch. You might find useful the following facts and figures about Portugal’s economy:
- Portugal registered a total FDI stock of around USD 161 billion in 2019.
- The value of the greenfield investments in Portugal was around USD 3,4 billion.
- Portugal ranks 39th out of 190 countries worldwide, according to the 2020 Doing Business report.
- Non-EU investors in Portugal can gain citizenship in 6 years if a minimum investment of UR 350,000 is made.
Would you like more details about the income tax in Portugal? Feel free to contact our law firm in Portugal and discuss all the legal details. We can help you start a business in Portugal.