Portugal

ABOUT PORTUGAL

Situated in the extreme south-west of Europe, just a few hours from any of the other European capitals, Portugal attracts visitors from all over the world with its mild climate, 3000 hours of sunshine per year and 850 kms of splendid beaches bathed by the Atlantic Ocean.

This is a country that has the oldest borders in Europe, with an exceptional range of different landscapes just a short distance away, lots of leisure activities and a unique cultural heritage, where tradition and modernity blend together in perfect harmony. Its superb cuisine, fine wines and hospitable people make this a tourist paradise of the highest quality. 

INVESTING IN PORTUGAL

Besides the cultural and touristic attractiveness, Portugal offers a set of economic, social and legal characteristics that makes it a top choice for those that either want to live or invest in the European Union.

Portugal is a very safe country to live/work in. It ranks as the 3rd most peaceful country in the world among 163 countries (Global Peace Index 2019, and it provides its population an excellent quality of life, which results in welcoming, friendly people, that speak various languages.

In addition, Portugal has highly qualified workforce and state-of-the-art infrastructures (Roads and Harbours). Commercial and tax legislation in Portugal is very pro-business, and all compliance is done on-line, through modern e-governance services, reducing unnecessary bureaucracy. Besides the business-friendly general tax regime, there are a set of specific tax regimes available, both corporate and individual, aimed in attracting foreign investors and highly qualified workers, such as the International Business Centre of Madeira, the Participation Exemption Regime, and the Non Habitual Resident tax regime, between others.

CORPORATE TAX & PARTICIPATION EXEMPTION

Companies domiciled in Portugal are taxed on their worldwide income, subject to a flat Corporate Income Tax (CIT) rate of 21%. However, the standard CIT rate is 20% in the Autonomous Region of Madeira, (companies located in Madeira can also apply to the International Business Centre of Madeira tax regime, and benefit from the reduced 5% CIT rate).

There is a reduced CIT for the first €15.000/€25.000 of taxable profit, and there is also state and local/regional surtax that might be applicable, depending on where the company is operating, and the taxable profit it presents every year.

Besides the general corporate tax regime, the Portuguese companies benefit from all EU directives, namely the interest and royalties EU Directive, and the parent-subsidiary EU Directive.

Additionally, Portuguese companies can benefit from the Participation Exemption tax regime, which establishes the following CIT tax benefits:

  • CIT full exemption on dividends received;
  • CIT full exemption on capital gains computed from the sale of shares;
  • Withholding tax exemption on dividends paid to corporate shareholder.

To benefit from these exemptions, the company needs to comply with some requirements, such as ownership of at least 10% of the shares of the company paying out he dividends, between other criteria.

For more detailed information on the applicable tax regime, and Portuguese company’s compliance obligations, please download the following file:

PERSONAL TAX & NON-HABITUAL RESIDENT TAX REGIME

Residents in Portugal are subject to Personal Income Tax (PIT) on their worldwide income, at progressive rates that vary between 14,5% and 48% for the FY 2019. There are alternative fixed tax rates for specific incomes, such as investment income (28%). Non-residents are taxed on income they earn in Portugal, at a PIT rate of 25%. Additional surcharges might be applicable.

The NON-HABITUAL RESIDENT tax regime (NHR) was created in September 2009, and is intended to attract high-network individuals, and highly qualified professionals working in activities with a high value added, through a very attractive personal tax regime.

The new regime is available to all individuals becoming tax resident in Portugal (if they were not Portuguese tax residents in the previous 5 years), and the status is granted for a period of 10 consecutive years.

The advantages of the NHR tax regime vary according to the type of income and its origin:

SALARIES

Regarding salaries of a Portuguese source arising from high added value activities, NHR residents will be subject to a reduced 20% PIT rate.

As for salaries of a non-Portuguese source, NHR residents will be exempt from PIT, as long as the salaries received had been subject to tax in the country of source (under existing Double Tax Treaty).

BUSINESS AND PROFESSIONAL INCOME

Regarding business and professional income of a Portuguese source arising from high added value activities, NHR residents will be subject to a reduced 20% PIT rate.

As for business and professional income from high added value activities, of a non-Portuguese source, NHR residents will be exempt from PIT, provided that such fees could have been taxed under an existing Double Tax Treaty (DTT). If no DTT exists, the income can still be exempt if it can be taxed in the other jurisdiction, (as long as it is not black listed) in accordance with the provisions of the OECD Model Tax Convention, and the income is not to be considered as from a Portuguese source.

RENTAL INCOME, INVESTMENT INCOME AND CAPITAL GAINS

Regarding rental income, investment income and capital gains of a non-Portuguese source, NHR residents will be exempt from PIT, provided that such fees could have been taxed under an existing Double Tax Treaty (DTT).

If no DTT exists, the income can still be exempt if it can be taxed in the other jurisdiction, (as long as it is not black listed) in accordance with the provisions of the OECD Model Tax Convention, and the income is not to be considered as from a Portuguese source.

PENSION INCOME

Finally, regarding pension income, of a non-Portuguese source, NHR residents will be exempt from PIT, provided that such pension income did not resulted from past contributions that allowed for past PIT deductions in Portugal.

Together with the fact that there is a free remittance of funds either to Portugal or abroad, and no wealth tax or inheritance tax in Portugal, makes it a very interesting solution, making Portugal a top choice for High Net Worth Individuals who wish to take up residence in the European Union.

For more information on the advantages of the NHR tax regime, please download the following file:

GOLDEN VISA

The Golden Visa is a visa scheme designed to encourage investment from non-EU/EFTA nationals. The Portuguese Golden Visa offers a fast-track to obtaining a residency permit in Portugal.

The beneficiaries of Golden Visa are entitled to:
  • Residence visa for entering Portugal;
  • Living and working in Portugal, on condition that they stay in Portugal for a period of 7 or more days, in the first year, and 14 or more days, in the subsequent years;
  • Visa exemption for travelling within the Schengen Area;
  • Family reunification;
  • Applying for permanent residence visa (after 5 years) and Portuguese citizenship (after 6 years).
Applicants must make one of the following investments:
  • Capital transfer of at least €1,000,000 into Portugal;
  • Creation of at least 10 jobs in Portugal;
  • Purchase property/real estate in Portugal worth at least €500,000;
  • Acquire and renovate property/real estate in Portuguese urban regeneration areas at least 30 years old to the value of at least €350,000;
  • Investing at least €350,000 in scientific research in Portugal;
  • Investing at least €250,000 or more in the support of Portuguese arts, culture, and heritage;
  • Investing at least € 350,000 in Portuguese investment funds / venture capital, with a minimum maturity of 5 years on the acquisition date, aimed at capitalizing Portuguese companies;.
  • Investing at least € 350,000 in the constitution / capital increase of a Portuguese company, and which creates / maintains at least 5 jobs.

These investments can be made either as an individual businessperson or via a business set up in Portugal or another EU member state.

Portugal’s investor visa covers shareholders of companies already set up in Portugal or in another EU state with a stable residence in Portugal and tax obligations fulfilled.

For more information on the advantages of the GOLDEN VISA, please download the following file:

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