PIT is levied on income obtained by individuals, under six different categories, and its taxation will depend on the individual’s tax status.
|Residents||Liable to PIT on worldwide income (Portugal and abroad)|
|Non Habitual Residents||Liable to PIT on the net employment and self-employment income from "high value-added activities" at a flat rate of 20%. Foreign-source income may be exempt, under certain conditions|
|Non residents||Liable to PIT only on the Portuguese source of income|
|Category||Type of income|
|Category A||Employment income|
|Category B||Business and professional income|
|Category E||Investment income|
|Category F||Rental income|
|Category G||Capital gains|
|Salaries, holidays and Christmas bonus, commissions||x||–||x||–|
|Members of statutory board||x||–||minimum of 1 IAS (1)||–|
|Cash shortage allowance||–||Up to 5% of the monthly salary||–||Up to 5% of the monthly salary|
|Daily allowance in Portugal||Directors||–||Up to € 69.19/day||–||Up to € 69.19/day|
|Others||–||Up to € 50.20/day||–||Up to € 50.20/day|
|Daily allowance for travel abroad||Directors||–||Up to € 100.24/day||–||Up to € 100.24/day|
|Others||–||Up to € 89.35/day||–||Up to € 89.35/day|
|Mileage allowance||–||Up to € 0.36/Km||–||Up to € 0.36/Km|
|Company car – acquisition/private use||x (2)||–||x (2)||–|
|Travel expenses not related to the company’s activity||x||–||x||–|
|Loans granted by the company – acquisition of permanent private house||x||(≤ €180,426.40 ) and (rate≥ 70% x ECB rate)||–||–|
|Loans granted by other entity - the employer supports the interests (totally or in part)||x||–||x||–|
|Loans granted by the company – others||x (3)||Interest rate ≥ reference rate||–||–|
|Extraordinary profit distribution/profit distribution||x||–||x (4)||–|
|Working hours exemption||x||–||x||–|
|Indemnity for the termination of the labour contract||–||Up to (average of the regular salary of the last 12 months)*years of work (5)||–||Up to (average of the regular salary of the last 12 months)*years of work (5)|
|Retirement pension, company’s complement/Social Security||x||–||–||x|
|Share plans||x||–||–||x (6)|
|Lunch allowance||–||Up to € 4.52/day||–||Up to € 4.52/day|
|Meal vouchers||–||Up to € 7.23/day||–||Up to € 7.23/day|
|Employer subsidies (health, education)||x||–||–||x|
|Sickness benefit, paid by Social Security||–||x||x||–|
(1) Portuguese reference remuneration for 2017 (Indexante dos Apoios Sociais) – € 421,32.
(2) The benefit from the private use of a company car is only liable to taxation when there is a written agreement. For the purpose of liability to Social Security Contributions, additional conditions are required. The annual taxable income derived will be quantified by the application of 0.75% to the market value of the car at 1 January of the relevant year.
(3) Reference rate has not yet been determined.
(4) Profits distributions attributed to employees are subject to Social Security contributions. However, this liability to Social Security will only enter into force when regulated.
(5) For managers, members of the board, public sector managers and representatives of permanent establishments of non-resident entities, the amounts received for the termination of the employment contract are totally taxable only on the part that respects to these some functions. The part of the compensation concerning the periods in which they exercised their duties as regular employees may continue to benefit from the tax exclusion. For Social Security purposes, no liability to contributions arises in respect of the compensation for termination of employment contract in the event of collective redundancy; non compliance with legal notice; extinction of employment; individual redundancies or dismissals caused by inadaptability of the employee; obsolescence; for resolution by the employee; for termination before the term of the employment contract.
(6) Provided the benefits from the Share Plans are not paid on a cash – Settlement basis.
As from 1 January 2017, the Portuguese monthly minimum wage is increased to Eur 557.
