The Portuguese tax framework is dynamic, as the tax legislation is subject to frequent changes due to political swings, with changes occurring on a regular, and often annual, basis.

The traditional vehicle for the introduction of such changes is the State Budget (Orçamento do Estado), which is drafted yearly by the Government. The drafted Budget is submitted to Parliament for discussion and approval, after which it is promulgated by the President and published in the Portuguese Official Gazette (Diário da República). Traditionally, most amendments enter into force at the beginning of the following fiscal year (January 1^st) for systematic consistency. Where necessary, supplementary regulations are issued to ensure their effective and proper implementation.

In addition to amendments introduced through the State Budget, Portugal regularly aligns its legislation with European Union and Organisation for Economic Co-operation and Development (OECD) initiatives. This involves the transposition of EU directives into domestic law on tax matters or the direct application of new EU regulations.

Furthermore, Portuguese tax law may undergo ad hoc changes to address recent jurisprudential developments.

Taxpayers in Portugal are subject to various administrative obligations.

Filing of tax returns is required by both individuals and legal persons: the Personal Income Tax return (PIT) for individuals, and the Corporate Income Tax return (CIT) for companies and other entities.

PIT returns must be submitted between April 1st and June 30^th, for the previous year’s income, with any tax due payable by August 31^st. The tax is assessed by the Tax Authority. CIT returns must be submitted by May 31^st, and tax is determined on a self-assessment basis.

Certain individuals and entities that qualify as taxable persons for VAT purposes, including self-employed individuals and companies that produce, trade, or provide services with a place of supply in Portugal, must notify the tax authorities of the commencement, modification, or cessation of their activity. VAT returns must be submitted monthly or quarterly, depending on trading volume.

Some taxpayers (namely, employers of any nature and self-employed individuals) are required to meet Social Security obligations. For example, self-employed workers must submit quarterly Social Security returns.

Regarding real estate property, owners and certain holders of rights in rem are liable for an annual municipal property tax, which may be paid in up to three instalments over the year.

For record-maintenance, the general retention period is 10 years, unless a different period is specifically established.

The Portuguese Tax Authority (Autoridade Tributária e Aduaneira) is the administrative body responsible for the assessment, collection, and enforcement of taxes in Portugal. It falls under the oversight of the Ministry of Finance and is organically dependent. All taxpayers have access to the Tax Authority’s online portal using secure credentials (taxpayer number and password), which enables them to interact directly with the Authority.

For routine matters, taxpayers can use the e-Balcão service to submit requests or seek clarifications. In most cases, the Tax Authority can respond directly through this platform and resolve the issue promptly.

For more complex or disputed matters, however, e-Balcão may not be sufficient. In such instances, taxpayers may pursue formal dispute resolution mechanisms, including administrative appeals, arbitration, or judicial proceedings.

Tax disputes can be decided via administrative appeal, judicial court ruling, or tax arbitration.

Administrative appeals are filed before the Tax Authority and are submitted to the competent Tax Office of the taxpayer’s area of residence. In most instances of a refusal, the taxpayer may subsequently appeal to the administrative and tax court system.

Alternatively, taxpayers may bypass the administrative appeal and take their case directly to the judicial courts. Court proceedings can be lengthy due to current backlogs in the judicial system.

A faster option is arbitration, which is handled by the CAAD (Centro de Arbitragem Administrativa). Arbitration generally provides a more expedient resolution than the standard court process.

In Portugal, tax payment deadlines vary depending on the type of tax and the taxpayer’s specific circumstances, as there is no standard rule. Deadlines are generally set by law, although they may occasionally be adjusted to account for exceptional circumstances. For instance, due to a blackout in April 2025 that prevented access to the Tax Authority’s online portals, deadlines for certain filings were extended. The Tax Authority issues an annual fiscal calendar outlining the key dates for tax payments and return submissions.

For PIT, payment is generally due by August 31^st. In the case of CIT, the payment deadline coincides with the filing of the annual return, which must be submitted by May 31^st.

VAT payment deadlines depend on the reporting regime. Under the monthly regime, the tax must be filed and paid by the 25^th day of the second month following the reporting period. Under the quarterly regime, payment is due by the 25^th of the second month following the quarter’s close.

