Portugal

Value-added tax (VAT)

VAT rates

There are three VAT rates: the standard rate of 23% (22% in the Autonomous Region of Madeira; 16% in the Autonomous Region of the Azores), the reduced rate of 13% (12% in Madeira; 9% in the Azores), and the super-reduced rate of 6% (4% in Madeira from 1 October 2024 onward, currently, 5%; 4% in the Azores).

The reduced rate is applicable to the supply of several products and services, including meals at restaurants and take away, musical instruments, and agricultural tools.

The super-reduced rate is applicable, among others, to the supply of some essential food products, periodic publications, books, pharmaceutical products, hotel accommodation, agricultural products, passenger transport, acquisition and supply and installation of devices, machines and other equipment intended exclusively or mainly for the capture and use of solar, wind, and geothermal energy, and other alternative forms of energy. It is also applicable to the supply of electricity for consumption for a contracted power that does not exceed 6.90kva.

Exports and intra-EU supplies of goods are zero-rated.

 As of 4 January 2024, the basic food basket no longer benefits from a zero VAT rate.

Supplies of goods

Supplies of goods are subject to VAT in Portugal if the goods are located in Portugal at the moment their transport or dispatch to the customer begins. If the goods are located in Portugal and there is no transport or dispatch, then supplies of the goods are subject to VAT at the moment they are put at the disposal of the customer.

Supplies of services

Supplies of services are, in general, subject to VAT in Portugal whenever: (i) acquired by taxable persons that have their business, a fixed establishment, domicile, or residence in Portugal to which the services are provided (B2B rule) or (ii) supplied to non-taxable persons if the provider has established its business, a fixed establishment, domicile, or residence in Portugal from where these services are provided (B2C rule).

Regardless of the place where the service provider and the acquirer are established, and of the acquirer being a taxable person, the supply of the following services is subject to VAT in Portugal if physically carried out in Portugal:

• Services connected with immovable property in Portugal.
• Passenger transport for the distances covered in Portugal.
• Admission to cultural, artistic, scientific, sporting, educational, entertainment, or similar events in Portugal.
• Restaurant and catering services in Portugal.
• Short-term hiring of a means of transport (up to 30 days, for boats up to 90 days) if the means of transport are put at the disposal of the customer in Portugal.

The supply of the following services is subject to VAT in Portugal if physically carried out in Portugal and if the acquirer is a non-taxable person:

• Transport of goods, other than intra-Community transport of goods, for the distances covered in Portugal.
• Intra-Community transport of goods if the place of departure is Portugal.
• Valuations of and work on movable property.
• Services and ancillary services relating to cultural, artistic, sporting, scientific, educational, entertainment, or similar activities, such as fairs and exhibitions, including the supply of services of the organisers.
• Hiring of a means of transport, other than short-term hiring, when the acquirer is established, has one’s permanent address, or usually resides in Portugal.

Telecommunications, broadcasting, television, and electronic services supplied to non-taxable persons are taxed in Portugal if:

• the service provider is established, has a permanent address, or usually resides in Portugal
• the acquirer of the services resides in another member state, and
• the total value of such services does not exceed EUR 10,000, with reference to the previous or current year.

However, such services shall not be taxed in Portugal if the service provider has its head office, PE, or domicile in another member state and provided that:

• the total value of such services does not exceed EUR 10,000, with reference to the previous or current year, and
• the acquirer is not a VATable person and does not reside in the same member state as the service provider.

Furthermore, the EU e-commerce VAT package established some changes with effect from 1 July 2021, including the extension of the mini one stop shop (MOSS) to a one stop shop (OSS) to allow suppliers to account for the VAT due in the member state of consumption on: (i) all types of cross-border services to private consumers (where the place of taxation is in the European Union) as well as on (ii) intra-EU distance sales of goods, for which VAT is, in principle, due in the member state of destination.

Customs duties

Customs duties are regulated by the Community Customs Code. Therefore, the rules foreseen for the import and export of goods in Portugal are similar to the rules applicable in other EU member states.

The customs duties' rates applied in Portugal vary according to the origin of the goods. There are several origin agreements that exempt from customs duties the importation of goods from certain countries or that determine reduced rates.

Excise duties

There are different types of excise duties, such as petroleum and energy products tax, alcohol and alcoholic beverages tax, tobacco tax, and vehicle tax.

The tax applicable to petroleum and energetic products depends on the goods supplied, for example:

• For diesel, it varies between EUR 278 and EUR 400 per 1,000 L.
• For the supply of natural gas, when used for carbonate fuel the tax applicable is EUR 0.307/GJ, and when used as propellant the tax applicable is EUR 1.15/GJ.

