Portugal - Tax Guide for Freelance Contractors
Welcome to our guide to Portugal Taxation. You will find a wealth of information which will be useful if you plan to work in, or place consultants in, Portugal.
Our tax guides give a general overview of the actual taxation rates and rules at the time of writing. There are of course many ways to legally reduce tax or social security burdens in Portugal. Please contact us for more information or an actual breakdown of your situation, and to find out more about our range of payroll and contact management services in Portugal.
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Portugese Income Tax
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Portugese Visas and Work Permits
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Umbrella and Contract Management Services in Portugal
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Tax residents in Portugal: are liable to pay Portuguese tax on their worldwide income,
Non tax residents in Portugal: are liable to pay tax on Portuguese-source income only.
Individuals will be regarded as tax residents:
- If they remain in Portugal for more than 183 days in a calendar year,
- If they visit the country for a shorter period, but have a dwelling in the country which can be deemed to be used as their habitual residence,
- Married individuals who stay in the Portuguese territory for less than 183 days will not be deemed to be tax residents of Portugal due to their spouse being deemed to be tax resident, provided that they can prove that the major part of their economic relationships is not located on Portuguese territory.
New regime for non-habitual tax residents:
As of 2009, the government introduced a special tax regime for new tax residents in order to attract highly qualified and specialised foreign professionals. Individuals who would normally be considered to be tax residents would be able to apply for it and therefore benefit from a flat tax rate of 20% if:
- they have not been tax residents in the last five years in Portugal
- their job consists of a high-value-added activity of a scientific, technological or artistic nature
The regime is applicable for a period of 10 consecutive years. Within the 10-year period, the individual may interrupt the Portuguese tax residence but may recover the non-habitual residence status for the remaining years.
Married persons are taxed according to an income-splitting system which allows spouses to divide their combined income by two for the purposes of applying the progressive tax rates.
Taxable income includes:
Income becomes taxable when it is actually received, not when the right to it develops (for example when the salary is received, not when the work is done). Income is divided into six categories:
- employment income,
- business income,
- investment income,
- real estate income,
- capital gains income,
- pensions.
Certain deductions are permissible for 2012 including:
- substantiated and unreimbursed expenses relating to compulsory pension payments,
- certain payment made to qualifying cooperatives.
Tax credits available for 2012 include:
- 10% unreimbursed health-related expenses, including interest on health-related loans, incurred by the taxpayer and his household (limited),
- 30% of his own and his dependants’ education expenses (limited),
- 15% of expenses incurred in paying a mortgage or rent on a permanent dwelling in Portugal (certain restrictions apply),
- 25% of expenses incurred for the care, in nursing homes or special homes, of the taxpayer himself or his disabled dependants (limited),
- 20% of alimony payments (certain conditions apply),
- 20% of the annual contributions to private pension plans.
Income tax rates for tax residents for 201: 2
- 11.50% for the first EUR 4’898,
- 14.00% from EUR 4’898.01 to EUR 7’410,
- 24.50% from EUR 7’410.01 to EUR 18’375,
- 35.50% from EUR 18’375.01 to EUR 42’259,
- 38.00% from EUR 42’259.01 to EUR 61’244,
- 41.50% from EUR 61’244.01 to EUR 66’045,
- 43.50% from EUR 66’045.01 to EUR 153’300,
- 46.50% over EUR 153’300.01.
A 21.5% flat tax rate is applied to non-residents for 2012 (this is not to be confused with the 20% rate applied to certain new tax residents).
Filing date
Paper format: between March and April depending on type of income received,
Internet: between April and May depending on type of income received.
Internet: between April and May depending on type of income received.