Regarding property taxation, Municipal Property Tax is payable annually and may be settled in a single instalment or in up to three installments, depending on the total amount due. Property Transfer Tax, by contrast, is normally payable on the date of the acquisition (or deemed acquisition) of real estate property.

There are no special deadlines for disputed amounts. In the event a taxpayer chooses to dispute the tax assessed, the payment is still generally required by the statutory deadline. Defaulting will trigger enforcement proceedings by the Tax Authority, which typically result in interest charges and penalties. To avoid such issues, taxpayers are therefore advised to pay the outstanding tax and subsequently challenge the tax amount. However, if the taxpayer’s claim is successful, any amount paid in advance will be reimbursed, in addition to interest. It is also possible to offer a guarantee in lieu of payment while challenging the assessed tax.

Tax authorities, including their officers, employees, and administrative staff, are required to maintain the confidentiality of all taxpayer information, as well as any personal data obtained during tax proceedings. Confidentiality may be waived in certain circumstances, such as with the taxpayer’s authorization, in cases of cooperation between the Tax Authority and other public entities or foreign tax authorities, or when required for judicial proceedings or registration processes.

Portugal adopted the Common Reporting Standard by transposing EU Council Directive 2014/107/EU, which took effect on January 1^st, 2016.

Portugal has a Public Register of Beneficial Ownership. Companies, foundations, and other legal entities incorporated in Portugal are required to register with the Ultimate Beneficial Ownership Register and to regularly declare their beneficial owners.

The Portuguese CIT Code stipulates that a company is considered resident in Portugal if it has either its statutory seat or its place of effective management within Portuguese territory.

The concept of “place of effective management” means that a company, although incorporated and registered in another jurisdiction, may still be considered resident in Portugal and therefore subject to taxation here.

There is no legal definition of the concept of effective place of management. Portuguese Authorities follow the criteria provided by OECD Commentaries, EU Directives, and case law. Thus, the place of effective management is defined as the place where key management decisions are undertaken.

Certain restrictions apply to passthrough entities claiming relief under Double Tax Treaties, as nonresident shareholders of such entities are ineligible under DTTs entered into by Portugal.

Yes, the Tax Authority monitors cross-border transactions within international groups primarily through transfer pricing rules and the General Anti-Avoidance Rule (GAAR), as well as Controlled Foreign Company (CFC) rules. Secondarily, it relies on obligations arising from the transposition of EU Directive 2018/822 of 25 May 2018 (DAC 6) and rules applicable to transactions carried out with entities in blacklisted jurisdictions.

Yes, Portugal applies Controlled Foreign Corporation (CFC) rules in line with the EU Anti-Tax Avoidance Directive (EU Directive 2016/1164) (ATAD).

Under Portuguese law, a CFC is a foreign entity subject to a more favorable tax regime, namely where the effective income tax paid is less than 50% of the amount that would be payable in Portugal under domestic rules, or where the entity is established in a blacklisted jurisdiction.

Under the CFC regime, a substantial interest is deemed to exist where a Portuguese-resident company holds, directly or indirectly or using a proxy, at least 25% of the share capital, voting rights, or rights to income of a non-resident entity, in which case the profits of that entity are attributed to the resident company.

Resident taxpayers controlling a foreign entity must include all or part of the CFC’s low-taxed income in their Portuguese tax base, even if no distribution was made. If a distribution does occur, the income amount is reduced by the amount previously taxed under the Portuguese CFC rules.

The CFC regime does not apply where the entity is incorporated into another EU Member State or in an EEA Member State that cooperates in tax matters, provided some requirements are met.

Yes, Portugal enforces a transfer pricing regime applicable to cross-border and domestic transactions between related parties. The terms and conditions applied must be those that would have been agreed between independent entities in comparable circumstances, in accordance with the arm’s length principle and consistent with OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

Furthermore, the CIT Code requires companies with an annual turnover exceeding EUR 10 million to prepare and submit transfer pricing documentation (Master File and Local File), unless an exemption applies. The exemption extends to situations in which the value of transactions does not exceed EUR 100,000 with each entity and EUR 500,000 in total.