The tax applicable to alcohol and alcoholic beverages also depends on the type of good supplied, varying between EUR 9.64 and EUR 33.85 per hectolitre for beer and EUR 1,602.51 per hectolitre for spirits.

Non-alcoholic beverages with added sugar are also liable to excise duties, depending on the added sugar amounts.

The tax applicable to tobacco (ad valorem) also varies in accordance with the type of product supplied (e.g. cigarettes, heated tobacco and fine-cut tobacco for rolling, cigarillos, tobacco used in a water pipe, and liquids for electronic cigarettes).

The tax applicable to vehicles varies in accordance with the type of vehicle, the fuel used, CO2 emissions, and the cylinder of the vehicle.

The environment component CO2 emissions is measured based on the Worldwide Harmonised Light Vehicle Test Procedure (WLTP).

An excise duty on consumption of electricity is due by producers, traders, self-producers, and consumers that buy electricity in organised markets.

Please note that the rates for petroleum and energy products, tobacco, and alcoholic beverages may differ depending on whether the tax is due on the mainland, in the Autonomous Region of Azores, or in the Autonomous Region of Madeira.

Property tax (Imposto Municipal sobre Imóveis or IMI)

IMI is a municipal property tax on the tax registration value (TRV) of urban and rural properties located in Portuguese territory. For urban properties, the TRV is determined by means of a valuation, based on the type of property, calculated by reference to a formula based on objective criteria, such as the construction cost per square metre, area, age, construction quality, and comfort indexes. IMI is owed by the real estate owner, the usufructuary, or the holder of the surface right of a real estate unit with reference to 31 December of the year that it concerns.

IMI is levied at the following rates, in addition to corporate or individual tax assessed on actual income generated by real estate:

Annual IMI rates are increased three times when urban real estate is in ruins or vacant for a period of over one year. In the case of real estate which conservation status results from natural disaster or calamity, this aggravated IMI rate does not apply. The same is valid for the additional increase of the IMI rate by 30% in the case of degraded buildings. 

Municipalities are allowed to increase the IMI rate applicable to buildings or part of buildings located in urban pressure areas as follows: (i) up to 100% in the case of buildings for local lodging (alojamento local) and (ii) up to 25% in the case of residential buildings that are not rented or allocated to the taxpayer’s permanent abode. The increase can go up to 50% if the taxpayer is a collective person or other equivalent entity for tax purposes.

Municipalities can increase the IMI rate applicable to urban real estate properties that have been vacant for more than one year, to buildings in ruins, and to land for construction intended for residential purposes when located in designated areas of urban pressure. In this situation, the IMI rate can be increased ten times, with a possible additional increase of 20% in each of the following years, capped at 20 times the applicable IMI rate. However, the aggravated rate (20 times the IMI rate for urban building) can be increased upon decision of the municipality as follows: (i) by 50% in the case of residential building or unit that is not rented or used for permanent abode in the respective year and (ii) by 100% if the taxpayer is a collective person or other equivalent entity for tax purposes.

IMI exemptions and reductions

Urban real estate subject to urban rehabilitation

There is an IMI exemption available to urban real estate subject to urban rehabilitation for a three-year period, renewable for an additional five-year period in case of buildings intended for leasing for permanent abode or main permanent abode.

This exemption is only available to buildings located in urban rehabilitation areas or buildings that have been built more than 30 years ago.

Historical stores

Historical stores, recognised by municipalities as establishments of historical, cultural, or social interest and that integrate the national inventory, will be IMI exempt for the year in which these situations occur.

Other benefits of environmental status attributed to real estate

By resolution of the municipal assembly, municipalities may determine a reduction of up to 25% of the IMI rate, applicable to urban real estate with energy efficiency.

Tax incentives for forestry activity

An IMI exemption is applicable to rural real estate within forest areas covered by a forest intervention zone and to rural real estate intended for forestry exploitation under a forest management plan.

Tax regime for investment promotion (RFAI)

Companies with investments that qualify for the RFAI can benefit from an IMI reduction or exemption for a period of up to ten years in relation to any real estate acquired and regarded as an eligible investment.

Properties intended for residential purposes

An IMI exemption is applicable to land for housing construction when there has not yet been a final decision regarding the prior control procedure for construction works and properties regarding which the final decision for residential purposes has not yet been issued.

Lease Support Program (Programa de Arrendamento Acessível or PAA)

An IMI exemption is applicable to urban buildings or autonomous units acquired, rehabilitated, or constructed to be allocated to the PAA.

Rental contracts concluded before the Urban Lease Regime

Buildings subject to a rental contract for housing, concluded before the Urban Lease Regime, in case of tenants with a corrected annual gross income (RABC) of less than five annual national minimum wages (RMNA) or aged 65 years or more over or disabled with a degree of disability equal to or higher greater than 60% are exempt from IMI.

