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The Personal Income Tax (IRS) was published through Decree-Law 442-A /88 dated November 30. Personal Income Tax is levied on the income of single persons, divided into 6 categories.

Residents in Portugal are taxed on the totality of their income (in Portugal and abroad) and non-residents are taxed for income obtained in Portugal (according to the different Personal Income Tax categories). A special regime was created in 2009, for non-permanent residents.

Tax Characteristics

The main characteristics of the Personal Income Tax (IRS) are based on a constitutional principal which consecrates the concept of progressive taxing, so as to mitigate social inequality, as stated in article 104 of the Constitution of the Republic.

Individual people residing in Portuguese territory, or not residing in Portuguese territory but receive income from Portugal, are subject to Personal Income Tax (IRS). For residents in Portugal, the Personal Income Tax is levied on the totality of earnings, including those obtained abroad. In respect of non-residents, the Personal Income Tax is levied exclusively on income generated in Portuguese territory.

Residents in Portugal are all people who, in the year respective of the earnings:

a) Have remained in Portugal for more than 183 days, consecutive or alternate;

b) Having remained for less time, maintained property in Portugal, until 31 December of that year, under such conditions that may lead to the inference of an intention to occupy the property as regular place of residence;

c) On the 31st December, is a crew member of a ship or aircraft provided that such person is employed by entities having their domicile, head-office or effective management in Portuguese territory;

d) Exercises functions or commissions of public character under the Portuguese State, abroad.

Income, in cash or in kind is taxable irrespective of the location in which it is obtained, of the currency in which it is paid and the form of payment.

As a tax which is levied upon an individual, the origin of the income is distinguished according to the source that generated it: contract of employment, self employment, pension, investment of capital, leasing property, treating each of these sources in specific terms.

The Personal Income Tax (IRS) is levied on the total yearly income comprised in the categories listed below, even if obtained through illegal acts, after applicable deductions and allowances.

The law prescribes specific deductions for each category, so as to take into consideration specific taxpayer situations, including marital status, number of dependents, and type of activity, etc. In this context, the taxable amount cannot be calculated in abstract terms, in other words, without a concrete and defined situation. Payment, which is voluntary, is made to the Tax Administration. The Tax Administration may seek to confirm the data submitted in the event of uncertainties or inconsistencies. The due date for payment varies for different categories, but falls between February and May of the year ensuing the year in which the income was received. When the due date is missed, the taxpayer is subject to a fine and to having the Tax Administration calculate the value of the tax owed.


Category A - Earned Income from Dependent Employment

Earned income from dependent employment comprises all forms of remuneration (wages, salaries, payment, gratuities, percentages, commissions, shares, social benefits or prizes, attendance stamps, fees, shares in fines or penalties and other incidental remunerations, even if periodic, fixed or variable, of a contractual nature (or not), paid or granted by the holder when generated by:

a) Dependent employment carried out under an individual employment contract or any other type of legally equivalent contract;

b) Work carried out under a contract, or document of identical nature, for the acquisition of services, under the authority and direction of a person or entity legally held to be the active subject of the contract;

c) Performance of a public job, service or duty;

d) Situations of early retirement or reserve, irrespective of whether services were supplied or not, or the attribution of payment, regardless of the grounds on which they are paid, before fully satisfying the requirements for retirement set forth by the social security system or, even in the absence of a labor contract, if any such remuneration is subject to the conditions of mandatory payment until such requirements are met, even when such remuneration is paid in the form of a pension fund or other entities that substitute the original employer.

Category B - Business and Professional Income

Following is a list of what is considered Business and Professional Income:
a) Income resulting from the exercise of any commercial, industrial, agricultural, forestry or cattle breeding activity;

b) Income resulting from the self-employed exercise of any services including scientific, artistic or technical activities, of whatever nature, including those connected with the activities described above;

c) Income resulting from intellectual property, industrial property, or from the supply of information concerning an industrial, commercial or scientific experiment, if obtained by the original holder.

