Tax laws Portugal
Portugal's taxation system comprises various taxes levied by national and regional governments, aiming to fund public services and infrastructure.
Personal Income Tax (PIT):
Portugal employs a progressive income tax system with rates varying by region (mainland, Madeira, and Azores). The tax brackets and rates are as follows:
| Taxable Income (€) | Mainland Rate (%) | Madeira Rate (%) | Azores Rate (%) |
|---|---|---|---|
| Up to 7,703 | 13 | 10.15 | 10.15 |
| 7,703 to 11,623 | 18 | 14.7 | 14.7 |
| 11,623 to 16,472 | 23 | 18.55 | 18.55 |
| 16,472 to 21,321 | 26 | 19.95 | 19.95 |
| 21,321 to 27,146 | 32.75 | 29.75 | 24.5 |
| 27,146 to 39,791 | 37 | 33.67 | 25.9 |
| 39,791 to 51,997 | 43.5 | 42.2 | 30.45 |
| 51,997 to 81,199 | 45 | 43.65 | 31.5 |
| Above 81,199 | 48 | 47.52 | 33.6 |
Corporate Income Tax (CIT):
The standard CIT rate is 21%, with reduced rates for small and medium enterprises (SMEs):
| Entity Type | Mainland Rate (%) | Madeira Rate (%) | Azores Rate (%) |
|---|---|---|---|
| Resident entities and permanent establishments | 21 | 14.7 | 14.7 |
| SMEs (first €25,000 taxable profit) | 17 | 11.9 | 11.9 |
Companies in Madeira's International Business Centre can benefit from a 5% CIT rate on qualifying profits, provided they meet certain requirements.
Value-Added Tax (VAT):
VAT rates differ across Portugal's regions:
Mainland Portugal: Standard rate of 23%, with reduced rates of 13% and 6% for specific goods and services.
Madeira: Rates of 22% (standard), 12%, and 5%.
Azores: Lower rates of 16%, 9%, and 4%. Businesses earning less than €10,000 annually are VAT-exempt.
Recent Developments:
Youth Tax Incentives: To combat youth emigration, Portugal introduced tax incentives for individuals under 35. Young workers may receive up to a 100% income tax exemption in their first year if earnings don't exceed €28,000, with gradually decreasing benefits over the next nine years. This measure aims to retain talent and has an estimated cost of €645 million, benefiting over 350,000 youths.
Budget Approval Challenges: The Portuguese government faces difficulties passing the 2025 budget due to a fragmented parliament. The proposed budget includes tax cuts and increased public spending, but political disagreements may lead to a potential crisis and possible new elections.
RELATED Blog
0 comments