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Tax Guide 2022 | PIT

Last reviewed 27 July 2022

PIT is levied on income obtained by individuals. Taxation depends on the individual’s tax status. There are six different income categories.

Taxable person

Taxation

Residents

Liable to pay PIT on overall global income (Portugal and abroad)

Non Habitual Residents

Liable to pay PIT, at a flat rate of 20%, on income derived from the net employment salary and any self-employment income from "high value-added activities".

Foreign-sourced income may be exempt, under specific conditions (pensions may be taxed at a 10% rate)

Non residents

Liable to pay PIT on Portuguese sourced 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

Category H

Pensions

Taxpayers covered

Taxpayers whse annual gross income in Category B (business and professional income) does not exceed € 200,000, and have not opted for an organized accounts regime can apply for the simplified regime.

Taxable income

The taxable income under the simplified regime will be calculated by applying the following coefficients to the gross income:

Income

Coefficient (%)

Sale of goods and products, as well as provisions of services in the hospitality, food and beverage sector, except those related to local accommodation establishments

0.15

Services related to local housing located in containment areas (apartments and villas)

0.50

Listed service-rendering activities (Article 151 of the PIT Code)

0.75

Other services

0.35

Income from contact which object is the transfer or temporary transfer of the use of intelectual or industrial property, or the provision of information related with know how in the industrial, commercial or scientific sector. Investment income from activities that generated business and professional income. Positive income from real estate. Positive balance of capital gains and capital losses and other increases in wealth.

0.95

Non business-related subsidies

0.30

Other business related subsidies and remaining income under Category B

0.10

Income from services rendered by a shareholder of a company subject to the tax transparency regime

1.00

Income arising from services rendered to an entity in which, for more than 183 days in a given tax year:
- the taxpayer holds, directly or indirectly, at least 5% of the respective share capital or of the voting rights;
- the taxpayer, its spouse or “de facto” spouse, and their ascendants and descendants hold, as a group, directly or indirectly, at least 25% of the respective share capital or of the voting rights.

1.00

In case of services listed in Article 151 of the PIT Code (coefficient of 0.75) and other services not specifically listed (coefficient of 0.35), the taxable income is assessed differently:  the above coefficients are added to the positive difference between 15% of the gross income and the sum of a set of pre-established expenses, incurred with the acquisition of goods and services related with the activity developed and communicated to the tax authorities.

Accordingly, the application of the referred coefficients is partially dependent on a verification of the expenses effectively incurred by the taxpayer. Notwithstanding the eligible expenses effectively incurred, the legislation states that, a deduction of a fixed amount of EUR 4,104 or, if higher, of the total amount of the social security contributions paid is allowed (for the amount not exceeding 10% of the gross income provided that these were not deducted already).

Practical example

A taxpayer earning a total gross income of € 40,000 derived from the rendering of services (listed in Article 151 of the PIT Code) and incurring expenses in the amount of at least € 1,896, can benefit from the coefficient in full, i.e. 75%. 

Gross Income

€ 40,000

Applicable coefficient

75%

Taxable income

€ 30,000

     Validation of the application of the coefficient:

15% of Gross Income

€ 6,000

(-)

Specific deduction

€ 4,104

(-)

Deductible expenses effectively incurred

€ 1,896

(=)

Difference between 15% of gross income and the amount of deductible expenses

€ 0



Taxation of income, subventions and allowances


Taxation of income, subventions and allowances

Description

PIT

Taxation

Exemption

Salaries, holidays and Christmas allowances, commissions

x

Members of statutory board

x

Cash shortage allowance

Up to 5% of the monthly salary

Daily allowance in Portugal

Directors

Up to € 69.19/day

Others

Up to € 50.20/day

Daily allowance for travels abroad

Directors

Up to € 100.24/day

Others

Up to € 89.35/day

Mileage allowance (own car)

Up to € 0.36/Km

Company car – acquisition/private use

(1)

Loans granted by the employer – acquisition of permanent private house

x

(≤ €180,426.40 ) and (rate≥ 70% x ECB rate)

Loans granted by other entity in which the employer bears an interest (totally or partly)

x

Loans granted by the employer – other purpose

x

Interest rate ≥ reference rate

Extraordinary profit distribution/profit distribution

x

– 

Indemnity for the termination of the employment contract

– 

Up to (average of the regular salary of the last 12 months)* years of work (2)

Early retirement

x

– 

Lunch allowance

– 

Up to € 4.77/day

Meal vouchers

– 

Up to € 7.63/day

Child expenses vouchers

– 

x

Education voucher  

x

– 

Allowance for house rental

x

– 

(1) The benefit obtained from the private use of a company car is only liable to taxation when there is a written agreement on the matter.
(2) Managers, board members, directors of companies, public managers or representatives of permanent establishments in Portugal of non-resident entities: the amount received for the termination of the employment contract is fully taxable, but only the value relative to the exercise of those functions. 