The activities listed below are deemed to be commercial or industrial:

a) Purchase and Saleb) Manufacturing

c) Fishing

d) Mining and other extractive industries

e) Transportation

f) Construction

g) Urban planning and land plot development

h) Hospitality industry and alike, food and beverage, as well as the sale or holding a legal title of a timeshare

i) Travel agencies and tourism

j) Handicrafts

l) Agricultural and Cattle breeding activities which are not connected to land development or if the activity is clearly of an ancillary naturem) Agricultural, forestry and cattle breeding activities integrated in other business activities

Category E - Capital Income

Capital income is deemed as the proceeds and other economic advantages, of any nature or denomination, either financial or in kind, derived, directly or indirectly, from elements of assets, goods, rights or legal situations, of securities, as well as from their alteration, transfer or termination, with the exception of gains and other income taxed under other categories.

Proceeds and economic advantages specifically include:

a) Interest and other forms of remuneration incurred by loan agreements, opening of credit, carry-over and any others which provide temporary availability of money or other fungible goods for profit;

b) Interest and other forms of remuneration incurred through demand or savings deposits in financial institutions, as well as deposit certificates;

c) Interest, amortization of premiums or reimbursement and other forms of remuneration of government securities, bonds, equities, certificates of assignment, cash bonds or other similar securities issued by public or private entities, and other instruments of financial applications, including bills, notes and other negotiable debt securities, while used as such;

d) Interest and other forms of payment for supplies, capital allowances or advancements made by shareholders to the company;e) Interest and other forms of remuneration due because partners failed to collect the profits or earnings available to them;

f) The balance of the interest evaluated on the current account contract;

g) Accrued interest or any monetary claim arising from the extension of its maturity or default in payment, whether legal or contractual, with the exception of interest payable to the State or other public entities for late payment or late payment of any contributions, taxes or fees and interest paid as compensation not subject to tax;

h) The profits of entities subject to Corporate Income Tax (IRC) available to the owners or their affiliates, including advance payments on profits;

i) The amount attributed to members as a result of profit sharing that is considered income through investment of capital and the amount attributed to members for the amortization of shares without capital reduction;

j) Income from participating units in investment funds;

l) Income earned by the associate in an association by shares and stock, and in respect of the latter, the income referred to in subparagraphs h) and i) earned by the associating party after the deductions owed to the associate;

m) Income derived from contracts that have as their object the termination or temporary use of intellectual or industrial property rights, or the supply of information relating to an experiment carried out within the industrial, commercial or scientific sectors, if not received by the author or original owner, as well as those obtained for technical assistance;

n) Income arising from the use or right to use agricultural, industrial, commercial or scientific equipment when they don’t constitute income derived from land, as well as those derived from sporadic or continuous lending of equipment and computer networks, including data, or availability of computing power installed in any of the possible forms;

o) Interest not included in other paragraphs of this article posted on any current bank accounts;

p) Any other income derived from the simple application of capital;

q) Proceeds obtained from transactions of foreign exchange swaps, interest rate swaps, foreign exchange forward transactions;

r) The remuneration obtained from certificates guaranteeing holders the right to receive an amount greater than the minimum subscription amount.


Category F - Real estate income

Real Estate Income is deemed to be Income from leasing of rural, urban and mixed property, paid or made available to the respective owners.

The following are deemed leasing:

a) An amount pertaining to the transfer of usability of a building or part thereof, or services associated to the building;

b) An amount pertaining to the rental of machinery and other moveable assets installed in the leased property;

c) The difference, received by the sublessor, between the amount of rent paid by the sublesee and the amount paid to the landlord;

d) The right to use, the whole or part, of an immovable property for any special purposes, namely advertising;

e) The right to use common fractions under a regime of separate ownership in a building;

f) The profitable constitution, of temporary fruition rights, even when for a life time, of rural, urban or mixed property.

Category G - Increase in Wealth

Earnings not considered in other categories, comprise Increase In Wealth:

a) Capital Gains;

b) Any compensation aimed at restoring non pecuniary damages , except those settled by legal or arbitral decision or resulting from a ratified agreement in accordance with the law, of non-confirmed actual damage and loss of profits, in the latter case, only those designed to offset non received net benefits as a result of the damage, are considered;

c) Amounts earned in virtue of assuming commitments of non-competitiveness, regardless of the source or deed;

d) Unsubstantiated increase of assets.

