Income Tax

MASTER IN FINANCE

ISEG, 14.15

INCOME TAX

INCOME TAX

The Personal Income Tax (IRS) Code took effect on 01 January 1989 and was approved by Decree-Law n 442-A/88, of 30 November.

Characteristics

Progressive

Income is treated in a single overall way

Incomes are in several categories

But subject to a technically uniform taxation regime

For residents in Portugal, it is payable on the annual total value of all personal income, irrespective of source, form and place of realisation.

For non- residentes it is only applied to incomes received in Portugal

MASTER IN FINANCE - TAXATION

INCOME TAX

The Personal Income Tax Code (CIRS) was approved by Decree-Law No. 442-A/88 of November 30. Since then, there have been innumerous changes.

Personal income tax, better known by the acronym IRS in Portugal, is applicable to all resident and non-resident individuals in the country.

Employers are responsible for withholding and subsequently giving part of a worker's salary, considered as taxable, to the government. This amount is determined based on the employees or the households income and is technically referred to as "withholding at the source".

In the subsequent year, employees must submit a tax declaration, with the withholding at the source construed as an advance on tax collection. So, wherever an employee's tax withholding exceeds the amount owed, a refund is awarded and vice versa.


INCOME TAX

In the year in which income is earned, those deemed to be Portuguese residents:

a) have resided in Portugal for more than 183 consecutive or interspersed days;

b) have resided for a shorter period of time, but have housing arranged there that makes one presume their intention to maintain and occupy it as an habitual residence;

c) on December 31st are ship or aircraft crew members, working for organizations with residence in Portugal;

d) perform public service duties or missions abroad on behalf of the Portuguese government.


INCOME TAX

As long as the head of household resides in Portugal, all persons who are part

of the household are considered residents. This residency status may,

however, be eliminated by a spouse who has not resided in Portugal for more

than 183 consecutive or interspersed days, upon providing evidence that most

of their economic activities have no connection to Portuguese territory, in

which case the spouse is subject to taxation as a non-resident regarding

income that he or she has earned that is considered to have been earned in

Portuguese territory.


INCOME TAX

Taxpayers considered part-time residents in Portuguese territory are those

who, becoming tax residents, have not been taxed as such under the

personal income tax in the previous five years. Taxpayers considered part-

time residents acquire the right to be taxed as such for a period of 10

consecutive years, renewable, with registration of this status in the

taxpayer records of the Directorate General of Taxes.


INCOME TAX

With respect to non-residents, their income is considered to be earned in Portugal under the following

conditions, among others:

- Category A income, when the site of their engagement is located there, or when such income is paid by

entities that have residence, headquarters, effective management or permanent establishment there to

which payment is attributable;

- Compensation of board members of legal entities and other entities, income from intellectual or industrial

property and know-how, income from technical support and other income from capital, pensions and

bonuses of any game or sweepstakes or contests paid by entities that have established residence,

headquarters, effective management or a permanent establishment in Portugal, to which payment should

be attributed;

- Income from professional and business activities attributable to a permanent establishment located in

Portugal;


INCOME TAX

With respect to non-residents, their income is considered to be earned in Portugal under the following conditions, among

others:

- Income not attributable to a permanent establishment located in Portugal from employment and other services, including

scientific, artistic, technical, and brokering in the performance of any agreements done or used in Portuguese territory, with

the exception of those concerning transport, telecommunications and financial activities, provided that it is paid by entities

which have their headquarters, effective management or a permanent establishment there to which payment should be

attributed;

- Capital gains from the onerous transfer of shares in the capital of entities with headquarters or effective management in

Portuguese territory, including remitting and amortizing them with a decrease to capital, as well as the money attributed to

members as a result of splitting up a company that is considered a capital gain, or other securities issued by entities with

central management or control located in Portugal, or from shares or other securities, when these conditions do not prevail

and payment of income is attributable to a permanent establishment located in Portugal;

- Other capital gains not covered in the preceding paragraphs, when assets, rights or legal positions are located therein, including,

in particular, income from transactions related to derivatives owed or paid by entities that have residence, headquarters,

effective management or a permanent establishment in Portugal, to which payment should be attributed;


INCOME TAX

HOW IT WORKS?


INCOME TAX

CATEGORIES OF INCOME

- Category A - Paid Employment Income

- Category B Business and Professional Income

- Category E Capital Income

- Category F Real Property Income

- Category G - Asset Income

- Category H - Pensions


INCOME TAX

The Law provides specific deductions for each category, and also abatements that make allowance for the specific circumstances of the individual taxpayer, such as marital status, dependants, type of activity, etc.

The tax base is calculated by adding together the gross income in each category, applying the proper rate to each of them according to the appropriate income scale.

In the case of a family unit, irrespective of the scheme to which each of the members is subject, the tax base corresponds to the total income of the members who make up the unit.


INCOME TAX


INCOME TAX


A series of expenses, charges, tax benefits and credits due to dual international

taxation, may also be deducted from taxes determined as a result of a specifically

applicable rate, from which the personal tax payable at the end will result, from which

withholding tax incurred, as well as any advance payments made, will also be

deducted.

Deductions from taxable income will be made to the personal income-tax collection up

to a certain amount, which only apply to resident taxpayers in Portugal.

INCOME TAX


Payment Personal income tax (IRS) is paid to the Directorate General of Taxation and must be made in the year following the one to which the income refers, by the following deadlines: a) On paper: i) In March, when taxpayers have only received income or it has had been placed at their disposal, from categories A and H; ii) In April, in all other cases; b) By electronic data transfer: i) In April, when taxpayers have only received income or it has been placed at their disposal, from categories A and H; ii) In May, in all other cases.

Documents

Income Tax