Now that James knows that Portugal is a prime location to invest, do business and live, he is really considering the possibility to set a company in Portugal.
For James, it's very important to clarify certain rules. It seems that he could take some tax advantages by developing his business in Portugal, rather than keep paying a high level of taxes on his own country. However, he's not quite sure about the Portuguese tax rules and benefits.
Let's help James!
In today's video, we'll go through the main Portuguese taxes:
Resident individuals are liable to IRS on their worldwide income. IRS is levied on residents at progressive rates, which may vary from 14.5 per cent up to 48 per cent, according to the bracket of taxable income (ie, the sum of the various categories of income subject to taxation net from the corresponding deductions).
Non-resident individuals are liable to IRS only on income derived within Portugal (eg, income from real estate situated therein, including capital gains from the transfer thereof). IRS is usually levied on non-residents at final withholding taxes, which may vary from 25 per cent up to 28 per cent, according to the nature of the income.
Nowadays there is a new special regime for non-habitual tax resident individuals, which may potentially mean a significant tax saving. The tax regime for non-habitual residents is part of the Investment Tax Code and is intended to attract to Portugal certain qualified individuals and investments. Please check more info at http://nonhabitualresidents.uwu.pt/.
Resident entities are liable to IRC on the worldwide income. An entity is regarded as resident in Portugal if its head office or effective management is located therein. Non-resident entities are liable to tax only on income of Portuguese source (ie, attributable to a permanent establishment located in Portugal or, if that is not the case, due by a resident entity).
The standard rate for IRC decreased from 25% in 2013 to 21% in 2016. Furthermore, since 2014 the first €15.000 of profit are taxed at 17% for SME´s.
Non-resident entities without a permanent establishment in Portugal are subject to tax at a 25% rate, or to final withholding tax rates varying from 0% to 35%, depending on the nature of the income.
IMI rates are 0,8% for rural property, and 0,4% to 0,7% for urban property. If the value of the urban property is assessed in accordance with the IMI Code, rates are between 0,2 % and 0,4 %.
IMT is levied on the transfer of property rights over real estate located in Portugal, or other acts which provide similar economic results and computed over the price effectively agreed on the transaction or the fiscal value of the property, if higher.
IMT is assessed (i) at marginal rates up to 8% (acquisitions of urban property exclusively intended for dwelling purposes), (ii) at a 6,5% rate (acquisitions of other urban property) and (iii) at a 5% rate (acquisition of rural property).
IVA is levied over three main groups of transactions – supply of goods and render of services in the Portuguese territory, import of goods and intra-community operations performed in the Portuguese territory. IVA rates applicable in the mainland are 23% (standard), 13% (intermediate) and 6% (reduced).