Gains not considered to be business and professional gains, comprise capital gains when obtained by:

a) Alienation of fruition rights on immovable property and appropriation of any elements belonging to private assets of a business or professional activity exercised by a self-employed worker and belonging to the self-employed worker;

b) Alienation for consideration of corporate rights, including remission and depreciation thereof through capital decrease, and other marketable securities, as well as the amount attributed to the members as a result of the alienation;

c) Profitable alienation of intellectual or industrial property, or a commercial, industrial or scientific experiment, where the transferor is not the original owner;

d) Profitable transfer of a contractual participation or other rights inherent in contracts concerning immovable property;

e) Transactions using derivative financial instruments, with some exceptions;

f) Transaction on autonomous warrants, irrespective of the fact that such a warrant is the object of disposal prior to the transaction or if the disposal has already taken place; in this latter case, independently of the form of settlement;

g) Operations concerning certificates giving the owner the right to get a certain amount of an underlying asset, other than remuneration from certificates warranting to the respective holder the right to receive a minimum amount higher than the subscription amount being considered as capital income.

Also considered Increase in Wealth are prizes won through any raffle, lotto or bingo games, as well as, any amounts of money or prizes attributed in any draw or competition, effectively paid or made available, with the exception of prizes won in public games organized by member states of the European Union or of the European Economic area as long as there is an interchange of information.

Category H - Pensions

The following are considered to be pensions:

a) Benefits attributed for retirement, old age, disability, survivor’s annuity, as well as other pensions of the same nature, including alimony;

b) Benefits rendered by insurance companies, pension funds or any other entity as a complement to social security benefits, attributed by employers that are not considered to be a salary for employment;

c) Pensions and benefits not included above;

d) Temporary or lifetime leases.


Personal Income Tax 2012
Taxable Income (in Euros) Rate Value to cut down
Up to 7.000 14,50% -
+ 7.000 a 20.000 28,50% 980
+ 20.000 a 40.000 37,00% 2.680
+ 40.000 a 80.000 45,00% 5.888
+ 80.000 48,00% 8.280


It is also applicable a progressive solidarity surcharge of 2.5% on taxable income between Euro 80,000 and Euro 250,000, and 5% for income above 250,000 Euros, on a temporary basis. A surcharge of 3.5% is also temporarily applicable on the part of the taxable income that exceeds the annual minimum wage (Euro 7,070).


On September 23, 2009, Decree-Law 249/2009 was published, establishing a new tax regime, in lieu of the Personal Income Tax (IRS), applicable to non-habitual residents. The above referenced Decree-Law has been in effect since January 1, 2009.

Non habitual resident - Concept

For the purposes herein, taxable persons, having acquired fiscal residence in Portuguese territory who have not, in the preceding five years been liable for Personal Income Tax, are non-habitual residents. An individual should register this status with the Taxpayer Registry of the Tax Services. Under these terms, the non-habitual resident acquires the right to be taxed as a non-habitual resident for the period of 10 consecutive. For each of those years, the individual is to be considered a resident for fiscal purposes. However, if during this 10 year period, the taxpayer did not choose to file as a non-habitual resident (or was not considered to be a resident for fiscal purposes) for one or more of the consecutive years, they may resume this status for the remainder of the established period.

Regime and Benefits

The net income in categories A (Employees) and B (Self Employed), corresponding to high added value activities, of a scientific, artistic or technical nature (see below), by non habitual residents shall be taxed at 20%. Income in category A (Employment) of non habitual residents, obtained abroad, are tax exempt, if alternatively:

a) They are taxed by the source State, according to the convention to terminate double taxation entered into by Portugal and the source State;

b) They can be taxed in another country, in cases where the convention to terminate double taxation has not been entered into, as long as the income obtained is not considered to have been obtained in Portuguese territory, according to the Personal Income Tax (IRS) Code. 