The additional surcharge is progressive and it is applicable on the income subject to the marginal tax rates, exceeding € 80,000.A rate of 2.5% is applicable to taxpayers with a taxable income exceeding € 80,000 up to € 250,000 and a rate of 5% is applicable to the taxable income exceeding € 250,000.
|Rate (%)||Deductible Amount||Rate (%)||Deductible Amount||Rate(%)||Deductible Amount|
|Up to 7,091||14.50||–||12.41||–||10.15||–|
|+ 7,091 up to 20,261||28.50||992.74||28.50||1,140.94||21.38||796.32|
|+ 20,261 up to 40,522||37.00||2,714.93||37.00||2,863.13||29.60||2,461.77|
|+ 40,522 up to 80,640||45.00||5,956.69||45.00||6,104.89||36
|PIT taxes 2017|
|Category||Rates %||Note||Rates %||Note|
|Employment income||A||0 a 44,5||WTA||25||FTW|
|Remuneration of board members||A||0 a 44,5||WTA||25||FTW|
|Rendering of services||B||11,5/25||WTA||25||FTW|
|Royalties earned by the author/original owner||B||16,5||WTA||25||FTW|
|Royalties not earned by the author/original owner/technical assistance||E||16,5||WTA (1)||25||FTW|
|Equipment lease||E||16,5||WTA (1)||25||FTW|
|Dividends||E||28||FTW (1) (2) (3) (4) (5)||28||FTW(3)|
|Interest from bank deposits||E||28||FTW(1) (3) (4)||28||FTW(3) (6)|
|Interest from shareholder loans||E||28||FTW(1) (3) (4)||28||FTW(3) (6)|
|Interest from debt securities||E||28||FTW(1) (3) (4)||28||FTW(3) (6)|
|Other investment income||E||16,5||WTA (1)||28||FTW|
|Rental income||F||25||WTA(6) (7)||25||FTW(7)|
|-capital gains on shares||G||28||-6||28||–|
|-capital gains arising the disposal of real estate||G||14,5 a 48||(8) (9)||28||–|
|Pensions||H||14,5 a 48||WTA||25||FTW|
FWT: Final Withholding tax
WTA: Withholding Tax on Account of the final tax payment
(1) Taxed autonomously at a rate of 28% if paid by non-resident entities and not subject to withholding tax.
(2) Income paid or made available to recipients resident in Portuguese territory by non-resident entities without permanent establishment in Portugal, domiciled in jurisdictions with more favourable tax regimes is subject to a withholding tax rate of 35%.
(3) Income paid or made available to accounts opened in the name of one or more holders acting on behalf of one or more unidentified third parties is subject to a final withholding tax rate of 35%, unless the beneficial owner of the income is identified.
(4) Income paid or made available to recipients resident in Portuguese territory by a third party on behalf of non-resident entities domiciled in a more favourable tax regime is subject a withholding tax rate of 35%.
(5) The taxpayer can opt to include 50% of the dividends earned to be taxed at the progressive rates in the annual income tax return. This is only applicable to dividends of Portuguese source and paid by a entity resident in European Union or in the European Economic Area.
(6) The taxpayer can opt to include this income in the annual income tax return.
(7) The capital gains obtained on real estate by fiscal residents are only considered by 50% of his value.
(8) Included 50% of this income in the annual income tax return.
(9) May be excluded from taxation, provided that the sale value is reinvested in real estate, i.e. for private residence purposes.
|Private use of company car||Acquisition of company car:|
Benefit in kind
Benefit in kind
|Car's Age||Annual Depreciation||Accumulated Depreciation|
|10 or more||0.05||0.90|
The taxpayer may opt for the standard organised accounts regime.
(1) Should a tax return not be submitted, net income of category B is determined according to the rules of the simplified taxation regime, with the application of a coefficient of 0.75.
Taxpayers who have not exceeded an annual gross amount of € 200,000 in this category are covered by the simplified regime in the previous year.