Remark: 
As of 1 January 2022, the monthly minimum wage is € 705.



Taxable income (€)

Mainland

Rate (%)

Deductible amount (€)

Up to 7,116

14.5

+ 7,116 up to 10,736

23

604.86

+ 10,736 up to 15,216

26.5

980,63

+  15,216 up to 19,696

28,5

1,284.99

+ 19,696 up to 25,076

35

2,565.21

+ 25,076 up to 36,757

37

3,066.79

+ 36,757 up to 48,033

43.5

5,455.84

+ 48,033 up to 75,009

45

6,176.56

+ de 75,009

48

8,426.51

Taxable income (€)

Madeira (€)

 

Rate (%)

Deductible amount

Up to 7,116

10.15

+ 7.116 up to 10.736

16.10

423.40

+ 10,736 up to 15,216

21.20

970.86

+ 15,216 up to 19,696

22.80

1,214.39

+ 19,696 up to 25,076

29.75

2,583.33

+ 25,076 up to 36,757

33.67

3,566.31

+ 36,757 up to 48,033

42.20

6,701.54

+ 48,033 up to 75,009

43.65

7,398.04

+ de 75,009

47.52

10,300.99

Taxable income (€)

Mainland

Rate (%)

Deductible amount (€)

 Up to 7,116

10.15

-

+ 10,736 up to 15,216

18.55

686.44

+ 15,216 up to 19,696

19.95

899.49

+ 19,696 up to 25,076

24.5

1,795.64

+ 25,076 up to 36,757

25.90

2,146.76

+ 36,757 up to 48,033

30.45

3,819.09

+ 48,033 up to 75,009

31.5

4,323.59

+ 75.009

33.6

5,898.56

Taxable income (€)

   Rate

80,000 up to 250,000

2.5%

Above 250,000

5%



Withholding tax rates


Withholding tax rates

Residents and nonresidents

 

Residents

Non residents

 Income

Category

Rates %

Note

Rates %

Remark

Employment income

A

0 up to 43,8

WTA

25 (1)

FR

Remuneration of board members

A

0 up to 43,8

WTA

25

FR

Commissions

B

25

WTA

25

FR

Rendering of services

B

11,5/25

WTA

25 (1)

FR

Royalties earned by the author/original owner

B

16,5

WTA

25

FR

Royalties earned by the non original author/ technical assistance

E

28

WTA (2)

(3)

25

FR

Lease of equipment

E

16,5

WTA (2)

25

FR

Dividends

E

28

FTW (2) (3) (4) (5) (6)

28

FR (4)

Interest from bank deposits

E

28

FTW (2) (4) (5)

28

FR (4) (7)

Interest on shareholders’ loans

E

28

FTW (2) (4) (5)

28

FR (4) (7)

Interest from debt securities

E

28

FTW (2) (4) (5)

28

FR (4) (7)

Other investment income

E

28

WTA (2)

(3)

28

FR

Rental income

F

25

WTA(6)

25

FR (6)



Capital gains:

Disposal of shares

G

28

(6) (9) (10)

28

(10)

Disposal of real estate

G

14,5 up to 48

(7)

28

(8)

