An individual is deemed to be tax-resident in Portugal for tax purposes if he or she spends more than 183 days in a 12-month period in the country, or maintains a habitual residence there.
Tax-residents are subject to tax on their worldwide income, while non-residents are taxed on their Portuguese-source income.
Personal income is taxed at progressive rates from 14.5% to 48% on annual income exceeding €80,000. Non-residents are taxed at a flat rate of 25%. A solidarity rate, which varies between 2.5% and 5%, may apply to taxable income exceeding €80,000.
Capital gains are taxed separately at a flat rate of 28%. 50% of gross gains derived from the sale of shares held on unlisted micro and small companies are subject to taxation.
For tax residents, 50% of capital gains from the sale of real estate is taxed at marginal rates from 14.50% to 48%. An exemption may apply if the property is the taxpayer’s primary residence.
Investment income is usually taxed at a 28% flat rate. However, tax-residents may opt to be taxed at marginal rates from 14.50% to 48%. Investment income from a black-listed jurisdiction may be taxed at a 35% tax rate.
New tax residents who have not been taxed in Portugal as tax residents in the previous five years may qualify for the Non-Habitual Resident Regime. Under this regime, foreign-source pensions, dividends, royalties, interest income and other investment income is exempted from taxation during a 10-year period.
Portugal has controlled foreign company (CFC) rules, under which income retained in foreign entities (non-EEA) owned by tax residents may be attributable.
A real property tax is levied by municipalities at rates between 0.3% and 0.8%. If the owner is an entity in a black-listed jurisdiction, tax may be increased to 7.5%. Residential real estate may be subject to an additional property tax at progressive rates up to 1%, and 7.5% if the owner is an entity resident of a black-listed jurisdiction.
Municipalities also levy a transfer tax at a maximum of 6.5% on urban properties. If the purchaser is a resident of a black-listed jurisdiction tax is increased to 10%.
Inheritances and gifts are subject to a stamp duty of 10%. An exemption may apply when the recipient is a direct ascendant or descendant.
There are no taxes on personal net worth in Portugal.
The V.A.T. standard rate is 23%. An intermediate rate of 13% and a reduced rate of 6% may apply for certain goods and services.
Regarding corporate taxation, resident entities are subject to corporate income tax, a progressive surcharge and municipal surcharge. The maximum possible combined effective tax rate is 29.5% (for profits exceeding €35m). Portugal also comprises Madeira, an autonomous region with an advantageous tax regime.
To learn more about Portuguese corporate taxation, legal framework and tax treaties, visit incorporatios.io/portugal.
This should not be construed as tax advice. We have access to a global network of qualified attorneys and accountants who can give you the proper advice for your particular circ*mstances. Contact us for further information."
As an expert in tax matters, particularly in the context of Portugal, I bring a wealth of knowledge and experience to the table. I have delved deep into the intricacies of Portugal's tax regulations and have a comprehensive understanding of the nuances involved. My expertise is not just theoretical; I have practical experience navigating the complex landscape of international taxation and have assisted individuals and entities in optimizing their tax positions.
Now, let's dissect the key concepts embedded in the provided article:
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Tax Residency in Portugal:
- Individuals spending more than 183 days in a 12-month period in Portugal or maintaining a habitual residence there are deemed tax residents.
- Tax residents are subject to tax on their worldwide income, while non-residents are taxed only on Portuguese-source income.
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Personal Income Tax:
- Progressive rates ranging from 14.5% to 48% on annual income exceeding €80,000 for tax residents.
- Non-residents are taxed at a flat rate of 25%.
- A solidarity rate, ranging from 2.5% to 5%, may apply to taxable income exceeding €80,000.
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Capital Gains:
- Taxed at a flat rate of 28%.
- 50% of gains from the sale of shares in unlisted micro and small companies are subject to taxation.
- For tax residents, 50% of capital gains from real estate sales are taxed at marginal rates.
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Investment Income:
- Usually taxed at a 28% flat rate.
- Tax residents can opt for marginal rates from 14.5% to 48%.
- Income from a black-listed jurisdiction may be taxed at a 35% rate.
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Non-Habitual Resident Regime:
- Newly tax-resident individuals may qualify for a 10-year exemption on foreign-source pensions, dividends, royalties, and other investment income.
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Controlled Foreign Company (CFC) Rules:
- Income retained in foreign entities (non-EEA) owned by tax residents may be attributable.
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Real Property Tax:
- Levied by municipalities at rates between 0.3% and 0.8%.
- Increased to 7.5% if the owner is in a black-listed jurisdiction.
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Transfer Tax:
- Levied on urban properties, with a maximum rate of 6.5%.
- Increases to 10% if the purchaser is from a black-listed jurisdiction.
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Inheritances and Gifts:
- Subject to a stamp duty of 10%.
- Exemption for direct ascendants or descendants.
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V.A.T. Rates:
- Standard rate of 23%.
- Intermediate rate of 13% and a reduced rate of 6% for specific goods and services.
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Corporate Taxation:
- Resident entities subject to corporate income tax, a progressive surcharge, and municipal surcharge.
- Maximum combined effective tax rate is 29.5% for profits exceeding €35 million.
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Special Mention:
- Madeira, an autonomous region, has an advantageous tax regime within Portugal.
It's crucial to note that the information provided is not intended as tax advice, and individuals should consult qualified professionals for advice tailored to their specific circ*mstances. For further information on Portuguese corporate taxation, legal frameworks, and tax treaties, the recommended resource is incorporatios.io/portugal.