Portugal no longer enforces a traditional “thin capitalization” regime. Instead, rules have been introduced to limit the deductibility of financing expenses. Such expenses are deductible up to EUR 1 million or 30% of EBITDA (whichever is higher). Any unused portion of this limit may be carried forward and added to the maximum deductible amount for up to five subsequent tax periods.

Corporate taxpayers are entitled to request Advance Pricing Agreements (APAs), to determine, in advance, the transfer pricing policy to be applied, usually consistent with OECD Guidelines. Portuguese law provides for unilateral, bilateral, and multilateral APAs.

Portugal has a general anti-avoidance rule (GAAR) designed to combat tax avoidance. Under the GAAR, artificial arrangements lacking valid economic reasons, carried out in abuse of legal forms, or whose primary purpose is to obtain a tax advantage, may be disregarded for tax purposes. Actual taxation shall reflect the transaction’s economic reality rather than its adopted legal form.

The GAAR is enforced through a special procedure, and the Tax Authority bears the burden of proving that the GAAR’s conditions are met in the specific case. The taxpayer is entitled to a prior hearing before any decision is made.

No, Portugal has not implemented a digital services tax. Portugal transposed EU Directive 2021/514 (DAC 7) in 2023, requiring digital platform operators to disclose information on platform activities carried out by customers and reportable sellers.

Portugal has steadily adjusted its tax system to reflect the OECD Base Erosion and Profit Shifting (BEPS) agenda, which is largely carried out through the implementation of EU directives. A range of measures have been adopted, such as rules addressing hybrid mismatches (Action 2), limits on interest deductions (Action 4), and controlled foreign company (CFC) legislation (Action 3). Anti-abuse clauses in treaties, enhanced reporting duties (including Country-by-Country Reporting – Action 13), and reinforced information-exchange obligations have also been introduced.

Portuguese transfer pricing rules historically followed OECD Guidelines and are in line with Actions 8, 9, and 10.

The Multilateral Instrument (MLI) has further reshaped the application of treaties. Other initiatives include the modified nexus approach applied to the Patent Box regime (Action 5), disclosure obligations for cross-border tax arrangements, and revisions to transfer pricing rules and the definition of permanent establishment in line with OECD guidance (Action 7).

More recently, Portugal implemented the Global Minimum Tax regime (RIMG) by transposing EU Directive 2022/2523 of December 14^th, 2022. This framework imposes a minimum level of taxation on large domestic groups and multinational enterprises operating in the EU. Subsequently, a Ministerial Order approved the Registration Form Model and its completion guidelines under the RIMG, securing compliance with the registration obligations of entities located in Portugal that form part of in-scope groups.

Portugal traditionally has a positive attitude towards OECD-sponsored initiatives. As a result, Portuguese legislation is generally aligned with OECD BEPS standards. However, there are certain minor divergences, notably through the incorporation of elements of the UN Model Tax Convention, namely in relation to on-service permanent establishments and dependent agent PEs. Often, Portugal exceeds the minimum standards in the transposition of EU Directives and OECD-sponsored initiatives.

Portugal has negotiated the inclusion of “limitation on benefits” clauses in recent DTTs, in line with BEPS Action 6 recommendations. This stance is further enhanced by the inclusion of the Principal Purpose Test through the MLI.

For further details on connected matters, please see Question 14.

Yes, Portugal follows the OECD Model.

Business Profits

For resident CIT taxpayers and PEs, CIT is generally levied on taxable income at a rate of 20%. Small and medium-sized enterprises (SMEs) benefit from a reduced rate of 16% on profits up to EUR 50,000. Lower rates are available in the Madeira and Azores Autonomous Regions.

Non-resident entities without a permanent establishment in Portugal are generally taxed at a rate of 25% on income sourced in Portugal, unless a lower DTT rate applies

Under the simplified regime, CIT taxpayers with an annual revenue not exceeding EUR 200,000 and meeting several conditions may opt to determine their taxable base by applying fixed coefficients to gross revenue, instead of accounting.

A municipal surcharge tax (derrama municipal) may be levied at a tax rate of up to 1.5% on the taxable profit before the deduction of carried-forward tax losses. Each municipality sets the rate yearly.

