Tax rates in Portugal: what you need to know
Types of taxes in Portugal
Personal Income Tax (PIT): is a progressive tax that applies to both residents and non-residents with income derived from Portuguese sources. The taxable base consists of all income received by an individual during the calendar year, including wages, salaries, investment income and other forms of compensation.
Value Added Tax (vat): is a consumption tax on goods and services consumed by Portuguese natural or legal persons at various stages of production or distribution. It is levied at three rates: 23%, 13% и 6%.
Corporate income tax: this tax applies to companies operating within the country, as well as to companies with operations abroad but whose profits are derived from Portuguese sources. The corporate income tax rate depends on the legal status of the company; publicly traded companies pay 20%, while private companies can be taxed up to 28%.
Social security contributions: these are contributions paid by employers for the social security rights of their employees, such as health insurance, unemployment benefits, disability benefits, etc., which are calculated on the basis of employees' wages.
General tax rates in Portugal
Personal income tax rate: individuals subject to personal income tax are taxed on a progressive scale from 14.5% to 48% depending on their annual earnings; individuals earning more than €72,000 per year are taxed at a rate of 48%.
Value Added Tax Rate: The VAT rate varies between 6%, 13% and 23%. Food items are taxed at the lower rates, while luxury goods such as jewelry are taxed at 23%.
Income tax rate: companies operating in Portugal are subject to income tax ranging from 15% to 28% depending on their legal status; publicly traded companies pay 20% and private companies can be taxed up to 28%.
Tax benefits and incentives for business in Portugal
Startups can benefit from reduced income tax incentives if they organize their operations in certain areas of Lisbon known as Startup Lisbon Zones (ssl). In addition, foreign investors starting businesses in these zones can enjoy other benefits, such as reduced administrative costs and access to qualified human resources; they also benefit from reduced social security contributions when hiring new employees during the first two years after company registration.
Investment incentives are available through various programs such as the investment support programs (psi), which offer grants or subsidies for investments made in R&D projects; the investimento direto estrangeiro (ide) program, which provides incentives for foreign direct investment in Portugal; the portuguesa para investimentos e estratégia internacionalização (piei) program, which encourages internationalization strategies through grants or subsidies for R&D activities aimed at foreign markets.
International tax incentives include double tax treaties signed with more than 90 countries, whereby Portuguese taxpayers do not pay taxes twice when investing abroad. In addition, transfer pricing rules stipulate that companies transferring goods/services between entities located in different countries must use market prices rather than artificially inflated prices when calculating profits; this ensures fair taxation practices among multinationals.
Conclusion
In conclusion, Portugal has a progressive taxation system where individuals, businesses, start-ups and investors can benefit from various incentives; these include personal/corporate income tax reductions, double taxation agreements, investment incentives, etc. Given the favorable climatic conditions and educated workforce, it is no wonder why many entrepreneurs choose this country over others when looking to start a new business!
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