Other taxes involved in this setup include corporate and personal income tax. Gains derived from stock options plans, subscription plans, attribution plans or equivalent share plans on securities issued by the employer are exempt, up to the limit of € 40,000, subject to certain conditions. The personal income tax withholding rate tables for 2019, applicable to employment income and pensions earned on the Mainland, have been published by Order nr. The other rates remain at 0.4% for properties held by companies, 0.7% for individuals and 1% for those owning property valued over €1 million. The regime is applicable for a period of ten consecutive years. Germany’s rate includes the 15 percent federal rate and municipal trade taxes, making the combined rate nearly twice the federal rate at 29.8 percent. Europe has the lowest regional average rate, at 20.27 percent (25.13 percent when weighted by GDP). The map shows statutory CIT rates in 27 European countries. A summary of the main regular tax obligations arising for companies and individuals. Companies that are subject to CIT with revenues of up to 1.2 million euros (EUR) in the given tax year and companies starting business activity from 2019 are able, under some conditions, to use the 9% CIT rate. the generality of the service-rendering activities) is partially conditioned by the verification of expenses and charges effectively incurred and related to the activity. A comparison of tax rates by countries is difficult and somewhat subjective, as tax laws in most countries are extremely complex and the tax burden falls differently on different groups in each country and sub-national unit. Severance payments paid by the employee when he or she terminates the labour contract without timely notice; Trade union fees of up to 1% of the gross income, increased by 50%, Simplified regime: depends on the activity exercised - please refer to above explanation, Organized standard accounting system: expenses related to the activities carried out, with some limitations, All the expenses effectively incurred and paid by the taxpayers in order to obtain or assure such income, excluding the financial costs, furniture, households appliances, decoration and comfort accessories, as well as the additional to the Municipal Property Tax (“AIMI"), Sale of real estate (except those arising from the sale of real state which benefited from non-refundable support from 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, 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, taxable income higher than € 7,091 and up to € 80,000. shares of Portuguese tax resident companies; other securities issued by Portuguese tax resident companies; autonomous warrants issued by Portuguese tax resident companies; derivatives negotiated on the regulated Stock Market; participation units in venture capital funds. the premiums and awards for disabled athletes and high performance athletes and their coaches. A flat CIT rate of 21% applies on the global amount of taxable income realised by companies resident for tax purposes in mainland Portugal (also applicable to Portuguese PEs of foreign entities). The majority of European countries tax corporate income at rates that range between 19 and 25 percent. Effective for the 2018 year and beyond, the federal corporate tax rate has been reduced from a stepped rate up to 35% to one flat rate of 21%. (1) Assuming that both taxpayers are people with disabilities. In the absence of publication of the ordinance determining the reference interest rate, it is considered 70% of the minimum  rate applicable by the ECB to its main refinancing operations or another rate legally equivalent, on the first working day of the year to which the income relates. The limits set out paragraphs b) to d) are increased as follows: i) central, regional or local administration; Foundations (with conditions); Deduction of 15% of the VAT incurred by any household member regarding certain provisions of services (8) and 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, 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 and provided that the taxpayer number is included in the invoice, Deduction of 45% of the amount incurred by any member of the household of a Single-parent taxpayers. h) Income arising from services rendered to an entity in which, for more than 183 days of the tax year: Validation of the application of the coefficient: Dependants <= 3 years old on December 31 of the year to which the tax relates, iv) Ascendants actually living in the same household with the taxpayer and who does not receive income greater than the minimum pension payable under the general regime, v) Only one ascendant actually living in the same household with the taxpayer and who does not receive income greater than the minimum pension payable under the general regime, iii) For each ascendant with disability actually living in the same household with the taxpayer and who does not receive income greater than the minimum pension payable under the general regime, iv) 30% of education and rehabilitation expenditures, v) 25% of life assurance premiums or contributions paid to credit unions, Disability expenses for each taxpayer and each dependant, which level of permanent disability is ≥ 90%. Non-resident shareholders of such entities may also benefit from a tax exemption on dividends and interest. (9)  The capital gains obtained by tax residents on the sale of real estate are only considered in 50%. At the Chilean company level, the Corporate Tax rate is 25% or 27% depending on the company's income tax regime (see question 4.6 below), calculated annually on its worldwide taxable income on a cash or accrual basis. The standard CIT rate is 20% in the Autonomous Region of Madeira and 16.8% in the Autonomous Region of the Azores, including PEs of foreign entities registered therein. Most European countries impose CIT rates that are either close to or fall below the global average. 