What Do You Know About Corporate Tax in Portugal?
The success of Portugal as an investment destination is based on the country’s positive approach towards international business. Portugal offers a strategic location, access to key markets, skilled human resources, competitive costs and top infrastructures.
There are several investment options in Portugal such as real estate, capital transfer and job creation. Although most of the investors prefer to make an investment in real estate, having information about the corporate tax rate in Portugal can be interesting as well.
Being aware of the Portuguese tax scheme is mandatory for investors who are interested in creating jobs in Portugal. Previously, we have informed you about non-habitual tax regime of this country which brings a lot of benefits to those who have gained their residency through Portugal Golden Visa program.
This post would be useful for those who have thought about creating jobs in Portugal or investors who have a company in this country at the moment. So, stay with us to get a piece of information on the corporate tax system.
Who pays corporate tax?
Generally, people who own an incorporated company, have to pay corporate tax. But, there are 2 main categories for whom paying corporate tax is mandatory.
- Resident incorporated companies must pay corporate tax on their worldwide income.
- Non-resident companies (those registered outside Portugal) must pay corporate tax on Portuguese income not subject to personal income tax.
It is worth mentioning that if the company owner is self-employed or a sole trader, he has to pay Portuguese income tax on his profit instead of corporate tax.
Corporate tax rates in Portugal
Corporate tax has an average rate of 21.51 % in the European Union. Portuguese corporate tax rate is slightly under it. The profit of the company will be imposed at a rate of 21% in Portugal.
It is important that not only the company has to pay corporate tax on the profit it gains, but also there is going to be some surcharges as well.
But these surcharges are not for every company. Only under specific circumstances, it will be necessary to pay this extra money. For instance, if a company has a net profit of more than 1.5 million euros per year, it would have to pay the surcharge.
Here, we take a look at some of the surcharge rates:
- 3% surcharge on profit between €1.5 million and €7.5 million;
- 5% surcharge on profit between €7.5 million and €35 million;
- 9% surcharge on profit over €35 million
Corporate tax exemptions
Due to the Portuguese generous tax scheme, small business company owners would have to pay taxes at a flat rate of 17% on their first €15,000 taxable profit. Also, companies can enjoy tax deductions which this country offers such as:
- Deductions for international double taxation;
- Deductions concerning tax incentives;
- Special advance payment deductions (if the taxes will be paid in two installments in March and October, rather than three installments in July, September, and December).
There are a lot of costs and expenses for each company. When calculating tax, all of these costs will be deducted and only the net profit which has been made in a tax year will be considered.
Deductible costs for the company are:
- Manufacturing and production costs
- Labor costs
- Costs relating to conservation and repair
- Marketing costs
- Financial costs relating to the business (e.g. insurance, rent, bills)
- Administrative costs relating to the business
- Costs for any provisions needed for the day-to-day running of the business
- Research and analysis costs
- Tax planning costs
- Depreciation and amortization
- Realized capital losses
Corporate tax calendar
The Portuguese tax year runs from 1 January to 31 December. The deadline for paying corporate tax is between 16 April to 16 May of the following year.
Companies can pay their corporate tax in 3 installments which are in July, September and December.
As it was mentioned in corporate tax exemptions, if company owners pay their tax in 2 installments instead of 3, they will benefit from tax deductions.
Additionally, if taxes are paid late, the company could face a penalty between 30% to 100% of the tax due. So, paying taxes on time is very important because it can prevent paying extra money to the Portuguese government.
With due attention to the statistics available from Portuguese residency by investment program, the most profitable and cost-effective option in order to receive this country’s residency is to make an investment in real estate. If you are interested in receiving Portugal Golden Visa, we suggest you take a look at luxurious projects in Portugal or you can contact one of our advisors.
CBF’s highly experienced specialists can help you achieve your Portugal residency by investment (GOLDEN VISA) and provide you more information. To get started, please contact one of our advisors in UAE, Denmark or Canada.
If you have any questions about obtaining Portugal Residency through investment, please comment below.