Last modified: 27/01/2025 19:38

Corporate taxation

	Rate
Corporate Income Tax (IRC)	20%/14.7%/14% (effective) (1) (4)
National surtax (derrama estadual)	3%/5%/9% (effective) (2)
Regional surtax (derrama regional)	2,1%/3,5%/6,3% – 2,4%/4%/7,2% (effective) (2)
Autonomous taxation	35%/10%/5% (effective) (3)

1. The standard rate of corporate income tax is 20% in mainland Portugal. The standard rate is 14.7% or 14%, on Madeira or in Azores islands respectively. In addition to the standard rate of corporate income, there is a local surtax (derrama municipal) on the taxable income at rates of up to 1.5%.
2. In addition to the standard rate of corporate income tax, national surtax (derrama estadual) is applicable, in mainland Portugal as follows: 3% on that part of taxable income between EUR 1.5 million and EUR 7.5 million; 5% on that part of taxable income between EUR 7.5 million and EUR 35 million and 9% on that part of taxable income exceeding EUR 35 million. On Madeira Island there is also a Regional Surtax at the rate of 2.1% on the part of taxable profit between €1,500,000 and €7,500,000, at the rate of 3.5% on the part of taxable profit between €7,500,000 and €35,000,000 and at the rate of 6.3% on the part of the taxable income above €35,000,000. On Azores islands, the Regional Surtax is at the rate of 2.4% on the part of the taxable profit between €1,500,000 and €7,500,000, at the rate of 4% on the part of taxable profit between €7,500,000 and €35,000,000 and at the rate of 7.2% on the part of taxable profit above €35,000,000.
3. Autonomous tax is payable (together the corporate income tax) in respect of payments made to tax-haven residents and to several other types of expenses payments (Ex.: compensation or bonuses paid to managers or directors for loss of office, private motor vehicles; entertainment expenses; allowances and travelling costs).
4. The rate is 25% for Non-resident entities, without a branch in Portugal (or   35% in case of payment of capital income when it’s paid to these entities into accounts in the name of one or more holders but on behalf of unidentified third parties except when the beneficial owner is identified, or in case of payment of capital income to non-resident entities subject to a tax-haven regime).

Residence: A company is resident in Portugal if it is incorporated under Portuguese Law, it has its legal head office or place of effective management in Portuguese territory.

Basis: Resident companies are taxed on their worldwide income. Income arising from a foreign source through a branch may be exempt, however. Portuguese branches are taxed on Portuguese source profits, similar to resident companies. Non-resident companies without a branch in Portugal are liable to tax on Portuguese-source income only.

Taxable income: A company’s taxable income is based on its net income, calculated in accordance with Portuguese GAAP, adjusted for positive or negative variations in net equity during the period, and for non-deductible expenditure or non-taxable income.

Significant local taxes on income: The local surtax (derrama municipal) on the taxable income at rates of up to 1.5%. Municipalities may decide on exemptions or reductions in local surtax depending on the year’s turnover or a minimum number of jobs that are created and maintained for a certain period of time.

Alternative minimum tax: Through the Law nº 41, of 8 December 2024 was transposed the (EU) Directive 2022/2523 of 15 December, to ensure a worldwide minimum level of taxation for multinationals groups and large groups in the European Union, approving the Global Minimum Tax Regime. This regime is applicable to incorporated entities located in Portugal that are part of a multinational group or of a large national group that has annual income of €750 000 000, in the consolidated financial statements of its ultimate parent entity in at least two of the four immediately preceding fiscal years. The Global Minimum Tax Regime (RIMG) introduces a new supplementary tax whenever the effective tax rate of a covered group is less than 15% in a given jurisdiction. The Law nº 41/2024 includes the Income Inclusion Rule (IIR), the Undertaxed Profits Rule (UTPR) and supplementary domestic tax on surplus profits of all constituent entities subject to low taxation located in Portugal (ICNQ-PT). The Law contains transitional provisions and safeguard rules applicable to companies, allowing them to gradually adapt to the new requirements. The RIMG takes effect for tax years beginning on or after 1 January 2024, with the exception of the UTPR rule, which will only be applicable from 1 January 2025.

Taxation of dividends: Dividends received by Portuguese companies from a domestic or foreign shareholding may benefit from the participation-exemption régime (see «Participation exemption». Where they do not do so, they are taxable in full.

Capital gains: Capital gains are generally included in taxable income. Capital gains from the disposal of shares may be exempt from IRC under the participation-exemption régime (as dividends above), that is capital gains from the disposal of qualifying participations are exempt under this régime where they arise from shareholdings of at least 10% in the share capital of the company concerned and which have been held by the taxpayer for an uninterrupted period of at least 12 months before the date of the disposal. However, capital gains from shareholdings in Portuguese companies more than 50% of whose assets consist of immovable property (except property used in an agricultural, commercial or industrial business) are excluded from the participation exemption.

Losses: Tax losses incurred in 2023 as well in tax periods prior to January 1, 2023, whose deduction period is still in progress on the date of entry into force of this law ( January 1, 2023) may be carried forward for subsequent years. However, the maximum set-off of losses in any year is 65% of the taxable profit (75% in the case of losses incurred in 2020 and 2021, due to the pandemic situation). Where there has been a transfer of 50% or more of the share capital of the company or of the voting rights, the carry-forward of losses may lapse, except when the operation is based on valid economic reasons. There is no forfeiture of losses if the change of ownership takes place within the same group of companies. Losses may not be carried back.