Under the simplified regime taxpayers who obtain self-employment from professional activities (listed in the table referred in article 151 of the PIT Code) or income from other activities not included on the table can deduct the mandatory social security contributions, related with the referred activities, that exceed 10% of the gross income received provided that those contributions are not deducted for that purposes. Under this regime, taxpayers can not deduct any other professional expenses against their annual gross income. The taxable income of this category will be computed by applying the following coefficients to gross income:
|Sales of goods and services in the hospitality and leisure sector, with the exception of operating activities of local accommodation establishments in the form of apartments/houses||0.15 (1)|
|Listed service-rendering activities, by the article 151.º of PIT code||0.75 (1)|
|Services not expressly foreseen in the table referred in article 151 of the PIT code||0.35 (1)|
|Royalties, know-how and other income (investment income, capital gains, rental income) obtained in connection with the self-employee/entrepreneurial activity||0.95|
|Non business-related subsidies||0.30 (1)|
|Business related subsidies and remaining income of category B||0.10 (1)|
|Income arising from services rendered by a partner to a transparent company for tax purposes||1.00|
On September 2009, the Portuguese Government approved new legislation establishing a regime for non-habitual tax resident individuals.
The tax regime for non-habitual residents is part of the Investment Tax Code and is intended to attract individuals and investments to Portugal.
Under the regime’s rules, employment and self-employment income derived from “high value-added activities of a scientific, artistic or technical nature” (included in a list of activities plublished by the Portuguese Government) earned by non-habitual residents in Portugal will be taxed at a flat rate of 20%.
Additionally, the regime also establishes a tax exemption for foreign-sourced income, such as, employment income, self-employment income, rental income, interest, dividends as well as other investment income, under certain specific conditions.
The regime is applicable for a period of ten consecutive years.
The regime will apply to individuals who become Portuguese tax residents under Portuguese domestic law in a certain year and have not qualified as tax residents in Portugal in any of the previous five years.
The status of non-habitual tax resident becomes effective upon registration with the Portuguese tax authorities, which should be applied for until 31 March of the following year to which the taxpayer becomes tax resident in Portugal.
Consideration of 50% of the positive or negative balance arising from Resident’s transmissions:
|Amounts in Euros||Married||Not married|
|Tax credits in respect of taxpayers and their relatives|
|ii) Single-parent taxpayers||–||–|
|Dependants <= 3 years old on December 31 of the year to which the tax relates||725.00||725.00|
|iv) Ancestors actually living in the same household with the taxpayer who do not receive income greater than the minimum pension payable under the general regime||525||525|
|v) Only one ancestor actually living in the same household with the taxpayer who does not receive income greater than the minimum pension payable under the general regime||710.00||710|
|People with disabilities|
|i) For each taxpayer||3,800.00 (1)||1,900.00|
|ii) For each dependant with disability||1,187.50||1,187.50|
|iii) For each ancestor with disability||1,187.50||1,187.50|
|iv) 30% of education and rehabilitation expenditures||No limit||No limit|
|v) 25% of life assurance premiums or contributions paid to credit unions||15% of computed tax||15% of computed tax|
|- Age-related retirement contributions||130.00||65.00|
|Disability expenses for each taxpayer and each dependant, which level of permanent disability is ≥ 90%||1,900.00||1,900.00|
|Health Expenses (2)|
|Deduction of 5% on the following expenses:|
|a) acquisition of goods and services which are exempt from VAT or that are liable to the reduced VAT rate of 6%;||15% of the health expenses, with limit of 1,000.00||15% of the expenses, with limit of 1,000.00|
|b) acquisition of other goods and services duly justified with a medical prescription||N/A|
|c) the health expenses limit shall be increased for households with three or more dependants in their care, for each dependant, in||N/A|
|d) Health insurance premiums or contributions paid to mutualism associations or institutions without profit intention||N/A|
|Education and training expenses|
|i) 30% of amounts spent up to a limit of||800.00||800.00|
|Nursing home fees|
|25% of charges for nursing homes fees and institutions to support the taxpayer, as well as charges with disabled persons, dependants, ancestors and relatives until the third degree who do not have income equal to or above the minimum monthly wage||403.75||403.75|
