Portugal - Tax Guide for Freelance Contractors

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, among other conditions, they remain in the country for more than 183 days in a calendar year,
• if they visit the country for a shorter period and have a dwelling in the country which can be deemed to be used as their habitual residence,
• if one spouse is resident in Portugal the other is usually considered to be resident too, unless they can prove the contrary.

An optional tax regime for non residents has become available. They will be able to choose to be taxed under the same rules applicable to Portuguese-resident taxpayers whenever 90% of their total income received is employment income, self-employment income and pension obtained in Portuguese territory.

This optional regime will only apply to resident taxpayers in another country within the EU/EEA countries, provided that tax information is shared between them.

New regime for non-habitual tax residents:

The budget law for 2009 authorises the government to introduce a new tax regime for non-habitual tax residents in order to attract highly qualified and specialised foreign professionals. Individuals who would normally considered to be tax residents would be able to apply for it and therefore benefit from a flat tax rate of 20% probably – similar to non-residents – if:

•  they have not been tax residents in the last five years in Portugal,
•  they register with the Portuguese tax authorities as non-habitual residents – this option would be valid for 10 years,
•  they would be considered as tax residents in each of the 10 years according to the domestic rules,
•  their job consists of a high-value-added activity of a scientific, technological or artistic nature.

Married persons are taxed jointly, unless one spouse is non resident, in which case the resident spouse files a separate tax return.

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).

• Employment income including:
• salaries,
• wages,
• bonuses,
• commissions,
• subsidies,
• gains from stock option plans, etc.

Certain deductions are permissible for 2009 including:

• 20% of the amount related to alimony pensions,
• certain payments to specific cooperatives (i.e. housing cooperatives).

Tax credits available for 2009 include:

• 20% of pension plan contributions up to a maximum of EUR 400 for taxpayers younger than 35 years old, EUR 350 for taxpayers between 35 and 50 years old and EUR 300 for taxpayers older than 50 years,
• 30% of the cost incurred in the acquisition of a 100% electric or renewable non combusting energy driven vehicle (subject to registry), but limited to EUR 796,
• 30% of the expenses incurred related to interest and repayment of loans for the purchase of a property or improvement on permanent residence, whether located in another EU country or within EEA (in this last case provided that tax information is shared); the deduction is limited to EUR 703.20,
• 30% of the expenses for health care which have not been reimbursed,
• 30% of education expenses of the taxpayer and the taxpayer’s children limited to EUR 720,
• 25% of life/personal accident insurance (up to a maximum of EUR 64 for a single person and EUR 128 for married couples),
• 30% of health insurance premiums limited to EUR 82 for a single person and EUR 164 for a married couple plus EUR 41 for each dependent.
• EUR 247.50 for a single person,
• EUR 495 for a married couple,
• EUR 180 for each dependent child,
• EUR 360 for each child under 3 years old.

Income tax rates for tax residents for 2009:

• 10.50% for the first EUR 4’755,
• 13.00% from EUR 4’755.01 to EUR 7’192,
• 23.50% from EUR 7’192.01 to EUR 17’836,
• 34.00% from EUR 17’836.01 to EUR 41’021,
• 36.50% from EUR 41’021.01 to EUR 59’450,
• 40.00% from EUR 59’450.01 to EUR 64’110,
• 42.00% over EUR 64’110.00.

Flat tax rate for non-residents for 2009:

• 20% on employment income.

Filing date:

Between 1st of February and 15th of March, following the year end for individuals with employment and pension income.