Worldway Comprehensive News: In recent years, Portugal's 'Golden Residence Permit Program' has continued to boom, becoming highly sought after by Chinese investors. Since the 'Golden Residence Permit Law' was implemented in October 2012, 1,909 Chinese investors have been approved by the Portuguese Immigration and Borders Service (SEF), accounting for 80.3% of the total number of approvals (2,378). This demonstrates the high level of interest Chinese investors have in this real estate investment immigration project. Many who have experienced investment immigration know that after moving abroad, the tax policies of the destination country are closely related to life after immigration. So, what is the tax system in Portugal like? Next, senior European immigration experts from Worldway will provide a thematic analysis for Chinese investors to help safeguard their immigrant life.
The Portuguese tax system consists of personal income tax, corporate income tax, value-added tax (VAT), and local taxes. Social security funds are also a component of the Portuguese tax system. There are 7 types of taxes currently in effect in Portugal: corporate income tax, personal income tax, value-added tax, municipal property transfer tax, municipal property tax, stamp duty, and other taxes.
Main Taxes and Tax Rates
【Corporate Income Tax (IRC)】Companies registered in Portugal that engage in commercial, industrial, or agricultural business activities in Portugal must pay corporate income tax to the Portuguese tax authorities. The corporate income tax base is calculated as: Profit - Deductible Costs. As of 2015, the general corporate income tax rate is 21%. In addition, some companies are also subject to municipal surcharges and state surcharges.
For small and medium-sized enterprises with an annual turnover of less than 50 million euros, the tax rate is reduced to 17% for the portion of taxable profit up to 15,000 euros.
【Municipal Surcharge (Derrama)】Local governments have the right to impose a municipal surcharge of up to 1.5% on top of the corporate income tax.
【Personal Income Tax (IRS)】For Portuguese residents, the personal income tax base includes all domestic and foreign income (taxed at a rate of 0-48%). For non-Portuguese residents, only income earned in Portugal is used as the tax base (at a flat tax rate of 25%).
Personal income includes: wages, income from business operations or service provision, capital gains, rental income, investment income, pensions, director's fees, etc. Personal income tax is paid based on the sum of total annual income according to the following rates.
Starting from 2014, the number of tax brackets for Portuguese personal income tax was reduced from 8 to 5. An additional 2.5% surcharge is applied to individuals with an annual income between 80,000 and 250,000 euros, and a 5% surcharge is applied to those with an annual income between 250,000 and 500,000 euros. Furthermore, a special surcharge of 3.5% is applied to all Portuguese taxpayers with an annual income higher than 6,790 euros. This regulation also applies to non-habitual residents.
Portuguese Personal Income Tax Rates
【Value-Added Tax (IVA)】Value-added tax is a tax that has been levied in Portugal since it joined the European Community in 1986. All goods and service transactions conducted within Portugal, as well as goods imported from outside the European Union, are subject to VAT.
Portugal uses three VAT rates: the general rate, the reduced rate, and the super-reduced rate. In mainland Portugal, the general rate is 23%, the reduced rate is 13%, and the super-reduced rate is 6%. In the Autonomous Region of Madeira, these are 22%, 12%, and 5% respectively. In the Autonomous Region of the Azores, these are 16%, 9%, and 4% respectively.
【Municipal Property Transfer Tax (IMT)】All real estate and land transactions within Portugal are subject to the municipal property transfer tax. The tax base is the higher of the property transaction price or the registered property value. For rural real estate, the transfer tax is 5% of the transaction price. For urban real estate, the transfer tax rate varies depending on the transaction price: real estate sales contracts under 92,407 euros are exempt from the transfer tax; a floating rate of 2% to 8% applies to amounts between 92,407 and 574,323 euros; for amounts exceeding 574,323 euros, the transfer tax rate is fixed at 6%. The municipal property transfer tax is paid by the buyer, generally at the time of payment for the property or on the first working day thereafter. For property transactions conducted abroad, the tax must be paid within the month following the transaction.
【Municipal Property Tax (IMI)】Property owners must pay municipal property tax annually, which falls under the category of local taxes. The tax rate for rural real estate is 0.8%, the tax rate for urban real estate is between 0.3% and 0.5%, and the tax rate for real estate located in jurisdictions on the 'blacklist' is 7.5%. The tax base is calculated based on the registered property value and is periodically reviewed by local governments; the tax assessment base is usually 80-90% of the market price of the property.
【Stamp Duty (IS)】Stamp duty is a tax levied on various contracts, property transfer documents, business ledgers, books, etc., signed during economic activities. There are two ways to collect stamp duty in Portugal: one is a fixed rate, such as for checks, commercial ledgers, wills, real estate registration, etc., with fees ranging from 5 cents to 25 euros; the other is to collect stamp duty as a percentage of the total contract amount, with rates ranging from 0.04% to 10%. Such contracts include real estate sales, donations, guarantees, mortgages, insurance policies, etc.
【Other Taxes】These include excise taxes and vehicle taxes. Excise taxes include: taxes on alcoholic beverages, taxes on fuels and other energy sources, and tobacco taxes. The tax base for vehicle tax is determined based on engine capacity and carbon dioxide (CO2) emissions.