|20% of the amount spent||No limit|
|Real estate costs|
|Tax credit of 15% of the following expenditures:|
|a) amounts, spent by way of rent , net of subsidies or official contributions, concerning an urban real estate or fraction for permanent housing under the Urban Rental Regime or the New Urban Rental Regime||502.00||502.00|
|b) debt interest, for contracts concluded until 31 December 2011, incurred on the acquisition, construction or improvement of permanent private residential property used as the taxpayer’s permanent private residence, or rent (paid) in respect of a tenant's duly substantiated permanent residence||296.00||296.00|
|c) instalments payable as a result of contracts concluded until 31 December 2011 with housing cooperatives or under the group purchasing regime, for the purchase of residential property for use as the (taxpayer’s) personal and permanent residence or rental paid in respect of a tenant's duly substantiated permanent residence, to the extent in which they refer to interest of related debt||296.00||296.00|
|d) amounts paid by way of rent under a leasing contract concluded until 31 December 2011 in respect of a personal and permanent residence under their regime, to the extent that it does not constitute repayment of capital||296.00||296.00|
|The limit set out in paragraphs a) is increased as follows:|
|taxable income up to € 7,091.00;||800.00||800.00|
taxable income higher than € 7.091, 00 and up to € 30.000,00
The limits set out paragraphs b) to d) are increased as follows:
taxable income up to € 7. 091,00;
taxable income higher than € 7.091,00 and up to €30.000,00
|Retirement Savings Funds and Retirement Savings Plans (3)|
|Tax credit of 20% of the amount invested:|
i) people under 35 years old;
ii) people between 35 and 50 years old;
iii) people above 50 years old.
Tax credit of 25%:
i) central, regional or local administration; Foundations (with conditions);
ii) donations to other entities.
15% of computed tax
15% of computed tax
Capitalisation public Regime
Tax credit of 20% of the amount invested in individual accounts managed under the capitalisation public regime.
Value Added Tax (VAT) borne (4)
Deduction of 15% of the VAT incurred by any household member included on invoices communicated to the tax authorities regarding certain provision of services.
Family general expenses
Deduction of 35% of the amount of expenses incurred by any member of the household provided that the taxpayer number is included in the invoice for expenses incurred and services previously communicated to the Portuguese tax authorities
Deduction of 45% of the amount incurred by any member of the household of a Single-parent taxpayers
|Limitation to computed tax deductions and tax benefits||2017|
|Limits to aggregate computed tax deductions (5)|
|For 2016, the limits to aggregate computed tax deductions are:|
(1) Assuming that both taxpayers are people with disabilities.
(2) This limit applies to paragraphs a) and d). Should training and education expenses have been made outside of Portuguese territory, the taxpayer may report them using the Portuguese Tax Authorities' website.
(3) Amounts invested after the retirement date are not deductible.
(4) Deductible expenses incurred with services acquired in the following sectors of activity:
Maintenance and repair of motor vehicles;
Maintenance and repair of motorcycles and related parts and accessories;
Accommodation and food service activities;
Hairdressers and beauty saloons;
(5) Health and insurance expenses, education and training expenditures, nursing home fees, invoice requirement, costs with immovable property, alimony and tax benefits are included. In households with three or more dependents, the above limits are increased by 5% for each dependent or civil godson, which is not a taxpayer.
Retirement Savings Accounts
Interest on capital ≤ € 10.500 is exempt
Author rights of the original owner, resident in Portugal are taxed only at 50%, with the amount excluded from taxation limited to € 10.000
Venture capital funds
Capital gains derived from the sale of participation units are taxed at a 10% rate
Real estate investment funds in forest resources
Capital gains derived from the sale of participation units are taxed at a 10% rate
Capital gains obtained by non residents
The following disposals are exempt:
Contributions to social security regimes made by employers
Employers' contributions to pension funds (or other complementary social security regimes) are exempt from IRS if certain conditions are met
Interest of deposits of any applications on public debt, benefit from a tax exemption in 1/5 and 3/5 of its value, if the capital is not withdraw during 5 and 8 years, respectively, and the remuneration maturity occurs at the final of the agreed period.