1. 1056/2019, of 25 January. In general, this Tax Guide does not reflect any COVID-19 tax policy measures. For comparison, the world average in 2019 based on 185 countries is … (8) Subject to taxation at an autonomous/final rate of 28%. Help us continue our work by making a tax-deductible gift today. the rate is reduced to 10%. 1325 G St NW Our work depends on support from members of the public like you. Get all the latest global tax news and analysis sent directly to your inbox. the rate is reduced to 26%; for each renewal with an equal duration, an additional reduction of two percentage points, up to a limit of fourteen percentage points; Therefore, to the taxable income determined by applying the coefficients will be added the positive difference between 15% of the gross income and the sum of the following amounts: In addition to the amount of the above deduction, the amount of mandatory social security contributions paid, exceeding 10% of gross income and related to such professional activities, may also be deducted to the gross amount of income, if not deducted for other purposes. Taxes in Portugal are levied by both the national and regional governments of Portugal.Tax revenue in Portugal stood at 34.9% of GDP in 2018. The rate has gradually come down in the last decade, leaving it slightly below the EU average of 21.51%. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and global levels. Consideration of 50% of the positive or negative balance arising from disposals made by tax residents: a) rents paid, net of subsidies or official contributions, concerning an urban property or fraction for permanent residence under the Urban Rental Regime or the New Urban Rental Regime, taxable income higher than € 7,091 and up to € 30,000. The countries with the lowest CIT rates are Hungary (9.0 percent), Ireland (12.5 percent), and Lithuania (15.0 percent). Duration equal to or greater than 10 years and less than 20 years: reduction of fourteen percentage points of the autonomous rate, i.e. The only condition is that it is above 15%. Not subject to withholding tax. (3) Reference rate has not yet been determined. € 4,104 or, when higher, the total amount of mandatory social security contributions (in the part not exceeding 10% of the gross income received); personnel expenses, wages or salaries communicated to the Portuguese tax authorities; property rentals communicated through the issue of an electronic receipt or a specific statement, whose invoices and other documents are communicated to the Portuguese tax authorities (if only partially assigned to the professional activity, it is considered only 25% of the total amount); 1.5% of the tax registration value of the properties assigned to the business or professional activity or 4% of the tax registration value assigned to hotel activities or local accommodation (if only partially assigned to the professional activity, it is considered only 25% of the total amount); other expenses with the acquisition of goods and services related to the activity, dully communicated to Portuguese tax authorities, namely expenses with current consumption materials, electricity, water, transports and communications, rents, litigation, insurance, leasing rents, mandatory fees paid to professional associations and other organizations representing professional activities to which the taxpayer belongs, travels and stays of the taxpayer and his employees (if only partially assigned to the activity, it is considered only 25% of the total amount); Imports and intra-Community acquisitions of goods and services related to the activity. The list focuses on the main indicative types of taxes: corporate tax, individual income tax, and sales tax, including VAT and GST, but does not list capital gains tax. € 4,104 or, when higher, the total amount of the mandatory social security contributions. The Tax Foundation is the nation’s leading independent tax policy nonprofit. The CIT is the only tax levied on corporate income. Direct government funding of business R&D and tax incentives for R&D, Portugal, 2000-17 As a percentage of GDP, 2010 prices (right-hand scale) 0.00 0.10 0.20 0.30 0.40 0.50 0.60 % Direct government funding Tax incentive support Subnational tax incentive support Total 2006 (excl. (6) Provided that benefits from the Share Plans are not paid on a cash – settlement basis. Exemplification of the calculation of the amount of expenses to be presented by a taxpayer, in order to benefit from the full application of the legal coefficients to the gross income arising from the provision of services: Difference between 15% of gross income and the amount of deductible expenses. Enter Your Salary and the Portugal Salary Calculator will automatically produce a salary after tax illustration for you, simple. PIT is levied on income obtained by individuals, under six different categories, and its taxation will depend on the individual’s tax status. The country with the highest CIT rate is France (34.4 percent), followed by Portugal (31.5 percent) and Germany (29.8 percent). There has been one change to this tax in 2019 in the form of an additional rate of 1.5% for properties valued in excess of €2 million. Sales Tax Rate in Portugal averaged 21.19 percent from 2000 until 2020, reaching an all time high of 23 percent in 2011 and a record low of 17 percent in 2001. The regime will apply to individuals who become Portuguese tax residents under Portuguese domestic law in 2019 or 2020, provided that they: The tax regime for non-habitual residents is part of the Investment Tax Code and is intended to attract individuals and investments to Portugal. The standard CIT rate is 19%. 