Foreign tax relief: Foreign-source income is included in taxable income, but relief is granted for income that is taxed abroad. Foreign-source income is taxed net of foreign taxes; no credit is given for foreign taxes paid in the part of the excess of the maximum rates foreseen in Double Taxation Agreements. A credit is given for foreign taxes paid on dividends of non-qualifying participations. The tax credit may be reported for 5 following tax periods, in case of insufficient tax amount determined in the period in which the foreign income is included in the tax base. For this purpose, the tax deduction is determined by country (not income by income), except with regard to the profits of permanent establishment located abroad.

Participation exemption: Dividends of a shareholding of at least 10 per cent and held for at least 12 months, the profits distributed by entities resident in Portugal or by entities resident in another member state member state of the EU / European Economic Area may benefit from a total exclusion from taxation, provided that the beneficiary is a resident entity or a permanent establishment located in Portugal of an entity resident in another EU/European Economic Area member state or a European Economic Area or a entity resident in a country with a Double Taxation Agreement with Portugal. In the case of non-EU entities that are residents in another member state of the European Economic Area requires the existence of an obligation of administrative cooperation in the field of taxation equivalent to that established within the EU. The exclusion from taxation also applies to dividends distributed by entities resident in other countries (except for entities subject to a privileged tax regime tax regime), which are subject to an income tax similar to the Portuguese corporate income tax at a nominal rate not less than 60 per cent of the Portuguese standard corporate income tax rate.

Holding-company regime: The legal form of a holding- company, is designated by “SGPS” (Sociedade Gestora de Participações Sociais) and it’s formed to own and manage share investments and must not undertake commercial or industrial activities directly. An SGPS may acquire real property but only for its own use and for the use of companies in which it holds more than 10% of the share capital. An SGPS may provide management and treasury functions to group companies. There is no specific tax regime. The general taxation rules apply, namely the participation exemption rules for income from dividends and capital gains obtained from share investments.

Tax-based incentives: The main tax incentives to investment and to company capitalization currently available are the following:

• Tax benefits for productive-investment projects and globalization-oriented investment projects, subject to a tax-incentive contract. For investment projects in Portuguese territory, of equal amount €3,000,000 or more and verify Under certain conditions, a tax credit may be granted (for a period of up to 10 years) between 10% and 25% of the amount of the investment. The tax deduction has no limit in the case of new created companies.

• The Investment Assistance Tax Regime (RFAI), which applies to qualifying investments in eligible regions subject to certain conditions and applicable to certain eligible activities. Investments must provide for the creation of jobs and their maintenance until the end of the minimum period of maintenance of the investment assets.

The eligible investments will be tangible fixed assets in new condition, intangible assets consisting of expenses with technology transfer, and, from 2024, the salary costs arising the creation of jobs for employees with a master’s degree or doctorate, in the condition that the maintenance of the created jobs for a minimum period of five years (or three years, in case of Small Mid Cap companies).

The relief consists of a tax credit, capped at 50% of the tax due (without limit in the case of investments made during the start-up period and two following tax periods, except if the company results from a split), in amount of 25% 30% of the investment (for investments of no more than EUR 10 15 million) or 10% of the amount of the investment (for investments exceeding EUR 10 15 million). In case of insufficient tax amount in the year of investment, the deduction may be done in the following 10 years.

• The Incentive of company capitalization (in force since 2023) consists on a deduction for the purposes of taxable income corresponding to the application of the 12-month Euribor rate (average of the tax period based on the rate on the last day of each month) added of a spread of 1.5% (or 2% Small Mid Cap companies) to the amount of net increases in eligible equity capital. The net increases in eligible capital corresponds to the algebraic sum of the increases net of eligible equity capital verified in the year and in each of the six preceding tax periods, which begin on or after January 1, 2023. The deduction is increased by 50% in 2024, 30%in 2025 and 20% in 2026.

• The R&D incentives (SIFIDE II) – Deduction of an amount for research and development expenses, in the part not subsidized by the State, carried out to 2025 tax period. The relief consists of a tax credit calculated in a base rate of 32.5% for expenses incurred in the period and an incremental rate of 50% on the increase in expenses incurred in the period in relation to the simple arithmetic sum of the last two exercises, until the limit of €1,500,000. The base rate can be increased by 15% in the case of Small Mid Cap companies that have not yet completed two financial years and that did not benefit from the incremental rate.

The deduction of the tax credit can be used in the year of the incurred expenses or, due to insufficient collection, in the following 12 financial years. This incentive cannot be combined with the same investment, with any other tax benefits of the same nature, including benefits of a contractual nature. The companies interested in using SIFIDE II must submit the electronic application by the end of the 5th month of the following year to the related tax period.

• Patent box – Under the patent-box régime, income from certain qualifying intellectual property, may benefit from an 85% exemption from corporate income tax, corresponding of income derived from contracts transfer or concession temporary use of patents, drawings or industrial models or copyright about computer programs, provided that several conditions and requirements. The scheme shall apply, also to the income resulting from the violation of these rights, but not apply to income arising from accessory provision of services included in the contracts.