PIT

Individuals qualifying as tax residents in Portugal are generally taxed on a worldwide income basis. Non-resident individuals are liable to Portuguese tax only on Portuguese-sourced income. Under certain types of special income tax regimes (Non-Habitual Tax Residency and Fiscal Incentive for Scientific Research and Innovation, NHR and IFICI, respectively), specific types of foreign-source income may be exempt under specific conditions.

Portuguese PIT is a schedular tax, with income being divided into the following categories for the purposes of assessing the taxable basis:

A – Employment income;

B – Business and professional income;

E – Capital income such as dividends, interest, royalties;

F – Real estate income;

G – Capital gains and other net worth increases; and

H – Pension income.

As a general rule, earned income and pensions are taxed according to progressive tax rates, ranging from 12.5% to 48% for income exceeding EUR 83,696. For individuals whose taxable income exceeds EUR 80,000, a solidarity charge of 2% applies. Taxable income in excess of EUR 250,000 is liable to an additional solidarity surcharge of 5%.

Interests, dividends, and royalties are taxed at a flat rate of 28% or 35% (for income derived from blacklisted jurisdictions). Rental income is generally subject to tax at a rate of 25% (residential use) or 28%.

Long-term capital gains on the disposal of financial instruments are generally taxed at a rate of 28% or 35% (for income connected to blacklisted jurisdictions). Short-term capital gains (holding period not exceeding 365 days) can be taxed at progressive rates if the taxpayer’s income exceeds a threshold of EUR 83,696.

In contrast, capital gains on real estate are subject to progressive rates on half of the gain. Under certain circumstances, capital gains on property may be exempt from tax under a rollover relief for reinvestment of proceeds in a new primary residence.

A full exemption from long-term capital gains is available at the disposal of cryptocurrency and virtual assets.

VAT (or other indirect taxes)

Portugal’s VAT system follows the EU VAT Directive’s common system. VAT generally applies to all supplies of goods and services and importations, with two types of exemptions as to the right to deduct VAT input.

VAT rates differ between mainland Portugal and the autonomous regions. In mainland Portugal, the standard VAT rate is 23%, with an intermediate rate of 13% and a reduced rate of 6%. In the autonomous regions, the rates are lower. In Madeira, the standard rate is 22%, the intermediate rate 12%, and the reduced rate 4%. In the Azores, the standard rate is 9%, the intermediate rate 12%, and the reduced rate 4%.

Stamp and/or capital duties:

Stamp Duty applies to certain transactions, agreements, or legal instruments, including the acquisition of property, loan contracts, donations, and guarantees. It is only levied on activities deemed to take place within Portugal and which are not subject to VAT.

Yes, business tax is generally imposed on a resident’s corporate taxpayer profits assessed in accordance with standard accounting principles and tax adjustments per the provisions of the Portuguese CIT Code.

Furthermore, permanent establishments are taxed on a worldwide income basis, using the same taxable basis as resident corporate taxpayers, i.e. profits.

In addition, under the simplified regime, CIT taxpayers with annual revenue not exceeding EUR 200,000 and meeting several conditions may opt to determine their taxable base by applying fixed coefficients to gross receipts instead of accounting.

Trusts are generally neither recognised nor regulated under Portuguese law, except in certain limited cases under Madeiran law. Portugal is not a signatory to the Hague Convention of July 1^st, 1985, on the Law Applicable to Trusts and their Recognition. For this reason, several instances of income and or property may be attributable to the ultimate beneficiary owner of fiduciary structures.

Non-corporate entities, such as foundations, associations, or cooperatives, may qualify for a special tax regime if granted public utility status. This recognition provides various benefits, including exemptions from property transfer tax, property tax, stamp duty, and corporate income tax, provided the assets are used directly for statutory purposes. Public utility status is granted to organisations that pursue general, regional, or local objectives in cooperation with public authorities and operate in legally defined sectors, such as social solidarity, education, training, or local development.