Pensions

H

0 up to 34.3

WTA

25

FR

FR: Flat rate
WTA: Withholding Tax on Account of the final tax payment

(1) The employment and self-employment income paid to non-resident individuals as a result of services provided to a single entity, is not liable to withholding taxes, up to the amount corresponding to the monthly minimum wage.
(2) Taxed autonomously at a rate of 28% if paid by non-resident entities, and not subject to withholding tax.
(3) Investment income obtained by non resident entities, without a permanent establishment in Portugal, and resident in tax havens, is subject to a tax rate of 35%.
(4) Income paid or made available to bank 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 tax rate of 35%, unless the beneficial owner of the income is identified.
(5) Income received by residents in the Portuguese territory, and paid, or made available by a third party on behalf of non-resident entities domiciled in a more favourable tax regime, is subject to a tax rate of 35%.
(6) Subject to taxation at an autonomous rate of 28%. For rental income the tax rate will depend on the duration of the contracts, as per the applicable legal framework.
(7) May be exempt from taxation, provided that the sales proceeds are reinvested in the acquisition of a primary private residence, under certain conditions.
(8) The capital gains obtained by non-resident entities, without a permanent establishment in Portugal, who are domiciled in jurisdictions with more favourable tax regimes, are subject to a tax rate of 35%.
(9) Capital gains arising on the sale of shares and other securities - from 1 January 2023 onward, the balance between capital gains/capital losses will mandatorily be aggregated if:
-  The assets are held for less than 365 days and
-  The taxable income of the taxpayer considering the balance of said capital gains and capital losses amount to € 75,009 or exceeds that amount.
This rule also applies to the balance between capital gains and capital losses subject to the aggravated rate of 35% (country, territory or region subject to a more favourable tax regime).
(10) subject to a flat rate of 35% if related to the redemption of bonds and other securities, or to the redemption of units in investment funds or their liquidation, as well as to securities issued by a non resident without a permanent establishment in Portugal domiciled in a country, territory or region subject to a more favourable tax regime, as per the list published by the Ministry of Finance.


Withholding tax rates applicable in 2020: Category A (employment income) and Category H (pensions)


Withholding tax rates applicable in 2022: Category A (employment income) and Category H (pensions)



Deductions on gross income


Deductions on gross income

Category of income

Deductions

 

A

€ 4,104 or the total amount of the mandatory social security contributions. if higher. This amount can be increased to € 4,275, provided that the difference stems from expenses incurred with mandatory fees paid to professional associations which are indispensable to the exercise of the respective activity
- Severance payments made by the employee for the termination of an employment contract without prior notice
- Trade union fees, up to 1% of the gross income increased by 50%

 

B

- Simplified regime: taxpayers whose annual gross income in Category B (business and professional income) does not exceed € 200,000 and have not opted for organized accounts regime, are eligible to apply (the deduction will depend on the applicable coefficient)
- Organized accounts: expenses related to the activities carried out, with some limitations

 

F

- All the expenses effectively incurred and paid by the taxpayers, excluding financial costs, furniture, households appliances, decoration and comfort accessories, as well as the additional to the Municipal Property Tax (“AIMI"), on account of a deduction to the tax assessed

 

G

50% of the positive or negative balance arising from disposals made by tax residents:
- Sale of real estate (except if arising from the sale of property which benefited from non-refundable support of the State or other public entities)
- Sale of intellectual or industrial property, or know-how, when obtained by the non-original author
- Assignment of position in contracts regarding immovable property

 

H

- Deduction of € 4,104 per taxpayer
- Trade union fees, up to 1% of the gross income, increased by 50%
- Mandatory contributions to social protection systems and legal health coverage sub-systems, in the part that exceeds € 4,104

 

PIT deductions


PIT deductions

Type of deduction

Married

Unmarried

Amounts in €

Personal and family deductions

i) Dependants

600

600

Dependants <= aged 3 years old (households with 1 dependent)

726

726

Dependents <= 3 years old, applicable to the second and following dependents, regardless of the age of the first dependent

900

900

Dependents <= 3 years old and <= 6 years old, applicable to the second and following dependents, regardless of the age of the first dependent

750

750

ii) Ascendants living in the same household as the taxpayer, and whose income does not exceed the minimum pension payable under the general regime

525

525

Only one ascendant living in the same household as the taxpayer, whose income does not exceed the minimum pension payable under the general regime

635

635

Deductions for disabled people

i) Per taxpayer

3,800 (1)

1,900

ii) Per dependant with disability

1,187.5

1,187.5

iii) For each ascendant with disability living in the same household as the taxpayer, and whose income does not exceed the minimum pension payable under the general regime

1,187.5

1,187.5

iv) 30% of education and rehabilitation expenditures

No limit

No limit

v) 25% of life insurance premiums or contributions paid to credit unions

15% of computed tax

15% of computed tax

- Age-related retirement contributions

130

65

Disability expenses for each taxpayer and each dependant, whose level of permanent disability is ≥ 90%

1,900

1,900

Health expenses

Deduction of 15% of the following expenses:

 

 

a) acquisition of goods and services which are either VAT exempt, or subject to the reduced VAT rate of 6%;

15% of the expenses, capped at 1,000

15% of the expenses, capped at 1,000

b) acquisition of other goods and services duly justified by medical prescription 


c) Health insurance premiums or contributions paid to mutualistic associations or non-profit organizations that provide healthcare services

The above is valid only for expenses within eligible sectors, and which are communicated to the Portuguese tax authorities through the official website