The relief applies to income from both the licensing and sale of patents and industrial designs or models registered after 1 July 2016, for which the tax exemption would apply to the balance between the income and gains generated and the expenses and losses incurred with industrial property rights, this balance is weighted by the fraction between the qualifying expenses (increased by 30%, within the limit of total expenses) and the total expenses incurred to develop the asset protected by industrial property. In 2020, this regime was extended to copyright about computer programs. The patents must derive from research and development carried out by or on behalf of the taxpayer. The licensee or transferee must use the patents in an agricultural, commercial or industrial business and must not be resident in a listed tax haven. The results of the use of the rights by the transferee do not materialize in the delivery of goods or services that give rise to tax-deductible expenses at the transferor entity, or at a company that is part of a fiscal group of companies, whenever there are special relationships between one or the other and the transferee.

Group relief/fiscal unity: A group of resident companies may opt to be taxed together, i.e. on an aggregated basis by the consolidation of their respective tax returns. A tax group is composed of a resident parent company and its 75% or more directly or indirectly held resident subsidiaries (‘qualifying subsidiaries’).

It is an additional requirement that the parent company holds more than 50% of the voting rights in each qualifying subsidiary). When the shareholding or voting rights are held indirectly, the effective percentage of the shareholding or voting rights is obtained by the process of successive multiplication of the percentages of the shareholding and voting rights at each of the levels and, if there are shareholdings or voting rights in a company held directly and indirectly, the effective percentage of the shareholding or voting rights results from the sum of the percentages of the shareholdings or voting rights.

The level of participation may be achieved by resident ‘companies in another EU/European Economic Area member state bound by administrative cooperation in the area of taxation equivalent to that established within the EU, provided that such companies are held, directly or indirectly, by at least 75%. Regarding to the tax losses, those originated during the application of the fiscal unity regime, can only be used in the fiscal unity itself, and are not deductible after the fiscal unity has ended or the departure of the company that generated them. The tax losses before the application of the fiscal unity can only be deducted up to the taxable profit of the company that generated them. The deduction of tax losses to be made in each tax period may not exceed the amount corresponding to 65% of the fiscal unity’s taxable profit.

Small company/alternative tax regimes: Companies may choose to the application of a simplified tax regime upon fulfilment of certain requirements, namely annual turnover does not exceed €200,000 and total assets does not exceed €500,000 in relation of the previous year. The income taxable base is calculated taking into account specific percentages depending on the type of income (4% of income from sales and provision of services relating to catering and beverage activities and hotel and other similar activities; 15% of income from crypto assets; 75% of income from services from professional activities specifically listed; 10% of income from services from other activities and operating subsidies; 30% of non-operating subsidies; 35% of income from the operation of local accommodation establishments not located in a containment area;50% of income from the operation of local accommodation establishments located in a containment area; 95% of income from crypto mining, royalties, capital income, property income and capital gains)

Corporate taxation: compliance

Tax year: Accounting period (12 months), generally coinciding with the calendar year (1st of January to 31st of December). However, a different annual fiscal period may be adopted, which must coincide with the social period of accountability that must be maintained for at least the following five fiscal periods. This obligation does not apply when the company becomes part of a group of companies obliged to draw up consolidated financial statements, where the parent company adopts a different tax period

Consolidated returns: In case of a group taxation, a consolidated tax return must be submitted, by the parent Company corresponding to the aggregated taxable basis of the tax returns of each company of the fiscal group.

Filing and payment: Corporate tax returns, based on the annual financial statements, must be submitted electronically, no later than the end of May of the following year, or within five months of the end of the accounting period. The tax due must be paid until the last day of the deadline for submitting the periodic tax return. The tax due corresponds to the difference between the total tax calculated in the tax return and the total amount of the three payments on account, due in July, September and 15 December of the year to which the taxable profit relates.

Penalties: Penalties and interest are imposed for late filing or non-compliance with the tax law.

Rulings: If taxpayers disagree with an assessment (notificação) issued by the tax authorities, they may either: (1) File an administrative claim, to be submitted within 120 days of the date of the assessment (2) Lodge a legal challenge, to be made within three months of the same date (3) Require arbitration by the Arbitration Tribunal, within 90 days. Where the taxpayer opts for an administrative claim and that claim is rejected, he may then: (1) File a further administrative appeal to a higher administrative instance, to be submitted within 30 days of the rejection (2) Lodge a legal challenge, within 15 days of the notification of the rejection;(3)Require arbitration by the Arbitration Tribunal, within 90 days. An appeal against the rejection of a second administrative claim may be made to the courts.

Taxation of individuals

Taxable income for individuals is the income resulting from the aggregation of income from the various categories earned each year, after making the deductions set out in each category of income.

For residents, the aggregated taxable income is taxed at the following rates:

Mainland Portugal	Rates (1)
Taxable amount (€)	Personal Income Tax  («IRS»)
Until 8 059	13%
From 8 060 to 12 160	16,5% – 14,18%
From 12 161 to 17 233	22% – 16,482%
From 17 234 to 22 306	25% – 18,419%
From 22 307 to 28 400	32% – 21,334%
From 28 401 to 41 629	35,5% – 25,835%
From 41 630 to 44 987	43,5% – 27,154%
From 44 988 to 83 696	45% – 35,408%
From 83 696	48%

In Madeira and the Azores the rates are lower. In the Azores, the rates are 80% of the rates in the above table. In Madeira the rates are on a specific table.

