How Much Tax Does a Company Pay In Portugal?
The tax a company pays in Portugal depends on various factors, including the company's size, income, and specific location within the country. Here are some key points:
Corporation Tax (CIT) Rate
In mainland Portugal, the standard CIT rate is 21% for companies that are tax residents. This rate also applies to Portuguese Permanent Establishments (PEs) of foreign entities. In the Autonomous Region of Madeira, and the Autonomous Region of the Azores - IRC rate is 14,7% and the reduced rate is 11,9% for the first 50.000€ of taxable income for SMEs.
Reduced CIT Rates for SMEs
Some small and medium-sized enterprises (SMEs) and small-medium capitalization companies enjoy a lower CIT rate of 17% on the initial EUR 50,000 of taxable income. Beyond this, the standard CIT rate is applicable. In certain regions, such as inland areas of mainland Portugal, the Autonomous Region of Madeira, and the Autonomous Region of the Azores, even more favourable rates are available. For example, SMEs and Small Mid Cap companies in these regions are subject to a rate of 12.5% in mainland Portugal and 8.75% in the Autonomous Regions on the first EUR 50,000 of taxable income.
Value-Added Tax (VAT)
Portugal's standard VAT rate is 23%. However, reduced rates of 13% and 6% apply to certain goods and services. The Autonomous Regions of Madeira and Azores have distinct VAT rates: 22%, 12%, and 5% in Madeira; and 18%, 9%, and 4% in the Azores. These rates vary based on the type of goods and services. Additionally, some items may be exempt from VAT under specific conditions
Local Surtax (Derrama)
Certain municipalities in Portugal levy a local surtax of up to 1.5% of taxable income, assessed and paid when filing the CIT return.
State Surtax (Derrama Estadual)
This state surtax applies at various rates depending on the taxable profit: 3% on profit exceeding EUR 1.5 million and up to EUR 7.5 million, 5% on profit exceeding EUR 7.5 million and up to EUR 35 million, and 9% on profit exceeding EUR 35 million.
Regional Surtax (Derrama Regional)
In the Autonomous Regions of Madeira and the Azores, a regional surtax applies at rates of 2.1% to 6.3% on taxable profits exceeding certain thresholds.
Companies need to consult with tax professionals to understand their specific tax obligations, as other factors like VAT (Value Added Tax), specific industry regulations, and eligible tax deductions can also influence the overall tax liability. At Rauva, we connect our clients with Certified Accounting Partners who can provide expert advice tailored to the company’s specific situation, ensuring compliance with Portuguese tax laws while optimizing tax liabilities.