Contributions and Taxation

Useful Information

Taxes
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​The Portuguese tax system applies various taxes, in particular:

  • Income tax (IRS) and corporate tax (IRC);
  • Property taxes – municipal property tax (IMI) and municipal property transfer tax (IMT);
  • Consumption taxes – value added tax (IVA);
  • Other taxes on specific situations and/or assets, i.e., stamp duty, car tax, fuel tax, etc.

In the case of foreigners who remain in Portugal for up to one year, there are some particular aspects to take into consideration.

  • Tax identification number (NIF)

For individuals who come to work in Portugal, the first contact with the Portuguese tax system occurs when applying for a tax identification number (NIF).

A NIF is necessary to carry out any legal process and even to open a bank account in the country. It can be applied for by yourself at the Directorate General for Taxation (DGCI) (at your local tax office or Citizens' Advice Bureau (Loja do Cidadão)), if you are living in Portugal, or by a tax representative, if you are non-resident. It is necessary to present a valid ID (civil identification document or passport) and fill a specific form.

  • Income tax

Income tax is applicable to both individuals (IRS) and companies (IRC). However, whether you have to pay income tax or not will depend on your employment relationship with the host organisation (see information on the Portuguese employment system) and whether you are a resident or not. Residents are taxed on their overall earnings, while non-residents are only taxed on income earned in Portugal.

A resident is someone who remains in the country for at least 183 consecutive days in a 12-month period or whose main residence is in Portugal. A resident must pay IRS (income tax) on income earned anywhere in the world.

On the other hand, a non-resident is someone who remains in Portugal for less than 183 days. In this case, s/he is not considered to be tax domiciled and must only pay tax on income earned in Portugal.

When no relationship exists, such as in the case, for instance, of scientific research grants (there is no legal employment relationship with the host organisations), the tax is not applicable. The same applies to a foreign student who is studying in Porto under a mobility programme.

  • Social security contributions

For the majority of workers, social security contributions are calculated by applying an overall rate of 34.75% (employees pay 11% and employers 23.75%) to their wages. Employee contributions are deducted directly from their wages and paid to social security by the employer.

For the self-employed, the size of the contribution is calculated by applying a rate to their earnings chosen from one of 10 scales indexed to the IAS (social security index). The amount deducted is therefore related to the level of social protection chosen by the worker: compulsory (25.4%) or more extensive (32%).

For scientific research grant holders, contributions are calculated by applying a rate of 20% to a base salary calculated as six times the IAS (social security index).

 

Further information on Contributions and Taxation can be obtained from:

Published 22-05-2013