Taxation in Portugal
Taxes in Portugal are levied by both the national and regional governments. Tax revenue in Portugal stood at 34.9% of GDP in 2018 The most important revenue sources include the income tax, Social security contributions, corporate tax and the value added tax, which are all applied at the national level.
Income tax
Employment income earned is subject to a progressive income tax, which applies to all who are in the workforce. Furthermore, a long list of tax allowances can be deducted, including a general deduction, health expenses, life and health insurance, and education expenses. In 2015 a tax of 3.5% was introduced on all employment and state pension income over €6,790. For the year of 2016, the personal income taxation system is as follows:| Taxable income | Tax on this income |
| Up to €7,091 | 14.5% |
| €7,091 to €20,261 | 28.5% |
| €20,261 to €40,522 | 37% |
| €40,522 to €80,640 | 45% |
| Over €80,640 | 48% |
Corporate tax rate
Mainland Portugal.
The corporate tax rate in Portugal is 21% It was lowered by 2% from 23% in 2015 as a part of tax reforms, nevertheless profits of SMEs up to €15,000 are taxed at a special rate 17%. Some corporate enterprises are exempt from corporation tax, including charitable foundations, Church institutions, and sports clubs.Madeira
The Corporate Tax Rate in Madeira is 20%, nevertheless profits of SMEs up to €15,000 are taxed at a special rate 13%.Madeira International Business Centre
Companies incorporated and headquartered in Madeira can apply for an International Business Centre license and, granted that they comply with substance requirements, benefit from a corporate tax rate of 5% on the taxable profit derived from economic activities engaged with non-resident entities or entities duly licensed within the MIBC.Azores
The Corporate Tax Rate in Azores is 16,8%.Value added tax
Mainland Portugal
Three different VAT rates apply: normal, intermediate and reduced. There is a general rate of 23% for luxury goods, decorative plants, cut flowers, utensils and other equipment for firefighting and fire prevention, followed by a reduced rate of 13% for ordinary wine, spring, mineral, medicinal and carbonated water, and tickets for cultural events. This is followed by a further reduced rate of 6% on cereals, meat, shellfish, fruit, vegetables, and other essential foods, books, newspapers, medicines, passenger transport and hotel accommodation.In 2014, the government introduced the fatura da sorte, a lottery of tax-free cash and luxury cars awarded among consumers with VAT bills.
The goal is to bring into the formal economy the many unregistered and untaxed purchases.
Madeira
The VAT rates in Madeira are 22%, 12% and 5%.Azores
The Azores has lower applicable VAT rates of 18%, 10% and 5%. Businesses with revenue of less than 10,000 Euros per year are exempt from VAT.Social security contributions
All employment income is subject to social security contributions.General Social Security Regime
Closed Social Security Regimes
| Type of Employees | Additional Contribution Supported by the Employer |
| Beneficiaries of the Social Security Special Fund for the Workers of the Whool Industry | 0,5% |
| Beneficiaries of the Special Fund for Insurance Brokers | 1% |