Additional to the IMI (AIMI)

AIMI is owed by individuals and corporations, as well as by structures or collective bodies without autonomous legal personality and undivided inheritances, that are owners, usufructuaries, or have the surface right of urban properties located in Portugal.

Urban properties classified as for ‘trade, industry, or services’ and ‘others’ are excluded from AIMI.

In the case of real estate financial leases, lessors are not allowed to charge AIMI on lease payments if the tax registration value of the property does not exceed EUR 600,000.

The taxable basis corresponds to the sum of the TRV of all the urban properties held by each taxpayer, reported as of 1 January of each year.

Properties that benefited from an IMI exemption in the previous year are excluded from the taxable basis.

The applicable rates are 0.4% for corporations, 0.7% for individuals and undivided inheritances, and 7.5% for urban properties owned by entities in tax havens.

AIMI is assessed by the Portuguese Tax Authority (PTA) in June of each year, with the respective payment being made in September.

Construction and housing cooperatives are no longer AIMI exempt when they own, have the right of surface of, or the usufruct of, exclusively, properties intended for social housing or for rent-controlled apartments.

On the other hand, the exclusion of taxation of properties that are exclusively intended for the construction of social housing or controlled-costs owned by construction and housing cooperatives or residents' associations is established.

The properties owned by construction and housing cooperatives, as well as residents' associations, will be excluded from taxation.

CIT credit

Taxpayers have the option to deduct the AIMI paid, limited to the fraction of the tax corresponding to the income generated by properties subject to AIMI, in the scope of lease or accommodation activities. This deduction option (deduction to the CIT fraction) jeopardises the deduction of AIMI in the determination of income subject to CIT.

Property transfer tax (Imposto Municipal sobre as Transmissões Onerosas de Imóveis or IMT)

IMT is a municipal tax levied on the transfer for consideration of real estate located in the Portuguese territory. The tax is owed by the acquirer at the rates shown below, and the taxable basis is the Tax Registration Value or for the price agreed upon by the contracting parties, whichever is higher. Note that the direct acquisition of at least 75% of a Portuguese company’s shares, whose assets derive directly or indirectly by more than 50% from real estate located in Portugal, is also subject to IMT, as long as the properties are not directly allocated to a commercial, industrial, or farming activity (except for real estate buy-sell activity). The direct acquisition of at least 75% of the units of close-ended real estate investment funds is also subject to IMT.

IMT exemptions

• Acquisition of properties by real estate trading companies for resale.
• Acquisition of properties intended for urban rehabilitation.
• Restructuring operations or cooperation arrangements.
• Acquisition of buildings individually classified as of national/public/municipal interest.
• Exemption or reduction of the IMT rate, regarding the acquisition of property that constitutes eligible investment under the RFAI.
• Acquisition of land for construction intended for the construction of residential properties and urban buildings or autonomous units acquired, rehabilitated, or constructed to be allocated to the PAA.
• First purchase of an urban building or an autonomous fraction of an urban building, up to EUR 316,272, intended exclusively for own and permanent habitation, by taxable persons up to 35 years of age who are not considered dependents for personal income tax (PIT) purposes in the year of the acquisition. For properties whose taxable value is higher than EUR 316,772 and up to EUR 633,453, a marginal IMT rate of 8% applies.

Stamp tax

Stamp tax is payable on a wide variety of transactions and documents, at rates that may be set in specific amounts or on a percentage basis. Important examples include the following:

Notes

1. In case of loans to consumers, tax rates are multiplied by approximately 2.5.
2. If the provider or the client are domiciled in Portugal, in which case the tax is borne by the client. In the case of a service provider outside Portugal, tax is assessed by the intermediary in Portugal, or by the representative appointed by the service provider in the cases where there is no intermediary.
3. In case of crypto assets deposited in institutions located in Portugal. It will also apply if the crypto assets are not deposited therein but the author has its domicile in Portugal, in the case of inheritance, or if the beneficiary has its domicile in Portugal, in the case of other free transfers.

Stamp tax exemptions

Some acts are exempt from stamp tax, such as the ones mentioned below (the exemption may depend on certain requirements):