Income in category B (Self Employment), obtained through high added value rendering of services of a scientific, artistic or technical nature (see below), or from intellectual or industrial property, as well as, from providing information regarding an experiment carried out in the commercial, industrial or scientific areas, and those in category E (Capital Income), F (Real Estate Income) and G (Increase in Wealth), obtained abroad by non habitual residents, are exempt if alternatively:

a) They are taxed by the source State, according to the convention to terminate double taxation entered into by Portugal and the source State;
b) They can be taxed in another country, in cases where the convention to terminate double taxation has not been entered into under the terms defined by the OECD Model Tax Convention on Income and Capital, as long as (i) it is not a territory subject to privileged tax systems (defined by an ordinance) and (ii), as long as the corresponding income, cannot be considered to have been obtained on Portuguese territory, as per the Personal Income Tax (IRS) Code.

Regarding category H (Pensions) income obtained by non habitual residents abroad, which were, for the same portion which was considered taxable, not considered tax deductable in Portugal, are exempt if alternatively:

a) They are taxed by the source State, according to the convention to terminate double taxation entered into by Portugal and the source State;

b) They cannot be considered to have been obtained on Portuguese territory as per the Personal Income Tax (IRS) Code. Income which is exempt from Personal Income Tax (IRS) under the above stated terms, are mandatorily included for the purposes of determining the taxable amount on remaining income, except in the case of:
  • Capital Gains from Securities;
  • Dividends and interest owed by non-residents, when not subject to withholding at source;
  • Income from employment or self-employment, subject to the above referenced special tax rate of 20%.

Non-habitual residents, holders income which is not taxable under the Personal Income Tax, per the above referenced terms, may opt to utilize the method of tax credit provided for by the international double taxation (in lieu of exemptions), and in this case, income is mandatorily included for the purposes of taxation under the general terms of the Personal Income Tax (IRS) code, except:

  • Gratuities earned for services rendered or due to the performance of work, when not attributed by employer;
  • Capital Gains from Securities;
  • Dividends and interest owed by non-residents, when not subject to automatic withholding;
  • Income from employment or self-employment, subject to the above referenced special tax rate of 20%.

Table of activities considered to be of high added value, for the purposes of application of the non habitual resident regime (Ordinance no. 12/2010 January 7):

1 - Architects, engineers and similar:
101 - Architects
102 - Engineers
103 - Geologists

2 - Visual artists, actors andmusicians:
201 - Theater, ballet, cinema, radio and televisionartists
202 - Singers
203 - Sculptors
204 - Musicians
205 - Painters

3 - Auditors:
301 - Auditors
302 - TaxConsultants
4 - Doctors and dentists:
401 - Dentists
402 - Medical Analysts
403 - Clinical Surgeons
404 - Ship’s doctor
405 - General Practitioners
406 - Dentists
407 - Clinical dentists
408 - Medical physiatrists
409 - Gastroenterologists
410 - Ophthalmologists
411 - OrthopedicSurgeon
412 - ENT(Ear Nose and Throat) specialists
413 -Pediatricians
404 - Radiologists
405 - Doctors from other specialties

5 - Teachers:
501 - Professors

6 - Psychologists:
601 - Psychologists

7 - Liberal Professionals, technicians and alike:
701 - Archaeologists
702 - Biologists and life sciences experts
703 - Computer Programmers
704 - Software consultant and activitiesrelated to information technology and computing
705 - Computerprogramming activities
706 - Computer consultancy activities
707 - Management and operation of computer equipment
708 - Dataservices
709 - Data processing, hosting and related activities;Web portals
710 - Data processing, hosting and relatedactivities
711 - Other data service activities
712 - Newsagencies
713 - Other information service activities
714 - Scientific research and development
715 - Research andexperimental development on natural sciences and engineering
716 - Research and development in biotechnology
717 - Designers

8 - Investors, Managers and Directors:
801 - Investors, Directorsand managers of companies that promote productive investment, as longas they are connected to projects and concession contracts that are eligible for tax benefits per the Investment Tax Code (CódigoFiscal)
802 - Upper Management

This aims to be a summary overview of the Personal Income Tax (IRS) and provide some understanding of it. For more information, please contact us.


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