The rates, by income bracket, are applied as follows: the lower rate is applied to the portion of income in the immediately preceding bracket and the higher rate is applied to the excess of that bracket.

An additional surtax (Solidarity tax) applies to taxable income above EUR 80 000 per year. The amount of the surtax is 2.5% on the excess of income over EUR 80 000 but not over EUR 250 000. Any excess of income over EUR 250 000 is subject to surtax of 5%.

Certain income obtained by residents is not aggregated (unless they opt for its aggregation). Income earned by non-residents is not aggregated.  In this situation withholding tax rates, or special rates will be applicable.

For non-residents, the following rates are applicable:

Income from Portuguese ‘source	Rates
Income subject to a withholding tax	25% or 28%
Capital gains and other income not related to a permanent establishment	25% or 28%
Business and professional income related to permanent establishment	25%

Residence: An individual is deemed to be resident in Portugal whenever he or she spends more than 183 days in Portugal during a given calendar year. A person is also deemed to be resident in Portugal if that person maintains a place of abode in Portugal available to him or her at 31 December of that year, and it can be inferred that the place of abode betokens the person’s intention to be habitually resident in Portugal. Where tax residence is acquired as a result of presence for over 183 days in Portugal, it is deemed to begin on the first day of presence.

Basis: Resident individuals are liable to income tax on their worldwide income. Non-residents are liable to income tax in respect of their Portuguese-source income only.

Taxable income: Taxable income is divided into six different categories: 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). Under the generale rule, residents are taxed on the aggregated income that corresponds to the sum of taxable income calculated in each of the above income categories.

The following types of income arising or deemed to arise in Portugal to a non-resident individual are taxable: Employment income; Director’s fees; Commissions; Income from services; Royalties earned by the author/original owner; Royalties not earned by the author/original owner / Technical assistance; Equipment-lease rentals; Dividends; Interest from bank deposits; Interest from shareholder loans; Interest from debt securities; Other investment income; Rental income; Capital gains (on the liquidation of a company, as the result of the settlement, withdrawal or revocation of a trust, or on shares or arising from the disposal of real property); Pensions. With the purpose of attracting to Portugal non-resident professionals engaged in activities with high added value, intellectual or industrial property or know-how, as well as beneficiaries of foreign pension schemes, a special régime was implemented for these temporary residents (the non- habitual residents’ regime). This regime was abolished since January 1st 2024. However, a transitory regime was established to apply the regime in certain conditions, as follow:

a) Temporary residents who, on January 1st, 2024, are already registered as non-habitual residents (until the final of the period of 10 years);

b) Temporary residents who, on December 31st, 2023, met the conditions for registration as non-habitual residents,

c) Become a resident for tax purposes by December 31, 2024 under specific situations.

The expatriate régime was available for individuals who are treated as resident in Portugal in the tax year concerned according to any of the criteria referred above, and have not been resident in Portugal at any time in the five years prior to the tax year concerned. An individual qualifying for the régime has the right to favorable tax treatment under it for a period of 10 consecutive years, from the year of registration as a Portuguese resident, as long as the individual continues to be resident in each of those 10 years. Under this régime, employment and self-employment income derived by the individual from ‘high value-added activities of a scientific, artistic or technical nature’ (as prescribed) is taxed at a special flat rate of 20%. Also available is a tax exemption (under certain conditions) for foreign-source income (employment income, self-employment income, rental income, interest, dividends and other investment income). For temporary residents who become residents from April 1, 2020, being registered on the regime, the rate of 10% rate is applied to pensions obtained abroad.

Capital gains: Capital gains (category G) are normally computed by deducting the total acquisition cost from the disposal or alienation proceeds. Indexation factors are applicable to the acquisition cost to compensate the inflationary increases, but only in respect of business fixed assets, immovable property and shares.

Capital gains from shares, warrants and other securities realized by resident taxpayers are taxed at a flat rate of 28%, unless the taxpayer opts to include the gain in income subject to progressive rates. From January 1, 2023, the balance between capital gains and capital losses resulting from shares, fiduciary structures, debt securities and investment units participation, are subject to progressive rates when it results from assets held for a period of less than 365 days and the individual has a taxable income, including this balance, equal or greater than the ultimate income bracket of the above table (€83 696, from 2025).

One half of the net capital gains arising on the sale of shares held in micro and small companies not listed on the stock exchange are exempt. Capital gains (including capital gains derived from immovable property) obtained by non-residents without a permanent establishment in Portugal are taxed at a flat rate of 28%, except for capital gains on the disposal of shares, which are exempt in certain cases. No withholding tax applies on capital gains. A capital gain from the sale of real property may be exempt (total or partially) if the property sold is the taxpayer’s primary residence and the sale proceeds (reduced where applicable by the value of any outstanding loans relating to the purchase of the property) are reinvested in the acquisition, improvement or construction of another primary residence in Portugal or within the European Union within 36 months of the sale or in the period of 24 months previous to the sale.