• Guarantees on stock exchange dealings regarding securities and derivatives.
• Transactions between financial institutions, when directly related to lending/security operations.
• Short-term treasury needs (less than one year) when granted by any company to dominated companies or to companies in which they hold not less than 10% to companies in which they hold a participation, as well as granted by any company to companies dominated by them or with a shareholding with voting rights of at least 10% or with a purchase price of at least EUR 5 million, as well as to financing between companies in a dominant or group relationship. The exemption for short-term treasury needs will only apply when the lender is a company.
• Loans not exceeding a one-year period, under a cash pooling contract, in case of companies in a control or group relationship (when a company, so-called dominant, holds, for more than one year, directly or indirectly, at least 75% of the share capital of a so-called controlled company or companies, provided that such participation grants more than 50% of the voting rights).
• Short-term shareholders’ loans (less than one year) in case of direct shareholding of 10% or more, held for one year or more.
• Shareholders’ loans, including the respective interest, not reimbursed before one year, when provided by shareholders, of at least 10%, of the share capital and as long as the shareholding is maintained for a consecutive period of one year, or since the incorporation of the subsidiary, provided that, in this case, the participation has been maintained during that period.
• Interest on loans for permanent housing.
• Free transfer of property to spouse, or de facto spouse, descendants, and ascendants.
• Mergers or cooperation operations.
• Warranties provided in favour of the state in the management of its direct public debt, and in favour of the Institute for the Management of Social Security Capitalization Funds, in its own name or on behalf of the funds under its management, for the exclusive purpose of covering its exposure to credit risk.
• Warranties provided in favour of the state or social security institutions upon the payment of debt by instalments under enforcement procedures or relating to the recovery of tax and social security credits.
• Under the RFAI, companies are exempt from stamp tax on the acquisition of real estate property that constitutes relevant investment, according to the terms of this regime.
• Securities repos or similar rights exchanged in stock markets, as well as repo and fiduciary sales in guarantee, performed by financial institutions and intermediated by central counterparts, are also exempt from stamp tax.
• Report agreements traded in an exchange stock.
• Exportation transactions, including: (i) insurance policies, (ii) banking guarantees, and (iii) guarantees provided by the state, directly or indirectly, under international agreements/law.
• Acquisition of the first residential property (exclusively intended to permanent place of residence) by persons with 35 years or less of age are exempt up to a limit of EUR 316,772.
• Reduction of 25% of the tax due on the net asset value of certain collective investment vehicles engaged in the lease of residential property.

Payroll taxes

There are no payroll taxes other than social security contributions (see below).

Social security contributions

As a rule, employers are required to make monthly social security contributions at the standard rate of 23.75% on the monthly gross remuneration of their employees.

Social security contributions are deductible for CIT purposes.

Bank levy and solidarity surcharge on the banking sector

Portuguese headquartered credit institutions, Portuguese subsidiaries of foreign credit institutions, as well as branches in Portugal of foreign credit institutions, including those resident in the European Union, are subject to a bank levy, applicable on a two-pronged tax base, as follows:

• Base I: Liabilities less the amount of the deposits covered by deposit guarantee schemes, such as the Deposit Guarantee Fund, the Mutual Agricultural Credit Guarantee Fund, or other officially recognised deposit guarantee scheme under the EU Directives. For this purpose, liabilities are defined as the set of elements accounted for in the balance sheet representing liabilities towards third parties, irrespective of their form or nature (excluding, amongst others, items accounted for as equity, liabilities for defined benefit retirement plans, provisions, liabilities concerning the revaluation of financial derivatives).
• Base II: The notional amount of off-balance sheet financial derivatives, excluding hedging derivatives and back-to-back derivatives.

The bank levy rate is set at a maximum of 0.11% on Base I and of 0.00030% on Base II.

In addition to the bank levy, the aforementioned credit institutions are also subject to a solidarity surcharge, levied upon the same taxable base as the bank levy. The solidarity surcharge rate is 0.02% on Base I and 0.00005% on Base II.

Both the bank levy and the solidarity surcharge have been widely challenged in court.

Carbon tax on air and sea travels

A carbon tax due by the user in the amount of EUR 2 applies on air, sea, and river travels.

This carbon tax is levied on the issuance of transport tickets in respect of:

• passenger commercial flights departing from airports and airfields located in the Portuguese territory, and
• landing of passenger vessels on terminals located in the Portuguese territory, in respect of fuelling, repair, embarking, and disembarking of passengers.

 As of 1 July 2023, a carbon tax is also levied on consumers of commercial and non-commercial flights departing from airports and airfields located in the Portuguese territory in the case of aircraft with up to 19 passengers. The applicable rate results from applying a formula that considers, among other circumstances, the aggravated pollution coefficient per capita and the maximum passenger capacity of the aircraft.

Levy on single-use packages and plastic bags

A levy is due for all single use packages, including composed packaging, acquired in ready-to-eat meals, for take-away, home delivery, and to store meals ready for consumption in the place of supply to the final consumer.

The levy is set at EUR 0.10 per package in Portugal mainland and can be passed along the economic chain. The final charge levy to the final consumer cannot be less than EUR 0.30 per package.

Regarding the plastic bags, it is foreseen a levy of EUR 0.08 for plastic bags and of EUR 0.04 for lightweight plastic bags.