There are various taxes in Portugal for individuals, ranging from income taxes (IRS), consumption taxes (IVA, IUC, ISV) and property taxes (IMI, IMT, IS).
As in most countries around the world, taxes in Portugal help to finance the public operations of the Portuguese state, including such aspects as healthcare, education, security, safety, justice, social security, and equality.
In this article we'll explore taxes in Portugal for natural persons (“pessoas singulares” in Portuguese). We have another article that explores corporate taxation in Portugal.
Personal income tax (IRS) is a tax in Portugal that taxes the income of natural persons (private individuals). IRS is governed by the rules set out in the IRS Code.
IRS is a direct tax levied on the income of individuals (not companies and other legal organisations). It is divided into six income categories, each with specific rules.
All residents of Portugal are subject to IRS. In addition, non-residents of Portugal must pay IRS on income earned in Portuguese territory.
In other words, if you are resident in Portugal, the IRS is levied on all your income, including that obtained outside Portugal. If you are not a resident of Portugal, the IRS is levied only on your income obtained in Portuguese territory.
Since the IRS is a personal tax, it distinguishes the origin of income according to the source from which it originates: employment contract, self-employment, pension, capital investments, rents, and other sources, treating each of these sources independently – the IRS categories.
IRS is levied on the annual value of income in the following categories:
Income from employment, i.e. all earnings from employment or public office.
Business and professional income derived from the exercising of any commercial or intellectual property activity.
Income from capital, such as interest, dividends, and other income from securities.
Property income, such as rent and other equivalent income.
Increases in assets that are not considered income from other categories: capital gains, indemnities, and other increases in assets.
Retirement, old age and invalidity pensions, and other similar income.
The law provides for specific deductions for each category, as well as deductions that take into account factors such as:
In this sense, this Portuguese tax cannot be calculated in the abstract, i.e. without a concrete and careful analysis.
The IRS is paid through a tax substitution mechanism, provided for in Article 20 of the Portuguese General Tax Law.
Withholding tax is the tax substitution mechanism whereby employees have part of their income "withheld" and transferred to the Portuguese state, as if it were a monthly IRS payment.
The calculation of the monthly amount to be withheld is based on the income earned by the worker and varies according to factors such as their physical condition, family circumstances and location (mainland Portugal, Madeira, or the Azores).
Every year, an annual tax return – called “Declaração de IRS” – detailing the previous year's income must be submitted to the Tax Authority (AT). After it receives your tax return, the Tax Authority takes stock of the withholdings made throughout the year and compares them with the calculation of the amount of IRS to be paid. So, depending on the difference in values, you may be due a tax refund or have to pay an additional amount of IRS.
Married and common-law couples can choose to file their tax return jointly.
In Portugal, there are three IRS tax tables: one for mainland Portugal, one for Madeira and one for the Azores.
Bracket | Taxable Income (€) | Normal Rate (%) | Deduction (€) |
---|---|---|---|
1º | Up to 7,703 | 13.25 | 0 |
2º | Over 7,703 to 11,623 | 18 | 365,89 |
3º | Over 11 623 to 16 472 | 23 | 947,04 |
4º | Over 16 472 to 21 321 | 26 | 1441,14 |
5º | Over 21 321 to 27 146 | 32.75 | 2880,47 |
6º | Over 27 146 to 39 791 | 37 | 4034,17 |
7º | Over 39 791 to 51 997 | 43,5 | 6620,43 |
8º | Over 51 997 to 81 199 | 45 | 7400,21 |
9º | Over 81 199 | 48 | 9836,45 |
Bracket | Taxable Income (€) | Normal Rate (%) | Deduction (€) |
---|---|---|---|
1º | Up to 7 479 | 10,15 | 10,150 |
2º | Over 7 479 to 11 284 | 14,7 | 11,684 |
3º | Over 11 284 to 15 992 | 18,55 | 13,706 |
4º | Over 15 992 to 20 700 | 19,95 | 15,126 |
5º | Over 20 700 to 26 355 | 29,75 | 18,264 |
6º | Over 26 355 to 38 632 | 33,67 | 23,16 |
7º | Over 38 632 to 50 483 | 42,20 | 27,629 |
8º | Over 50 483 to 78 834 | 43,65 | 33,391 |
9º | Over 78 834 | 47,52 | - |
The Single Social Tax (Taxa Social Única – TSU) is a tax in Portugal in the form of a compulsory contribution that funds the country's social security system.
Despite having the name “Taxa Social Única” (Single Social Tax), the TSU is a compulsory monthly tax levied on the gross salary of residents of Portugal who are employed or self-employed in Portugal.
TSU is paid by both employers and employees. The contribution is calculated as a percentage of your salary, and is divided into two rates:
Value Added Tax is a consumption tax in Portugal. It follows the laws of the VAT Code.
It is an indirect tax that applies to goods and services provided at a price.
VAT is paid by end consumers when they buy goods or services in Portugal.
There are three VAT rates in Portugal:
Different rates apply in mainland Portugal, the Autonomous Region of Madeira, and the Autonomous Region of the Azores.
Mainland Portugal | Madeira | Azores | |
---|---|---|---|
Reduced rate | 6% | 5% | 4% |
Intermediate rate | 13% | 12% | 9% |
Normal Rate | 23% | 22% | 18% |
There are two property taxes in Portugal:
These taxes in Portugal follow the provisions of the IMI Code and the IMT Code, respectively.
IMI is a Municipal Property Tax. It is a direct tax levied on the taxable value of property (rustic, urban, or mixed buildings) located in Portugal.
IMI is payable by all owners of rural, urban, or mixed properties in Portugal
IMT applies to the transfer, at cost, of property rights or partial rights applicable to property located in Portuguese territory.
IMT is paid when buying, selling, or exchanging a property in Portugal. Generally speaking, IMT is owed by the purchaser of the real estate property; however, there are specific rules for certain situations.
There are other taxes in Portugal that apply to specific tax situations and acts:
Stamp duty applies to a series of legal acts, contracts, documents, titles, paperwork, and other acts or legal situations that are listed in the General Stamp Duty Table. Given the diverse nature of the tax, it is necessary to consult the table in order to check whether a particular legal act is subject to this tax.
A Vehicle Tax (ISV) and a Single Circulation Tax (IUC) are levied on all vehicles registered in Portugal. ISV is paid when a vehicle is purchased, while IUC is paid annually.
These are taxes levied on the selling price of certain products, such as tobacco (IT), alcohol (IABA), and fossil fuels (ISP).