Taxes in Portugal

Learn more about taxes in Portugal

Find out the main tax obligations for the taxpayers in Portugal

 

The basis and principles of the Portuguese tax system are explicit in the Constitution of the Portuguese Republic (Constituição da República Portuguesa), resulting in the principle of tax legality, the prohibition of retroactivity of the tax law and the principle of tax equality. In this regard, the Constitution's main purpose is to obtain income from the state without neglecting extrafiscal nature objectives, as the fair distribution of wealth among the citizens.

 

The Portuguese tax system consists of:

  • Income taxes (Impostos sobre o rendimento):

    • Individuals (IRS): This tax is levied on all types of income earned by individuals residing in Portugal and also from income obtained in Portugal by non-residents. Income from dependent work (wages) is subject to IRS. Every year, employees must provide the State with part of their income in the form of a tax. Income from the purchase and sale of shares is a capital gain and is also subject to IRS.

    • Corporate income tax (IRC): tax on income earned by domestic companies or foreign companies with income in Portugal. It is calculated based on the taxable income presented each year or related to the activities carried out in Portugal.

 

  • Taxes on assets:

    • Municipal property tax (IMI): This tax is levied on the taxable value of buildings (rustic, urban or mixed) located in Portugal. It came into force in 2003 and replaced the Local Government Contribution.

    • Tax on Real Estate Transfers (IMT): This is a municipal tax levied on onerous transmissions of movable property located in Portuguese territory. Such taxes may also be levied on Stamp duty.

 

  • Taxes on expenditure:

    • Value added tax (VAT): it is a tax applied in Portugal that focuses on the expense or consumption and taxes the "added value" of the transactions carried out by the taxpayer. It is a multi-phase tax, which is settled at all stages of the economic circuit, from the producer to the retailer.

 

  • Other taxes applied to specific facts and / or property:

    • Stamp Duty (Imposto do Selo): is a tax with an effect on some acts and contracts. In this way, a fee is charged or a fee is applied to the value of the contract or act effected, except that this tax is applied in fewer situations. The stamp duty does not accrue with VAT.

    • Vehicle Tax (ISV): was created in 2007, replacing the Automobile Tax. This tax is intended to tax taxpayers for the costs they cause in the areas of the environment, road infrastructures and road accidents.