N/A

Education and training expenses

i) 30% of the expenses incurred capped at

800 (2)(3)

800 (2)(3)

ii) 30% of the expenses incurred with rented property, per member of the household, up to 25 years of age , who attends a recognised educational establishment located more than 50 km from the permanent residence of the household

300(2)

300(2)

Retirement homes

25% of the expenses incurred with retirement homes for the taxpayer, disabled persons, its dependants , ascendants and relatives ,up to the third degree, whose income does not exceed the minimum monthly wage

403.75

403.75

Alimony

20% of the amount spent

No limit

No limit

Expenses with real estate (3)(4)

Deduction of 15% of expenditures related to real estate, namely:

a) rents paid, deducted from any subsidies or official contributions, concerning an urban property or fraction for permanent residence under the Urban Rental Regime or the New Urban Rental Regime (deductions may be increased under certain conditions)

502 (5)

502 (5)

b) amounts incurred related to time sharing (in the year that such income is taxed at the level of the owner)

502

502

Retirement Savings Funds and Retirement Savings Plans

Tax credit of 20% of the amount invested:

i) people under 35 years old;

800

400

ii) people between 35 and 50 years old;

700

350

iii) people above 50 years old.

600

300

Donations

Tax credit of 25% of the amount of the donations to(5):

 

 

i) central, regional or local administration; foundations (under certain conditions);

No limit

No limit

ii) other entities.

15% of the tax assessed

15% of the tax assessed

Deduction of VAT incurred

Deduction of 15% of the VAT incurred by any household member, regarding certain provisions of services (6).

Deduction of 35% of the VAT incurred by any household member, with the acquisition of veterinary medicine.

Deduction of 100% of the VAT incurred by any household member on monthly passes for the use of public transportation, in both cases if included on invoices communicated to the tax authorities.

250

250

Family general expenses

Deduction of 35% of the amount of expenses incurred by any member of the household with the acquisition of goods and services, communicated to the Portuguese tax authorities, provided that the taxpayer number is included in the invoice

500

250

Deduction of 45% of the amount incurred by any member of the household of a single-parent taxpayers

N/A

335

Limitation on deductions and tax benefits

 

 

Limitation on the aggregate deductions (7)

 

- taxable income up to € 7,116

No limit

 

       

- taxable income above € 80,000

1,000

   

(1) Assuming that both taxpayers are disabled.

(2) If the expenses mentioned occur simultaneously in i) and ii), the limit is € 1,000 instead of € 800.

(3) The amount of the education and training expenses incurred by students attending education institutions located in inland regions ( as identified in Decree 208/2017 of 13 July), shall be increased by 10%. In addition, the overall cap of the tax deduction for education and training expenses shall be increased from € 800 to € 1,000, if the difference relates to the said expenses.

(4) This limit is increased to € 1,000 for 3 years (the first year being the one of conclusion of the contract), if these expenses derive from the transfer of permanent residence to an inland territory (as defined in Decree 208/2017 of 13 July).

(5) A taxpayer granting donations of an amount exceeding € 50,000 (i) which respective tax liability in the year concerned is lower than the amount of the allowed deduction or (ii) that reaches the cap of the deduction (15% of the tax liability), can carry the amount of the deduction forward for the following three years, capped at 10% the tax liability in each of the tax years concerned.

(6) The deduction is allowed in respect to expenses incurred with the following services:
     - Maintenance and repair of motor vehicles;
     - Maintenance and repair of motorcycles and related parts and accessories;
     - Accommodation and food service activities;
     - Hairdressers and beauty salons;
     - Veterinarian expenses.

(7) Includes health and insurance expenses, education and training expenditures, retirement home fees, deduction for requesting the issuance of an invoice, costs with immovable property, alimony expenses and tax benefits. In households with three or more dependants , the above limits are increased by 5% per dependent or civil godson, which is not a taxpayer.



Gross income of each category

(-)

Deductions on gross income

(=)

Net income of each category

(-)

Deductions of losses

(=)

Taxable income

(÷)

Family quotient (1 or 2) 

(x)

PIT rate and additional solidarity rate

(-)

Deductions

(x)

Family quotient

(=)

PIT assessed

(-)

Tax deductions (including tax benefits)

(=)

Tax liability

(-)

Withholding tax + Payments on account

(=)

PIT (payable/to be refunded)

Simulate your PIT liability using PwC’s simulations

Non-habitual residents

Taxation

Portuguese sourced employment and self-employment income, derived from “high value-added activities of a scientific, artistic or technical nature” (included in a list of activities published by the Portuguese Government), received by non-habitual residents in Portugal is subject to a special tax 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 specific conditions.