Capital gains obtained by a non-resident individual derived from the disposal of shares in a foreign company will nevertheless be regarded as having a Portuguese source (and therefore taxable in Portugal) if, at any time during the 365 days preceding the disposal, more than 50% by value of the shares is directly or indirectly derived from immovable property situated in Portuguese territory (except for immovable property related to an agricultural, industrial or commercial activity that does not consist in the purchase and sale of real estate).

Deductions and allowances: Deductions may be given against specific categories of income and tax credits are available against the amount of final tax liability. The system of personal allowances and deductions has been replaced by tax credits. The most important tax credits are: Per dependent child; Per dependent forebear; Health expenses and health insurance; Educational expenses; Alimony payments; Expenses on residential care for parents and grandparents; Mortgage interest or rent; Individuals with disabilities per dependent with disabilities; Contributions to capitalization of public companies; Donations (state/public, charity, museum, school, library, or other recognized social welfare or cultural entity). The tax credits are subject to a certain limit.

Foreign tax relief: Foreign-source income is taxed on a gross basis. A tax credit may be granted, as an elimination of international double taxation, deductible up to the lower of the Portuguese proportional tax or the foreign tax due under the Double Taxation Agreement between Portugal and the foreign Country of the source’ income.

Taxation of individuals: compliance

Tax year: Calendar year. The tax year may be less than 12 months, in the case of partial tax residence in the year in which the individual becomes a tax resident or becomes a non-tax resident.

Filing and payment: Each individual must file an annual return online. Spouses may file the annual return jointly, by option. The due date is between 1st of April and June 30th. The Tax Authorities issue an assessment on the basis of the return, no later than July, and any final payment due must be made by the end of August. In the case of individuals exercising a business or professional activity payments on account should be delivered on the 20th of each month of July, September and December. The amount is notified by Tax Authorities.

Penalties: Penalties apply for late filing or failure to file.

Rulings: See above under ‘Corporate taxation’.

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends	25% (1)	28%	25% (2)	28% (2)
Interests	25% (3)	28%	25% (4)	28% (4)
Royalties	25%	16,5% (5)	25% (4)	25% (4)
Capital gains	0%	0%	0%	0%
Fees for technical services	0%	25% (6)	0% (7)	0% (7)
Capital income paid to a resident in a tax heaven territory			35%	35%
Capital income paid toa resident by entities in a tax heaven territory, through an agent ‘payer		35%
Capital income paid (or available) in accounts  in the name of one or more holders but on behalf of unidentified third parties	35%	35%	35%	35%

1. Fully refundable to Portuguese companies, or not applicable to dividends that qualify for the participation exemption.
2. Exempt for companies in another EU Member State, other member state of the European Economic Area or in a jurisdiction with which Portugal has a double tax treaty providing for exchange of information which holds at least 10% of the share capital of the Portuguese company and has done so for an uninterrupted period of at least one year. Reduced rates for others recipients where tax treaties apply, under proper formalities
3. Fully refundable to Portuguese companies, or not applicable in case of a tax group.
4. Companies within the Interest and Royalties Directive (2003/49/EC) may be exempt from withholding tax. An EU-resident company is associated with a Portuguese company where the EU company has a direct holding of at least 25% in the Portuguese company or The Portuguese company has a direct holding of at least 25% in the EU company or a third EU company has a direct holding of at least 25% in both the EU company and the Portuguese company. Exemption is granted where the qualifying holdings have been held for at least two years and both or all companies concerned have one of the legal forms specified in the Directive. Reduced rates for others recipients in case of application of tax treaties under proper formalities.
5. No withholding tax in case of the original owner.
6. Professional services and intermediary commissions.
7. If it´s not considered as obtained in Portuguese territory or not applicable under tax treaties’ rules and formalities. For the exemption or reduction of withholding taxes under the terms of a tax treaty, the debtor entity must be in possession, until at the end of the deadline for the payment of the tax of official forms of the beneficiary, duly signed, joined by a residence certificate tax issued by Tax Authorities of the beneficiary’ Country. The forms have valid for 1 year from the date of certification, except in the case of a central bank or an agency governmental nature in which renewal is not necessarily periodic. In the absence of timely presentation of the respective form and certificate of residence, the debtor entity may obtain such documents later to justify the application of the tax treaty, being only subject to the payment of fines.

Branch remittance tax: Regarding the profits of a permanent establishment located abroad, the Portuguese Companies (with headquarters or effective management in Portuguese territory) may opt for not include for the determination of his taxable base concerning the profits (and losses) attributable to a permanent establishment located outside of Portuguese territory, provided that the permanent establishment is subject to one of the taxes listed in the Directive n.º 2011/96/UE, or to a minimum statutory rate of not less than 60% of the standard corporate income tax rate, the tax actually paid by the permanent establishment is not less than 50% of the tax that would be due in Portugal and the permanent establishment is not located in a tax heaven territory. The profits of the permanent establishment located abroad will not be exempt up to the amount corresponding to the tax losses of the permanent establishment deducted by the head office in the 12 previous tax periods; In case of the transformation of a permanent establishment into a company, the participation exemption shall not apply to dividends distributed to the Portuguese company, nor to capital gains arising from the sale of shares or from the liquidation of that company, up to the amount of losses attributable to the permanent establishment which contributed to the determination of the taxable base of the Portuguese Company in the twelve previous tax periods. Whenever the exemption ceases, the losses of the permanent establishment located abroad, as well as the dividends and capital gains from capital shares (in the event of the permanent establishment being transformed into a company), will not be deductible/exempt up to the amount of exempt profits in the previous twelve tax periods.