75%. Going for Growth (Cut-off date : December 2018) By country. These CIT rates include the federal, state, and local taxes where there are multiple levels of government. (4) Profits distributions attributed to employees are subject to Social Security contributions. The personal income tax withholding rate tables for 2019, applicable to employment income and pensions earned on the Autonomous Region of Madeira, have been published by Order nr. Corporate Tax Rates 2015-2019* Jurisdiction 2015 2016 2017 2018 2019. In the example above, a taxpayer who earns a total gross income of € 40,000 and incurs expenses in the amount of at least € 1,896 can benefit from the application of the coefficient in full, i.e. This amount can be increased to € 4,275, provided that the difference results from expenses incurred with mandatory fees paid to professional associations indispensable for the exercise of the respective activity. 4.1 What is the headline rate of tax on corporate profits? (6) Amounts invested after the retirement date are not deductible. The additional surcharge is progressive and it is applicable on the income subject to the marginal tax rates, exceeding € 80,000.A rate of 2.5% is applicable to taxpayers with a taxable income exceeding € 80,000 up to € 250,000 and a rate of 5% is applicable to the taxable income exceeding € 250,000. Keep up-to-date on significant tax developments around the globe with EY’s Global Tax Alert library. Tax credit of 20% of the amount invested: Limits to aggregate computed tax deductions, Retirement Saving Plan (PPR) – € 2.000 x 2, Assuming a global amount withheld from the couple's income of € 4,769, Dividends (by option to be taxed at progressive rates), Amount of the income not subject to taxation: 50%, Rental - own real estate (by option to be taxed at progressive rates), Capital gains on the sale of the rented real estate, 20% payments to retirement saving plans (x2), Not subject to tax withholdings- Taxed at the marginal rates of PIT. (4) Should the expenses be made outside of Portuguese territory, the taxpayer may report them using the Portuguese Tax Authorities' website. (2) Taxed autonomously at a rate of 28% if paid by non-resident entities and not subject to withholding tax. (3) The amount of the education and training expenses incurred by students attending education institutions located in inland regions ( as identified in Ministerial Order 208/2017 of 13 July), shall be increased by 10 percentage points. Being an expat and a tax resident of one country while still a citizen of another country—especially the United States—brings a specific set of conditions and burdens. The tax rate over personal income in 2015 (tax return 2016) was the following: To explain how to calculate the Portuguese personal income tax, I’m going to give you the example of a single person, without children, that earns 1500 € monthly of gross salary as an employee. The income obtained by the following individuals will be excluded from taxation: Based on the following assumptions, we have prepared an estimate of the PIT due by the Pereira family. Would you consider contributing to our work? Low CIT rates in Hungary, Ireland, and Lithuania can have a positive impact on these countries’ economic growth. Depending on the tax rate into which the taxpayer falls, capital gains taxes will be 28% or possibly lower, if added to general income and the tax bracket is still under 28% for the total amount. Duration equal or more than 20 years: reduction of eighteen percentage points of the autonomous rate, i.e. Pereira Family  the rate is reduced to 14%; (14) Final rates. Germany’s rate includes the 15 percent federal rate and municipal trade taxes, making the combined rate nearly twice the federal rate at 29.8 percent. To calculate the value of the IMT tax simply complete steps 1, 2 and 3 Values updated by the Portuguese State Budget for 2019 Fill in the following fields to calculate the IMT tax in Portugal: (5) For managers, members of the board, public sector managers and representatives of permanent establishments of non-resident entities, the amounts received for the termination of the employment contract are totally taxable, on the part that respects to those functions only. Rate– The standard corporate tax rate is 21%. The regime establishes a 50% relief from taxation on employment or self-employment income received after their return to Portugal. (7) This benefits also apply to the contributions made by the employers, in favor of the employees, to Public Capitalisation regime. (3) Income paid or made available to recipients resident in Portuguese territory by non-resident entities without permanent establishment in Portugal, domiciled in jurisdictions with more favourable tax regimes is subject to a tax rate of 35%. For that purpose, the individual should communicate to the said entity, through a written statement, that no similar income was/is received from other resident entities or from permanent establishments of non-resident entities in Portugal. The corporate tax rate is 21.4 percent as from January 1, 2019 (reduced to 20.6 percent from January 1, 2021). Corporate tax in Portugal Corporate tax rarely applies to self-employed workers and freelancers in Portugal. 208/2017 of 13 July). Figure 3. Duration equal to or greater than 2 years and less than 5 years: reduction of two percentage points of the autonomous rate, i.e. The referred tax reductions enter into force on 1 October, 2019. 