Portugal: Living There - Tax Issues

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Living There

INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. An individual is deemed resident in Portugal if he spent more than 183 days per calendar year in Portugal. Married couples are taxed jointly.

INCOME TAX (Imposto Sobre o Rendimento das Pessoas Singulares, IRS)

There is a single income tax for all individuals. It covers employment income, self-employment income, work income, commercial and industrial profits, agricultural income, investment income, income from property, pensions, capital gains, and other income. Aggregate income is taxed at progressive rates.

The following tax credits are extended to residents in lieu of previous deductible expenses:

• un-reimbursed health-related expenses and interest on health-related loans: 30% tax credit
• education expenses: 30% tax credit up to €600 (an additional tax credit of €112 for each dependent child is available, provided that the taxpayer has more than three dependent children studying)
• old-age home expenses incurred by the taxpayer, dependent ascendants, or siblings whose annual income does not exceed the minimum salary: 25% tax credit up to €316
• premiums on qualifying life assurance policies or personal accident insurance, and contributions: 25% tax credit up to €57 for single individuals and up to €114 for married couples
• premiums on health insurance: 25% tax credit up to €76 for single individuals and up to €152 for married couples (an additional tax credit of €38 for each dependent child is available)
• acquisition for expenditure on natural energy: 30% tax credit up to €728
• interest and/or capital payments on loans for the purchase, construction or refurbishment of the taxpayer's own house in Portugal: 30% tax credit up to €549; or rents in respect of a rental agreement based on RAU (agreements should be made for a period of 5 years or more): 30% tax credit up to €549

CAPITAL GAINS TAX

Capital gains realized by residents on the sale of Portuguese property are taxed at progressive income tax rates. Residents are liable to pay tax only on 50% of the taxable gain. The taxable gain is computed by deducting the following from the selling price: the acquisition cost, costs of transferring ownership, and improvement costs incurred in the last 5 years prior to the sale.

PROPERTY TAXATION

Property Tax (Immovable Property Tax, IMI)

This tax is levied on the officially assessed values or "patrimonial value" of the buildings located in the territory of each municipality. The calculation of the patrimonial value takes into consideration the cost of the building, the average value of the land, the location of the property, etc.

The applicable rate is defined annually by each municipality in a decision taken by the respective municipal assembly. Rural properties are taxed at 0.8% while urban properties can be taxed from 0.4% to 0.8%.

Houses destined to be used as a permanent home and those destined for rental may benefit from exemption, upon application to the director of the local tax office. Exemption from this tax may be granted for periods ranging between three and six years depending on the patrimonial value of the building in question.

Portugal - more data and information

• Lawyers (attorneys) with property law practices in Portugal

Your Comments

posted by James Kevin whelton | 2007-10-12

bank official, guernsey

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