Anti-avoidance legislation

Transfer pricing: Portugal has transfer-pricing rules that are based on the OECD Transfer Pricing Guidelines. The rules apply to related-party transactions and for accounting periods after 1 January 2001. Companies must prepare documentation to support their transfer-pricing policies when they have a turnover higher than EUR 10 million and carry out linked transactions whose value in the period has exceeded, per counterparty, EUR 100,000 and, in total, EUR 500,000, considering their respective market value.

Regardless of the previous limits, the rules apply to an entity that has carried out linked transactions with individuals or legal entities resident in a tax haven territory. Small or medium-sized companies must have a Simplified documentation regarding to the adopted transfer price policy. All others must prepare their transfer pricing documentation process in accordance with the methodology suggested in the OECD Guidelines based on a Main Dossier (with information on the Group) and a Specific Dossier (with specific information on the related party and economic analyses of the linked transactions).

Parties are related where one has a significant influence over the other or is economically dependent on the other or both are under the significant influence of or are economically dependent on the same third person or persons. A holding of 20% is sufficient to constitute a significant influence. Business restructuring or reorganization operations involving changes in business structures, termination or substantial renegotiation of existing contracts, especially when they involve the transfer of tangible or intangible assets are covered by these rules. It is possible for taxpayers to obtain advance pricing agreements with the tax authorities, fixing the appropriate transfer price for their transactions with the related parties specified in the agreement.

Interest restriction: Portugal abolished its thin-capitalization rules in 2013, in favor of a more general interest limitation, under which the total deduction for the net interest expense in any year cannot exceed the greater of EUR 1 million and 30% of EBITDA (earnings before interest (net financing expenses), tax and depreciation).

Any interest exceeding the limit may be carried forward for the subsequent five years. If the net interests are less than 30% of the EBITDA, the difference is added to the maximum deductible amount in each of the following five years, until it is fully used. For this purpose, the EBITDA corresponds to the taxable base (or deductible loss) plus net financing expenses and deductible depreciation and amortization. In case of a group taxation, the parent company of the group can choose to apply these rules to the group’s net interests expenses supported by all companies that are part of the group taxation.

Controlled foreign companies: Portugal has CFC legislation, under which the profits of a non- resident company may be attributed to its Portuguese-resident shareholders (both legal and natural persons) who directly or indirectly hold a significant interest in the non-resident company.

The rules apply where:

– The resident shareholder has a direct or indirect ownership of at least 25% of the capital, voting rights or rights to income or assets (or 10% if at least 50% of the capital, voting rights or rights to income or assets are owned directly or indirectly by Portuguese participators) and

– The CFC is resident in a jurisdiction where there is no corporate income tax or where the effective rate of such a tax is no more than 50% of the tax that the company would pay if resident in Portugal

The CFC régime is not applicable where the non-resident company is resident in another EU Member State or in an EEA state with which Portugal has an agreement for administrative tax cooperation equivalent to that established within the European Union. Nor does it apply where at least 75% of the CFC’s profits arise from manufacturing or farming activities in its own jurisdiction or from commercial transactions mainly with the local market and the CFC’s main business is not in one of the proscribed fields (e.g. banking, insurance etc). Where the rules do apply, the relevant proportion of the CFC’s profits is attributed to the Portuguese shareholder. Any distributions that the shareholder subsequently receives may be set off against the attributed profit.

Hybrid mismatches: Based on Anti-Avoidance EU Directive, specific rules to neutralize the effects into in force regarding hybrid asymmetries both for situations in which hybrid entities are not considered resident for tax purposes in Portugal and for the opposite situation. The expenses that cannot be considered deductible are listed, as well as the income that must be included in the calculation of the taxable income.

Disclosure requirements: The Portuguese ultimate parent company of a multinational group with a consolidated annual turnover of EUR 750 million or more is required to file a country-by-country (CbC) report in respect of the group. In circumstances where the ultimate parent company of such a group is resident outside Portugal and is not required in its state of residence to file a CbC report, that obligation may fall on a Portuguese member of the group.

A Portuguese entity that is part of a multinational group in which any of the entities is subject to submitting a declaration must communicate electronically, by 31 May of the following year (or no later than the last day of the fifth month after the end of the financial year, where this differs from the calendar year), the identification and country of the reporting entity of the multinational group. Within the scope of “Country-by-Country Reports” an agreement between the Competent Authority of the United States of America and the Competent Authority of Portugal was signed in 2017, on the automatic exchange of information.

Exit taxes: Specific rules are in force related to exit taxation in consequence of the residence ‘transfer’ of a Portuguese Company to abroad, or when assets allocated to a permanent establishment of a non-resident entity are transferred to abroad. This rule does not apply (unless the main objective is a tax evasion), if the assets remain assigned to a permanent establishment located in Portuguese territory and as long as the same accounting and tax regime is followed.