The regime is applicable for a period of ten consecutive years.

Conditions

The regime applies to individuals who become Portuguese tax residents, under Portuguese domestic law, in a specific year and have not qualified as tax residents in Portugal in any of the previous five years.

Specificities

The status of non-habitual tax resident becomes effective upon registration with the Portuguese tax authorities. Application should be filed until the 31st March of the year following that which the taxpayer becomes tax resident in Portugal.

Tax regime for former tax residents

Taxation

50% relief from taxation on employment and self-employment/business income.

Conditions

The regime applies to taxpayers that became or become resident in the Portuguese territory in 2019, 2020, 2021, 2022 or 2023 and:

  • Have been resident in the Portuguese territory in any of the 3 prior years;
  • Have been resident in the Portuguese territory prior to 31 December 2015, in case of taxpayers become that became tax resident herein in 2019 or 2020, and prior to 31 December 2017, 2018 and 2019, in case of taxpayers that became or become resident herein respectively in 2021, 2022 or 2023;
  • Have their tax situation regularized.

The regime applies for 5 years, including the year of return.

Youth Personal Income Tax (“IRS Jovem”)

Income from Category A (employment income) and Category B (self employment/business income); income from Category A (employment income) earned by young people aged between 18 and 26 years who are not dependents, is partially exempt from PIT, in the first five years following the conclusion of a cycle of education corresponding to or higher than Level 4 of the National Qualification Framework, subject to making said option in the annual PIT return.

The age to make the option is extended to 30 years old if the cycle of education corresponds to Level 8 of the National Qualification Framework.

The exemption applicable corresponds to 30% of the income earned in the first two years, 20% in the following two years and 10% in the last year, capped respectively at 7.5 x Social Support Index (IAS), 5 x IAS and 2,5 x IAS.

The exemption applies in the first year in which the income is obtained following the conclusion of a cycle of education and in the following four years, provided that the option is taken up to the limit age. Or in consecutive or alternate years, provided that the maximum age of the taxpayer does not exceed 35 years.

Acquisition of shareholdings by employees

Gains derived from stock options plans, subscription plans, attribution plans or equivalent share plans on securities issued by the employer are exempt from taxation, with a cap of € 40,000, subject to certain conditions.

Retirement Savings Accounts

Interest are exempt from taxation on the amount of a balance of ≤ € 10,500.

Intellectual property

Author rights obtained by a Portuguese tax resident who is the respective original owner, benefit from a 50% tax relief. However, the amount excluded from taxation is capped at € 10,000.

Venture capital funds

Capital gains derived from the sale of participation units are taxed at a 10% rate.

Collective investment vehicles in forest resources

Capital gains derived from the sale of participation units in real estate investment funds,or shares in real estate investment companies in forest resources, are taxed at a 10% rate.

Capital gains realized by non residents

An tax exemption applies to the disposal of:

● shares, other securities and autonomous warrants issued by Portuguese tax resident companies;
● derivatives negotiated at a regulated stock exchange;
● participation units in venture capital funds.

Exceptions apply in case of:

● residents in tax havens;
● disposal of shares in companies whose assets are comprised in more than 50% of real estate located in Portugal.

Employer contributions to social security regimes
Employers' contributions to pension funds (or other complementary social security regimes) are PIT exempt at the moment of the contribution, provided certain requirements are met.

Sportsmen

● Prizes and awards granted to disabled athletes, high performance athletes and their coaches are tax exempt.;
● Sports training grants awarded to non-professional sports agents (players, referees, judges) are tax exempt, up to € 2,375;
● Compensations paid to non-professional referees and umpires are excluded from taxation, up to € 2,375.

Tax benefits to expatriates

Employees that are displaced to a foreign country, which is not their habitual workplace, for a period of 90 days, 60 of which are consecutive, have a tax benefit. This benefit consists of a PIT exemption, applicable to the amount of the remuneration paid to the employee by the Portuguese employer, exclusively as a compensation for moving and staying abroad (up to € 10,000).

“Programa Semente” / Start-ups

This tax benefit is applicable to individuals making eligible investment under “Programa Semente”, allowing a PIT credit of 25% of the eligible investment. This investment is limited to shareholdings not exceeding 30% of the share capital or of the voting rights. It should be represented by cash contributions actually paid, and, among other requirements, the annual amount of the eligible investment cannot exceed € 100,000.00 per taxable person.

© 2022 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.

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