Tax In Portugal
One of the most consistently challenging aspects of contracting in Portugal is complying with the country’s tax system. As well as paying tax in Portugal, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
If you’re working in Portugal under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Portugal for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Portugal, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Portugal through PAYE is left with the prospect of doing everything themselves.
Do you know much about Portuguese Tax Law? Does Portugal have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Portugal can range from 14.5 to 48 percent, and you need to be sure you are placed in the correct tax brackets.
If you are a contractor and want a calculation on your tax and net retention in Portugal, we can supply it to you free of charge.
Contractors in Portugal are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Portuguese umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Portuguese taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Portuguese tax office or tax department directly including processing your tax refund if you are eligible.
We work with numerous umbrella companies in Portugal, many of whom are experts in tax and immigration laws. If you have any questions about tax in Portugal, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Portuguese work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Portugal but without the overhead of directly dealing with the Portuguese tax authorities. Get in touch with us today for some reliable advice on tax in Portugal!
Tax returns may be filed manually by collecting a tax return form for your tax office or electronically. The process of filing taxes in Portugal involves:
Step 1: Register as a tax payer in Portugal by filling in a registration form(link is external) (ficha de inscrição) and submitting it at your local tax office(link is external). The form to be filed is “N.º Identif.Fiscal-Pessoa Singular Ficha de Inscrição”. After submitting the form, you will be issued with your Portuguese income tax number.
Step 2: To file online, first register for an account on the government website(link is external). You will need your income tax number for this step. After registration, an access password will be sent your email address.
Step 3: Log in using your income tax number and password.
Step 4: File Modelo IRS1 which is the standard form. This is supplemented by a number of special forms for declaring different types of income. These forms include:
- Category A: employment income (wages & salaries, remuneration, commissions and fringe benefits)
- Category B: self-employment income from a profession or business in Portugal
- Category E: investment income
- Category F: rental income
- Category G: capital gains from selling property, assets or shares
- Category H: pensions in Portugal, including Plano Poupança Reforma (private pension plans).
Step 4: Enter details relating to deductions. All employees may deduct an amount of EUR 4,104. Other information:
- Compulsory social security contributions in excess of EUR 4,104 may be deducted without any limitation.
- Union contributions and indemnities to employers (the part that does not constitute a direct contribution for health, education, elderly support, home or insurance) may also be deducted, subject to particular limitations.
Step 5: Submit the tax return. The Portuguese tax authority will issue a respective tax assessment and any balance of tax due will be paid. Overpayments of tax is usually refunded directly into the bank account specified on your return within 3 months of filing.
The above progressive rates apply to resident taxpayers filing singly. For married taxpayers, the progressive tax rate is determined by dividing the taxable income by two.
Non-residents are taxed at a flat rate of 25% on their taxable income.
Non-habitual residents, those who have the right to reside in Portugal (an EU/EEA/Swiss or a holder of a residence permit) and has not been a tax resident of Portugal during the last 5 years, is subject to a flat tax rate of 20%. This status is granted for 10 years.
Additional solidarity taxes apply in accordance with the following table:
|
Grossed income |
Solidarity tax rate |
|
Up to 80,000 |
Exempt |
|
Between 80,000 and 250,000 |
2.5% |
|
Above 250,000 |
5% |
An extraordinary surcharge also applies to taxable income in accordance with the following table:
|
Grossed income |
Rate |
|
Up to 20,261 |
Exempt |
|
Between 20,261 and 40,522 |
0.88% |
|
Between 40,522 and 80,640 |
2.75% |
|
Above 80,640 |
3.21% |
Personal deduction and allowances: Employees may deduct an amount of EUR 4,104. Compulsory social security contributions in excess of EUR 4,104 are deductible without limitation.
Yes
You become a tax resident in Portugal if:
- You stay in Portugal for more than 183 days in any 12 month period.
- You have a dwelling in Portugal, during the abovementioned period, which may imply your intention to use it as your habitual residence.
Individuals that meet these conditions become a Portuguese tax resident from the first day of permanence in Portugal. As such, it is possible to split the year for tax purposes.
Yes, if you are a resident.
Non-residents are subject to tax on income arising in Portugal.