The taxable profit of the period of cessation of activity is determined by the difference between the market value of the assets and their respective fiscally relevant value. Immediate payment of the entire tax, calculated under the generale rules, or payment in 5 installments (subject to interest and bank guarantee will be required) may be considered. In the case of the last option, payment of tax is immediate if the assets are sold or separated from the activity or transferred to a non-EU country or European Economic Area country without a cooperation agreement on tax matters.

General anti-avoidance rule: General anti-avoidance rule: Portuguese Criminal Tax Law contains a general anti-avoidance provision (GAAR), under which a transaction carried out by artificial means the main purpose or one of the main purposes of which is to obtain a tax advantage may be considered void and the tax authorities may assess the taxpayer on the basis that the intended tax advantage has not been obtained. Strict conditions must be satisfied for the rule to be brought into play.

Digital services tax and Other significant anti-avoidance legislation: Digital services: The directive on administrative cooperation (DAC 7) has been transposed to the Portuguese legislation by Law nº 36/2023, of July 26th .

This legislation obliges digital platforms to communicate information about their users’ transactions to the tax authorities of the EU Member States. In addition to strict control to identify their users, platforms must provide information about relevant transactions carried out by these users.

Failure to present or present beyond the legal deadline the registration statement and the communication to the Tax Authorities of the information that platform operators are obliged to provide, is punishable with a fine. Other significant anti- avoidance legislation: The directive on administrative cooperation (DAC 6) has been transposed to the Portuguese legislation by Law nº26/2020, of July 21st, establishing the obligation to communicate to the Tax Authority certain internal or cross-border mechanisms with fiscal relevance (except VAT, Customs duties, Special consumption taxes and Social Security). The communication must be made, as a general rule, within 30 days, for cross-border and domestic mechanisms whose relevant event occurs since January 1, 2021. The communication is made on a specific form (Mod 58), harmonized under the defined rules, to facilitate the automatic exchange of information between EU states.

Value-added tax/Goods and services tax

Type of tax: As a Member State of the European Union, Portugal has a value-added tax régime similar to other VAT régimes throughout the European Union. In general, VAT is due on supplies of goods and services, the import of goods from outside the European Union and the ‘intra-EU acquisitions’ of goods from other EU Member States. If these transactions take place in Portugal, they are in principle subject to Portuguese VAT. Businesses (‘taxable persons’) charging VAT to their customers are liable to report and pay this VAT to the tax authorities. Any VAT incurred in the course of the taxable person’s taxable activity (e.g. charged by the taxable person’s suppliers), can in principle be deducted or set off against the VAT due. Only the net amount must be paid to the tax authorities. If there is a balance of deductible VAT, the amount can be recovered from the tax authorities.

Standard rate: Three different sets of rates apply, of 23%, 22% or 16%, depending on whether the supply takes place or is deeded to take place in mainland Portugal, Madeira or in Azores, respectively.

Reduced rates: 6%, 5% or 4% in mainland Portugal, Madeira or in Azores, respectively. Also, it applies an intermediate rate of 13%, 12% or 9% in mainland Portugal, Madeira or in Azores, respectively. The reduced rate applies to such supplies as: Certain foodstuffs; Passenger transport; Newspapers; Medical and dental care (where not exempt); Hotel accommodation; Wine; Certain urban renewal projects; Services related to agricultural production The intermediate rate applies to supplies such as certain food and drink; Fuel; Musical, cinema and theatre performances; ready and takeaway meals and the supply of food and beverages (excluding alcoholic beverages, soft drinks, juices, nectars and aerated waters).

Registration: A taxable person must be registered for VAT purposes when commencing business operations.

Filing and payment: Monthly returns, until the 20th of the second following month, when the turnover is equal to or greater than €650,000; Quarterly returns, until the 20th of the 2nd month following the quarter when the turnover is less than €650,000. VAT payments by the 25th, respectively.

Social security contributions

Social Security contributions are due by employers and employees. The part related to the employee is deducted in the payroll. The payment of the total contribution ( part of the employee and the part of employer)  is made together by the employer.

The main rates are the following:

	Employer	Employee
	Rate (%)	Rate (%)
Employees (in general) and directors	23.75%	11.00%
Directors (certain sitaution)	20.30%	9.30%
Home workers	20,30%	9,30%
Employees with very short-term contracts	26.10%	0.00
First-time employees or long term unemployed	0.00	11.00%
Agricultural workers	22.30%	11.00%
Local fishing and coastal vessel employees, owners of boats	21.00%	8.00%

Self-employed

Self-employed professionals will pay contributions of 21.4%. However, contracting entities (companies or individuals with business activity) will be obliged to pay contributions on the self-employee’s fees if the services acquired represent for the self-employed an economic dependence greater than 80% or benefit from at least 50% of the total amount of the self-employed worker’s activity. The 10% rate applies when there is a dependency greater than 80%, and 7% in other situations. The obligation to contribute does not apply to: lawyers and solicitors, foreign self-employed workers carrying out temporary activities in Portugal (subject to a foreign regime) and other workers exempt from the obligation to contribute. Workers who accumulate employment work with self-employment professional activity for the same company or for the same company business group are subject to the general regime of employees.