Furthermore, certain companies are treated as tax transparent, including civil companies not incorporated under commercial law, professional companies, and companies engaged in the mere administration of assets (usually held by shareholders of the same family). Complementary business groupings and European economic interest groupings are also fiscally transparent. In these cases, the income is directly attributed to the partners or shareholders.

For tax purposes, a tax resident transparent company constitutes a permanent establishment of its non-resident shareholders.

For resident taxpayers, corporate tax liability in Portugal is determined by tax residence rather than the place of incorporation. Consequently, a company incorporated abroad may still be subject to Portuguese corporate tax if it is considered resident in Portugal.

As noted in Question 8, a company is regarded as resident in Portugal if it has either its statutory seat or its place of effective management in the Portuguese territory.

Resident companies are taxed on their worldwide income, with double taxation relief being granted either by the applicable DTT or under domestic law.

Portugal adopts a credit method to offset taxes paid at source. In the event a DTT applies, the tax credit may not exceed the tax allowed to be paid abroad under the terms set out in the DTT.

Nonresident corporate taxpayers without a PE are taxed on Portuguese-sourced income, with exemptions available under the applicable DTT.

Nonresident corporate taxpayers with a PE are taxed under CIT provisions on worldwide income (profits) attributable to the PE.

Yes, Portugal offers favorable tax regimes for companies and individuals.

Although Portugal has several tax incentives in force, sector-specific exemptions do not exist. As an EU Member State, Portugal faces restrictions when granting tax benefits due to state aid limitations.

The Madeira International Business Center regime applies to entities licensed until December 31^st, 2026, granting access to a reduced corporate income tax rate of 5%, available until December 31^st, 2028. Eligibility for this benefit is subject to compliance with specific requirements relating to payroll costs and the nature of the activities performed. In addition, several income ceilings apply, determined by variables such as the number of eligible jobs created, the level of annual labor costs, the annual turnover, and the gross value added generated within the Autonomous Region of Madeira. Other benefits apply to MBIC licensed enterprises.

The RFAI is an Investment Promotion Incentive that translates into a deduction against CIT of a variable percentage of investment costs in productive assets (tangible and intangible), of companies operating in specific business sectors.

For individuals, the extremely popular NHR regime is still in force for past applicants. However, it was abolished at the end of 2023 by the 2024 State Budget. Individuals who were granted the NHR status as of December 31^st, 2023, are grandfathered in for a period of 10 years as of the date of approval. In addition, a transitional regime allowed certain applicants moving to Portugal prior to late 2023 to be granted the status.

Following the end of NHR, a new preferential regime was introduced, the IFICI. Although it is often regarded as its successor, it is narrower in scope and requirements are stricter The IFICI regime aims to attract businesses engaged in innovation and scientific research, with the strategic objective of fostering highly qualified employment in Portugal. It provides a reduced tax rate of 20% on employment and self-employment income for eligible activities carried out in Portugal, as well as an exemption for foreign-sourced income, except pensions and income derived from blacklisted jurisdictions. These exemptions are beneficial for both High Net Worth Individuals and high-added value professionals.

Portugal has also increased its focus on encouraging investment in technology and innovation through additional measures such as, the Patent Box regime, and the new legal framework for start-ups and mid-cap companies, with a special tax regime that also benefits employees of startups in relation to stock options plans.

Yes, Portugal offers a special Patent Box regime. This regime allows an exemption of up to 85% of the income derived from the licensing or assignment of patents, copyrights (including software), utility models, industrial designs, as well as compensation received for infringement of intellectual property rights.

A limit applies through an eligible expense / total expense ratio associated with the development of the IP rights. The Portuguese Patent Box regime follows a modified nexus approach and is compliant with BEPS Action 5.

In Portugal, groups of companies may opt to be taxed on their aggregated taxable basis. To qualify, the parent company must directly or indirectly hold at least 75% of the share capital of its subsidiaries and control at least 50% of their voting rights.

It is possible for the Parent Company to hold control over the subsidiaries through an EU or EEA resident company.

Additional requirements must also be met. All subsidiaries must be tax resident in Portugal, and their income must be fully subject to CIT. The parent company must have held control for more than twelve months, and must not be controlled by another entity, and must not have opted out of the regime during the previous three years.

