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Corporation tax
The standard rate of corporation tax in Portugal is 25%. An additional municipal tax is charged in most areas of up to 10% of the corporate tax due (i.e. up to 2.5% of taxable profits). The combined maximum tax rate is therefore 27.5% and is payable by Portuguese-resident entities and non-residents operating in Portugal through a permanent establishment. Rental income earned by non-residents without a permanent establishment in Portugal is subject to tax at 15%.
Capital gains
Capital gains on the disposal of property obtained by a Portuguese resident company or non-resident entity with a permanent establishment in Portugal may be 50% exempt if reinvestment relief applies. Capital gains realised on the disposal of real estate by non-residents without a Portuguese permanent establishment are subject to Portuguese corporation tax at 25%.
Gains on the direct or indirect disposal of shares acquired after 1 January 2001 by a non-resident in a company whose assets are made up more than 50% by Portuguese real estate are subject to 25% Portuguese corporation tax. An exemption may be applicable if the shares were acquired before 2001. 15% tax must be withheld on rents paid by Portuguese resident lessees with organised accounting, irrespective of the landlord’s residence. Entities resident in a tax haven, or in a jurisdiction with a more favourable corporate tax regime that Portugal, which own Portuguese urban property which is un-leased or unconnected to a business activity must declare annual taxable income of one 15th of the property’s fiscal value as defined by the Portuguese tax code (the IMI Code) unless it can be proven that the property is not in use by a Portuguese entity.
Property tax
Municipal property tax (IMI) is a local tax charged annually at 0.2% to 0.8% (depending on the nature and location of the property) on the fiscal value of the property defined by the IMI Code subject to evaluation in some cases. Specific exemptions may be available.
If the owner is an entity resident in a listed tax haven jurisdiction the tax rate increases to 5%. No tax exemption or other tax benefits are applicable.
Property transfer tax
The transfer of ownership in Portuguese property is subject to property transfer tax (IMT) at up to 6.5% (depending on taxable value of the property and the use to which it is put) on the higher of the consideration paid for the property or its fiscal value as defined by the IMI Code. Specific exemptions may be available.
If the buyer is a company resident in a listed tax haven jurisdiction, the rate increases to 15% and no tax exemption or other tax benefits are applicable.
Transfers of real estate are also subject to stamp tax at 0.8% on the fiscal value of the property as defined by the IMI Code. Transfers of leases are subject to stamp tax at 10% on one month’s rent and on any subsequent rent increase. The receipt of real estate as a donation is also subject to a 10% rate on the fiscal value as defined by the IMI Code.
VAT
VAT registration is compulsory, irrespective of tax residence, whenever taxable supplies are made in Portugal. The standard rate of VAT is 21% (previously 19%). Services relating to Portuguese real estate, such as estate agency, brokering and related professional services, are subject to VAT at the standard rate. The disposal and letting of real estate are exempt. However, it may be possible to opt to tax, in certain circumstances. In such cases, various strict regulations will apply for the subsequent 20 years.
The above is for general information purposes only. It is not intended to be comprehensive or to provide any specific tax advice.
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