Other taxes

Capital duty: Not applicable

Immovable property taxes: Property Tax (IMI) is a local tax levied on immovable property located in Portugal. The taxable person is the owner or usufructuary of the property as at 31 December of the tax year. The taxable amount of urban property is determined by direct valuation and results from the interplay of several factors (cost of construction, plot area, use, location, internal facilities and age). The rates are 0.3% to 0.45%, for urban property and 0,8% for rural property. For any immovable property owned by an entity resident in offshore jurisdiction (except individuals) or a dominated or controlled entity, direct or indirectly by these entities subject to a tax heaven regime, the rate is 7,5%. The above rates related to urban property may tripled in case of the property has been empty for over one year is in ruins, whose conservation status is not was caused by a natural disaster or calamity. An Additional Property Tax (AIMI) is due on immovable property related to the sum of the asset values regarding residential buildings and building land for construction owned by individuals (above €600.000), companies or entities in offshore jurisdiction, which rates are 0,7%, 0,4% or 7,5%, respectively. If the sum of the asset values is between €1,000,000 and €2,000,000 (or between €2,000,000 and €4,000,000 in the case of spouses with joint taxation option), an additional rate of 1% is applicable to the excess over the lowest limits when the taxpayer is an individual. In case of the sum of the asset values exceeds €2,000,000 (or €4,000,000 in the case of spouses with joint taxation option), an additional rate of 1.5% is applicable to the excess over the lowest limits when the taxpayer is an individual. When the property is owned by companies and allocated to the personal use of the shareholders, members of corporate bodies or of their respective spouses, ascendants and descendants, the applicable rate to the company is 0.7% (and 1% if property value is between €1,000,000 and €2,000,000 or 1.5% regarding the excess in relation to €2,000,000).

Transfer tax: Property transfer tax (IMT) is a local tax levied on the transfer for consideration of immovable property located in Portuguese territory. The rates are 5% for rural property, 6.5% for other urban properties. For any immovable property acquired by an entity resident in offshore jurisdiction (except individuals) or a dominated or controlled entity, direct or indirectly, by these entities subject to a tax heaven regime, the rate is 10%. In the case of acquisitions of buildings (or apartment) exclusively for own and permanent residence, the rates are in a specific table. A single rate of 6% or 7,5% will be applicable for acquisitions which amount is between €633,453 and €1,102,920 or more than €1,102,920, respectively. IMT is payable by the transferee. Such a transfer is also subject to stamp duty.

Stamp duty: The stamp duty is due on acts, contracts, documents, titles, books, papers and other transfers of title, provided for in the General Table, namely financial operations and insurance operations, which occur in Portuguese territory, including the free acquisition of goods by an individual by gift or inheritance. As a general rule, transactions subject to VAT and not exempt, are excluded from Stamp duty. The rate of transfer of immovable property is 0.8%. The rate of gifts of immovable property is 10.8% and the free acquisition of goods other than immovable property by individuals (Inheritance and gifts) is 10%. Stamp duty is payable by the transferee of the property. Some exemptions are available on gratuitous transfers to spouses, civil partners, descendants and forebears.

Net wealth/worth tax: Not applicable

Inheritance/gift taxes: Not applicable. It was abolished on 1 January 2004 and replaced by stamp duty.

Other: Other contributions are applicable in certain sectors – the regime of the contribution and solidarity surcharge on the banking sector, the regime of contribution on the energy sector as well as the regime of extraordinary contributions on the pharmaceutical industry and the national health system providers of medical devices.

Tax treaties

Portugal has concluded 81 full double taxation treaties on income and capital gains, but 2 treaties no longer are in force (Finland since January 1st, 2019 and Sweden since January 1st, 2022) and 1 treaty is waiting for compliance of all formalities to be in force (Kenya). Portugal is also a signatory to the OECD Multilateral Instrument. It has also 15 Agreements of tax information-exchange, but only 9 are in force. Double taxation treaties (in force): Germany; Austria; Algeria; South Africa; Saudi Arabia; Angola; Andorra; Barbados; Bahrain Belgium; Brazil; Bulgaria; Cape Verde; Canada; China; Chile; Cyprus; Correia do Sul; Ivory Coast; Colombia; Croatia; Cuba; Denmark; Slovakia; Ethiopia; Slovenia; Spain; Estonia; USA; United Arab Emirates; France; Georgia; Greece; Guinea-Bissau; Netherlands; Hong Kong; Hungary; India; Ireland; Italy; Iceland; Indonesia; Israel; Japan; Kuwait; Latvia; Lithuania; Luxembourg; Macao; Malta; Morocco; Mexico; Mozambique; Montenegro; Norway; Oman; Pakistan; Panama; Peru; Poland; Qatar; Kenya; United Kingdom of Great Britain and Northern Ireland; Czech Republic; Republic of Moldova; Romania; Russia; San Marino; São Tomé and Príncipe; Senegal; Singapore; Switzerland; East Timor; Tunisia; Türkiye; Ukraine; Uruguay; Venezuela; Vietnam. Agreements of tax information-exchange (in force): Andorra; Bermuda; Guernsey; Gibraltar; Cayman Islands; Isle of Man; Jersey; Saint Lucia; Saint Kitts and Nevis.