How are Income Taxes calculated in Portugal?

Income tax in Portugal, known as "Imposto sobre o Rendimento das Pessoas Singulares" (IRS), is a progressive tax applied to individuals based on their income and residency status. This guide explains how income taxes are calculated in Portugal, detailing the components that affect your tax liability.


Key Components of Income Tax Calculation

  1. Tax Residency:

    • Residents: If you spend more than 183 days in Portugal in a calendar year or have a permanent home in the country, you are considered a tax resident. Residents are taxed on their worldwide income.
    • Non-Residents: Non-residents are only taxed on income earned within Portugal.

  2. Taxable Income:

    • Categories of Income: Income in Portugal is classified into different categories, including employment income, business and professional income, investment income, real estate income, capital gains, and pensions.
    • Total Income: Your total taxable income is the sum of all these income sources, which forms the basis for calculating your income tax.

  3. Tax Brackets and Rates:

    • Progressive Tax Rates: Portugal uses a progressive tax system, where the rate increases as income rises. For 2024, the tax brackets are:

      Income Range (€)Tax Rate (%)
      Up to 7,47914.5%
      7,479 – 11,28423.0%
      11,284 – 15,99226.5%
      15,992 – 20,70028.5%
      20,700 – 26,35535.0%
      26,355 – 38,63237.0%
      38,632 – 50,48345.0%
      Over 50,48348.0%

      To calculate your tax, apply each tax rate to the portion of your income within each bracket. The sum of these amounts is your total tax liability.

  4. Deductions and Credits:

    • Personal Deductions: These can reduce your taxable income and include expenses related to health, education, housing, and dependents.
    • Tax Credits: Credits, such as those for charitable donations or renewable energy investments, directly reduce the tax you owe.

  5. Social Security Contributions:

    • Employees and employers must also contribute to social security, which is 11% of the employee’s gross salary for the employee and 23.75% for the employer. These contributions are deducted from your salary but are not part of the income tax calculation.

  6. Additional Surcharges:

    • High earners may face additional surtaxes, like the solidarity surcharge, which is an extra tax on income exceeding specific thresholds.


Example Calculation

If you are a Portuguese resident with an annual income of €30,000, here’s how your income tax might be calculated:

  1. Determine the Taxable Income:

    • Assume no other income and no deductions.

  2. Apply the Tax Brackets:

    • Up to €7,479: 14.5% = €1,084.46
    • €7,479 to €11,284: 23.0% = €876.65
    • €11,284 to €15,992: 26.5% = €1,249.22
    • €15,992 to €20,700: 28.5% = €1,343.13
    • €20,700 to €26,355: 35.0% = €1,978.25
    • €26,355 to €30,000: 37.0% = €1,353.65

  3. The total tax liability would be the sum of these amounts.


Filing and Payment of Taxes

  • Annual Tax Return: Residents must file an annual tax return between April and June, reporting all income, deductions, and credits. The Portuguese tax authority (Autoridade Tributária e Aduaneira) uses this to calculate your final tax liability.
  • Tax Payments: If your tax liability exceeds the taxes already withheld, you must pay the difference. Conversely, if too much was withheld, you may receive a refund.
  • Advance Payments: Depending on your income, you might need to make advance payments throughout the year.

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