Under this framework, the group’s taxable profit is determined by the parent company through the consolidation of the taxable profits and tax losses reported in the individual returns of each group member. Losses may be carried forward but are capped at 65% of taxable profit.

Yes, Portugal imposes withholding taxes on income paid to both individuals and legal persons in a domestic or cross-border context.

For individuals, withholding tax generally applies to salaries, pensions, rental income, dividends, interest, and royalties. The rates depend on the income type and any applicable DTTs. For corporate taxpayers, withholding taxes apply, absent of a DTT to dividends, interest, royalties, and service fees. Rates may increase if the payee is in a blacklisted jurisdiction or decrease under a DTT.

Portugal has 78 DTTs in force. Where a DTT applies, its conditions govern. Without a DTT, a general 25% withholding tax applies to income paid to non-resident CIT taxpayers.

Interest and royalty payments may also be exempt from withholding tax under the EU Interest and Royalties Directive, provided certain requirements are met.

For dividend income see 25.

Yes. Portugal applies several environmental levies payable by businesses, which are connected to sectors such as energy, transportation, pollution, and resource use.

The main instruments are the Tax on Petroleum Products (ISP), the Vehicle Tax (ISV), and the Single Circulation Tax (IUC), which collectively aim to incentivize the use of cleaner energy and more sustainable transportation practices.

Yes, dividends received from both resident and non-resident companies are generally subject to a withholding tax rate of 25%. However, exemptions may apply in certain cases. In addition, applicable double tax treaties may provide for reduced withholding tax rates on dividend distributions.

Generally, inbound and outbound dividends are taxed at standard CIT rates unless a participation exemption regime applies.

The participation exemption regime enables profits and reserves distributed to corporate taxpayers with their registered office or effective management in Portugal to be excluded from their taxable income, provided the following conditions are met:

1. The distributing company is subject to a CIT as listed in Directive 2011/96/EU or taxed at a minimum rate of 12% (60% of the current Portuguese CIT rate);
2. The Parent company holds at least 10% of the share capital or voting rights of the distributing entity for a continuous period of at least one year; and
3. The distributing company is not resident in a blacklisted jurisdiction.

The participation exemption regime also applies to domestic payments of dividends and outbound dividends.

Mutatis mutandis, an equivalent participation exemption regime exists for capital gains on the disposal of qualifying shareholdings. Restrictions may apply for the disposal of shareholdings in Portuguese companies owning a considerable percentage of real estate assets.

Portugal has traditionally attracted investment with a one-of-a-kind mix of lifestyle benefits and business- and tax-related advantages.

Its increasingly safe, innovation-friendly environment has secured rising volumes of FDI, benefiting from strong momentum in innovative sectors. The IFICI regime offers a one-of-a-kind opportunity for HNWIs and high-value-added professionals. It is expected to sustain the current growth momentum as a key attraction tool for talent in innovation-driven sectors.

Portugal also offers a strong case for investors in cryptocurrencies and businesses operating in the sector, given its full PIT exemption for long-term capital gains on the disposal of such assets.

Companies can second employees to Portugal while keeping Social Security contributions at source under the applicable EU coordination rules and/or bilateral Social Security conventions, thus minimizing payroll friction during the assignment.

Over the last decade, Portugal has revamped its regulatory and tax rules applicable to collective undertakings such as investment funds and REITs, making investment in this jurisdiction tax efficient.

The broad Portuguese DTT network (78 DTTs), together with a global participation-exemption regime, enables efficient capital repatriation and investment. Portugal’s special position within the Lusophone/CPLP world makes it an established platform for investment and doing business in those markets, while also serving as a gateway to the E.U.

The current government maintains a pro-business stance, with the intention to further reduce corporate taxation and to offer wider tax relief. Portugal consistently ranks as one of the safest countries in the world and offers an increasingly predictable operating environment, underpinned by improved macro stability.

In addition to the relocating activities to Portugal, it is also possible to redomicile a company to Portugal. When the departure jurisdiction is an EU Member State, Portuguese corporate law generally allows for inbound re-domiciliation. In respect of other jurisdictions, a case-by-case analysis must be conducted by the Portuguese Commercial Registry.