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As much as we all love to hate that T-word, unfortunately taxes are a fact of life no matter where we live. Portugal is no different and, if you make the move, whether temporarily or permanently, you will need to familiarise yourself with the local tax regulations.
When it comes to taxes, Portugal is just as complex as any other country, and much information is out there. Some of it is more accurate than others and it’s always worth checking with a reputable tax accountant to ensure you’ve got it covered. Also be aware that there are different types of residency in Portugal, and how you register can have a big impact on your taxes.
The main taxes in Portugal include:
Annual property tax: IMI (Imposto sobre Municipal Imoveis)
The amount of property tax varies depending on the value of the property and the year it was built. Property tax is assessed, and is charged in three installments per year.
Note that there are different one-time taxes related to the purchase and sale of property called IMT (Imposto Municipal sobre a Transmissão Onerosa de Imóveis).
Road tax: IUC (Imposto Único de Circulação)
An annual tax is charged per vehicle and varies depending on the vehicle type. The tax is payable at the Finanças (Portuguese tax office).
VAT - called IVA in Portugal - becomes relevant if you set up your own business and as to be expected, is quite complex.
Stamp Duty applies to a variety of income and transactions, including inheritance, lottery winnings, selling and leasing property, and the rate varies.
Personal Income Tax
As in any country, income tax can be convoluted and often has ifs and buts and variations depending on individual circumstances. There are different ways to set up your residency in Portugal which can help reduce taxes. As before, consulting a tax accountant before committing to any legally binding situation is recommended.
In brief, residents are taxed on salaries, capital gains, real estate earnings and income from abroad. Foreign earnings may be covered under a tax treaty that will avoid you paying tax in both countries. Part time residency and other situations may mean that income tax is only to be paid on income in Portugal and not on income earned in other countries. Generally speaking tax rates are from 11.5% to 46.5%, depending on income, residency and from where the income generates.
Social security charges
Social security (Segurança Social) charges must be paid by residents, and in general, the current rate for employees is 11% and the employer matches with 23.75%. Social security charges vary for the self employed and depends on what you select, but in general can be between 24% and 32%.
More tax information
The best information we’ve managed to find for detailed tax information is on the PWC website, which updates their information annually. However we still recommend consultation with a tax accountant… in case you missed that earlier.
And now for something different
For some light-hearted fun, check out some really unusual taxes and tax laws from around the world!