How does the fiscal system work in Portugal?
Every investor needs clear rules regarding the taxes he must pay when he decides to work in a certain country. AICEP Portugal Global focuses on the key aspects of the Portuguese tax system, summarizes the main taxes in Portugal, as well as the system of contributions to Social Security and some tax benefits, with an emphasis on the most relevant for business investment in Portugal.
- Personal Income Tax (IRS). Non-residents are liable to income tax only on Portuguese-source income, which includes not only that portion of remuneration that can be allocated to the activity carried out in Portugal but also remuneration that is borne by a Portuguese company or permanent establishment. Non-residents are taxed at a flat rate of 25% on their taxable remuneration, in 2014.
- Corporate Income Tax (IRC). Corporate tax (CIT) is a tax levied on profits derived by both resident and non-resident entities. The mere holding of assets does not give rise to CIT taxation. Taxable resident entities are companies and other corporate bodies whose main activity is commercial, industrial or agricultural and with head office or effective place of management in Portuguese territory. Resident entities are generally subject to taxation on worldwide profits.on-resident entities with a permanent establishment in Portugal are also subject to corporate tax on the profit attributable to those permanent establishments.
- Municipal Property Tax (IMI). IMI is computed over the property tax value of urban and rural real estates located in the Portuguese territory. Property tax value is determined by the Portuguese Tax Authority based on the information given by the taxpayer and by the application of different ratios which depend on the type of the property, its localization, state of conservation and facilities. In last 10 years, urban properties were subject to a general review with effects on 31 December 2012.
- Municipal Property Transfer Tax (IMT). IMT is levied on the transfer for consideration of real estate located in the Portuguese territory. Such transfers may also be subject to Stamp Tax. IMT is due by the purchaser and levied on the purchase price or on the property tax value, whichever is higher. Property tax value is computed according to the rules foreseen in the Municipal Property Tax Code.
- Value Added Tax (IVA). Value Added Tax is a consumption tax and is charged on goods and services supplied in the course of business. Credit is given for VAT paid by most registered businesses, thus this tax is ultimately borne by the final consumer. For VAT purposes, the territory of Portugal includes the autonomous regions of Azores and Madeira with reduced rates applicable to supplies in these islands. The EU VAT Directives have been implemented in Portuguese law and the main provisions of these Directives are harmonized in the different EU Member States.
- Stamp Taxes. Stamp Tax is due on acts, contracts, documents, titles, books, papers and other facts foreseen in the General Stamp Tax Table, which occur in Portugal and are not subject or exempt from VAT (certain prizes may be simultaneously subject to VAT and Stamp Tax). There will be no cumulative taxation on the same document or act, except for acquisitions, for no consideration, of the ownership or other rights over immovable property.
- Other Taxes. a) Excise Duties. In Portugal there are several excise duties in line with the EU Directives on this matter. These specific excise duties are levied on the related products (alcohol and alcoholic beverages, beer, oil and gas and manufactured tobacco) in the manufacturing, processing or import phases and applicable throughout the Portuguese territory. b) Vehicle Tax. The vehicle tax (Imposto sobre Veículos or ISV) is a registration tax levied upon the release of vehicles for private consumption. The taxable base is the engine capacity and the level of the carbon dioxide (CO2) emission. VAT is also levied on the acquisition of cars and the ISV is included in the tax base for VAT purposes.