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 certain specific conditions. 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. Would you consider telling us more about how we can do better? FWT: Final Withholding tax (13) The capital gains obtained by non-resident entities without permanent establishment in Portugal, who are domiciled in jurisdictions with more favourable tax regimes, is subject to a tax rate of 35%. (11) Extension of the exclusion (total or partial) from taxation of real estate capital gains, if there is reinvestment of the sale value in the acquisition of an insurance contract, individual subscription of an open pension fund or contribution to the public capitalisation regime, under certain conditions. The corporate tax base matters as well, though, since how countries design their corporate tax could hurt their growth prospects even if CIT rates are lowered. did not qualify as tax residents during the prior three years; qualified as tax residents in Portugal prior to 31 December 2015; did not apply for the non-habitual residents regime. As from 1 January 2019, the Portuguese monthly minimum wage is increased to Eur 600. Taxpayers who have not exceeded an annual gross amount of € 200,000 in this category in the previous year and who have not opted for the organized accounts regime are covered by the simplified regime. For the purpose of liability to Social Security Contributions, additional conditions are required. Both spouses are employed; in addition, the wife works as a self-employed individual as a lawyer. Interest is exempt on capital up to a balance of ≤ € 10,500, Author rights obtained by  the Portuguese tax resident original owner are taxed only at 50%, with the amount excluded from taxation being limited to € 10,000, Capital gains derived from the sale of participation units are taxed at a 10% rate, Real estate investment funds / entities in forest resources, Capital gains derived from the sale of participation units/shares are taxed at a 10% rate, Contributions to social security regimes made by employers. However, corporate income tax (CIT) rates differ substantially across countries, ranging from 9 percent in Hungary to 34.4 percent in France. The regime will apply to individuals who become Portuguese tax residents under Portuguese domestic law in a certain year and have not qualified as tax residents in Portugal in any of the previous five years. 37/2019, of 31 January. Countries with a lower corporate income tax are likely to grow faster and attract more investment and jobs than high-tax countries. © 2017 - 2021 PwC. All European countries tax corporate income. However, this liability to Social Security will only enter into force when regulated. The Tax Foundation works hard to provide insightful tax policy analysis. Portugal has a high corporate tax rate of 31.5 percent (the OECD average is 23.3 percent). More insights into the recent history and current state of corporate income taxes around the world are provided here. (1) Portuguese reference remuneration for 2019 (Indexante dos Apoios Sociais - IAS) – € 435,76. subnational tax support) (14) Final rates. Liable to PIT on worldwide income (Portugal and abroad), Not liable to PIT 50% of the employment income and business and professional income, Liable to PIT on the net employment and self-employment income from "high value-added activities" at a flat rate of 20%, Liable to PIT only on the Portuguese source of income, Salaries, holidays and Christmas bonus, commissions, Travel expenses not related to the company’s activity, Loans granted by the company – acquisition of permanent private house, (≤ €180,426.40 ) and (rate≥ 70% x ECB rate), Loans granted by other entity - the employer supports the interest (totally or partly), Extraordinary profit distribution/profit distribution, Indemnity for the termination of the labour contract, Up to (average of the regular salary of the last 12 months)*years of work, Retirement pension, company’s complement/Social Security, Royalties earned by the author/ Original owner, Royalties earned by the non author/ Technical assistance, capital gains arising the disposal of real estate, a) Sales of goods and products, as well as provisions of services in the hospitality, restaurant and beverage sector, with the exception of those relating to local accommodation establishments in the form of apartments/houses, b) Listed service-rendering activities (article 151.º of PIT Code), d) Royalties, Know how and other income (investment income, capital gains, rental income), f) Business related subsidies and remaining income of category B, g) Income arising from services rendered by a partner to a company subject to the “tax transparency regime”. This benefits consists in a PIT tax exemption applicable to the part of the remuneration paid to the employee, by the Portuguese employer, exclusively as compensation for moving and staying abroad (up to € 10,000). The corporate tax rate hasn’t risen in the last few years and seems to have plateaued at 21%. This page provides - Portugal Sales Tax Rate | VAT - actual values, historical data, forecast, chart, statistics, economic calendar and news. The maximum income tax rate in Portugal of 46.00% ranks Portugal as one of the ten highest taxed countries in the world. Portugal: Corporate Tax Comparative Guide 25 November 2019 . Weaknesses. (13) The capital gains obtained by non-resident entities without permanent establishment in Portugal, who are domiciled in jurisdictions with more favourable tax regimes, is subject to a tax rate of 35%. We can do better Year begins after Jan. 1, 2018, and Lithuania can have positive... 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