Expatriates’ tax benefit
Is created to employees that move from their normal work place to perform professional activity in a foreign country during at least 90 days, of which 60 days have to be consecutive. This benefits consists in a tax exemption applicable to the part of the remuneration paid to the employee, by the Portuguese employer, exclusively as compensation for moving and staying abroad (up to € 10,000)
The income obtained by the following individuals will be excluded from taxation:
contractors or auctioneers working on NATO shared infrastructures.
|Gross income of each category|
|(-)||Deductions against the gross income|
|(=)||Net income of each category|
|(-)||Deductions of losses|
|(÷)||Marriage coefficient/splitting (1 or 2)|
|(x)||PIT rate and additional solidarity rate|
|(x)||Marriage coefficient/splitting (1 or 2)|
|(-)||Withholding tax + Payments on account|
|(-)||Annual minimum salary|
|(-)||Deduction per each dependent|
Based on the following assumptions, we have prepared an estimate of the PIT due by the Pereira family.
Both spouses are employed; in addition, the wife works as a salaried employee and as a self-employed individual.
|Exemple – background|
|Mr. Pereira||Salary – € 12.000
Dividends – € 750
Rent from own real estate – € 8.000
Capital gains from the sale of rented real estate – € 10,000
|Mrs. Pereira||Salary – € 7.000
Lunch allowance – € 1.550
Rendering of services – € 13.000
|Expenses||Retirement Saving Plan (PPR) – € 2.000 x 2
Plumbing repairs of the rented real estate – € 300
Health expenses – € 1.200
Mortgage loans – € 5.200 (€ 2.600 regarding interests and € 2,600 regarding capital repayments)
Family general expenses – € 1.500
Assuming a global amount withheld from the couple's income: € 4,769 for 2016. Surtax withholding amounts to € 19.
|Income of each category||€|
|(-)||Deductions against the gross income|
|Specific deduction x 2||- 8.208.00|
|Cat B||Services rendered||13.000.00|
|(x)||Simplified regime - coefficient 75% (2016)||0.75|
|Cat E||Dividends (by option to be taxed at progressive rates)||750.00|
|(-)||Amount of the income not subject to taxation: 50%||- 375.00|
|Cat F||Rental - own real estate (by option to be taxed at progressive rates)||8.000.00|
|Maintenance and repair expenses||- 300.00|
|Cat G||Capital gains on the sale of the rented real estate||10.000.00|
|(-)||Amount of the income not subject to taxation: 50%||- 5.000.00|
|Sum net income of the categories = Taxable income||33.617|
|(÷)||Marriage coefficient ÷ splitting (1 or 2)||÷ 2|
|(x)||Mariage coefficient ÷ splitting (1 or 2)||x 2|
|Family general expenses
|20% payments to retirement saving plans (x2)||800.00|
|(=)||Underpayment ÷ (reimbursement)||1.050.37|
|(+)||Extraordinary tax (2017)||0|
|(-)||Surtax withholding tax||0|
|(=)||Final underpayment ÷ (a reimbursement)||1.050,37|
The personal income tax withholding rate tables for 2017, applicable to employment income and pensions earned on the Mainland, have been published by Order number 843-A/2017, of 3 January 2017.
The personal income tax withholding rate tables for 2017, applicable to employment income and pensions earned on the Autonomous Region of Madeira, have been published by Order number 55/2017, of 24 January 2017.
The personal income tax withholding rate tables for 2017, applicable to employment income and pensions earned on the Autonomous Region of Azores, have been published by Order number 936-A/2017, of 18 January de 2017.
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