Taxation in Portugal


Taxes in Portugal are levied by both the national and regional governments of Portugal. Tax revenue in Portugal stood at 34.9% of GDP in 2018. The most important revenue sources include the income tax, social security contributions, corporate tax and the value added tax, which are all applied at the national level.

Income tax

Employment income earned is subject to a progressive income tax, which applies to all who are in the workforce. Furthermore, a long list of tax allowances can be deducted, including a general deduction, health expenses, life and health insurance, and education expenses. The personal income taxation system is as follows:

Benefits available to former and first time tax residents

Under the Investment Tax Code, approved on September 23 2009, a new type of residency, for tax purposes was created under the Personal Income Tax Code, called non-habitual residency. This new tax residency type was created in order to attract to Portugal high-skilled professionals and pensioners obtaining foreign income.

Qualifying for NHR status

A person, regardless of their nationality, may apply for registration as a non-habitual resident if the following conditions are fulfilled:
  • The person is considered, for tax purposes, to be resident in Portuguese territory, in accordance with any of the criteria set out in Personal Income Tax Code in the year for which that person wishes to be taxed as NHR;
  • That person as not been considered to be resident in Portuguese territory in any of the five calendar years preceding the year for which that person wishes to be taxed as a non-habitual resident.

Personal Income Taxation

High Added Value Jobs
Under Ministerial Order issued by the Ministry of Finance, the follow jobs are subject to flat personal income tax of 20%:
NHR status holders registered up to 2019NHR status holders registered from 2020

  • Architects
  • Engineers
  • Geologists
  • Artists of theater, ballet, cinema, radio and television and singers
  • Sculptors
  • Musicians
  • Painters
  • Auditors and Tax consultants
  • Medical analysts; Surgeon doctors; Doctors on board ships; General practitioners; Dentists; Stomatologists; Physiatrists; Gastroenterologists; Ophthalmologists; Orthopaedists; ENT doctors; Pediatricians; Radiologists; and Doctors from other specialties.
  • University professors.
  • Psychologists.
  • Liberal, technical and assimilated professions:
  • Archaeologists;
  • Biologists and specialists in life sciences;
  • Consultancy and computer programming and activities related to information technology and computer science;
  • Management and operation of computer equipment;
  • Information service activities; Data processing, hosting and related activities; Web portals; and Other information service activities;
  • News agency activities;
  • Scientific research and development activities;
  • Research and development on natural sciences and engineering;
  • Research and development in biotechnology;
  • Designers.
  • Investors, directors and managers:
  • Investors, directors and managers of companies promoting productive investment, provided that they are assigned to eligible projects and have concession contracts for tax benefits under the Investment Tax Code, approved by Decree-Law 249/2009 of 23 September; Senior managers of companies.
  • General Manager and Executive Manager of Companies
  • Directors of Administrative and Commercial Services
  • Production and Specialty Services Directors
  • Hotel, restaurant, trade and other service directors
  • Experts in the physical sciences, mathematics, engineering and related techniques
  • Doctors
  • Dentists and stomatologists
  • University and Higher Education Professors
  • Information and Communication Technology Experts
  • Authors, journalists and linguists
  • Creative and performing arts artists
  • Intermediate science and engineering technicians and professions
  • Information and Communication Technology Technicians
  • Market-oriented farmers and skilled agricultural and livestock workers
  • Skilled, market-oriented forest, fishing and hunting workers
  • Skilled workers in industry, construction and craftsmen, including in particular skilled workers in metallurgy, metalworking, food processing, woodworking, clothing, crafts, printing, precision instrument manufacturing, jewelers, craftsmen, electrical workers and in electronics.
  • Plant and machine operators and assembly workers, namely stationary and machine operators

    • Corporate tax rate

    The corporate tax rate applicable to companies in Portugal may vary, depending on which part of the Portuguese territory said companies are incorporated and domiciled.
    Type of entityPortuguese mainland

    Madeira International Business Centre

    Companies incorporated and headquartered in Madeira can apply for an International Business Centre license and, granted that they comply with substance requirements, benefit from a corporate tax rate of 5% on the taxable profit derived from economic activities engaged with non-resident entities or entities duly licensed within the MIBC.

    Value added tax

    Mainland Portugal

    Three different VAT rates apply: normal, intermediate and reduced. There is a general rate of 23% for luxury goods, decorative plants, cut flowers, utensils and other equipment for firefighting and fire prevention, followed by a reduced rate of 13% for ordinary wine, spring, mineral, medicinal and carbonated water, and tickets for cultural events. This is followed by a further reduced rate of 6% on cereals, meat, shellfish, fruit, vegetables, and other essential foods, books, newspapers, medicines, passenger transport and hotel accommodation.
    In 2014, the government introduced the fatura da sorte, a lottery of tax-free cash and luxury cars awarded among consumers with VAT bills.
    The goal is to bring into the formal economy the many unregistered and untaxed purchases.

    Madeira

    The VAT rates in Madeira are 22%, 12% and 5%.

    Azores

    The Azores has lower applicable VAT rates of 16%, 9% and 4%. Businesses with revenue of less than 10,000 Euros per year are exempt from VAT.

    Automobile taxation

    Since a July 2007 tax reform, automobiles in Portugal pay two main taxes. The initial tax is the ISV, and is paid when the car is first registered in Portugal. The second tax is an annual registration tax called IUC. Earlier, the taxes consisted of Imposto Automóvel and Imposto Municipal sobre Veículos and were almost exclusively applied at the time of acquisition. The current system divides the tax load between acquisition and continuous registration, while discontinuing the regional taxes.
    The annual road taxes for automobiles have been based on displacement since 1981 at least. Later on, an additional factor reflecting CO2 emissions were added. Hybrids receive a discounted rate, while electric cars do not pay ISV. Between 1981 and July 2007, the tax thresholds were at 1,000, 1,300, 1,750, 2,600, and 3,500 cc. As the emissions levels were given more relevance in 2007, the displacement thresholds were simplified and changed to 1,250, 1,750, and 2,500 cc.

    Social security contributions

    All employment income is subject to social security contributions.

    Closed Social Security Regimes

    Type of EmployeesAdditional Contribution Supported by the Employer
    Beneficiaries of the Social Security Special Fund for the Workers of the Whool Industry0.5%
    Beneficiaries of the Special Fund for Insurance Brokers1%