Accounting and tax
- Corporate tax is levied at a 21% rate in Portugal. SMEs with less than €50 million income benefit from a reduced rate of 17% for profits up to €15,000. A local tax is also levied on all corporate profits, at rates of up to 1.5%;
- A corporate tax surcharge is levied on companies with over €1.5 million, at rates of up to 7%;
- The standard VAT rate is 23%. VAT filings are reported i) each quarter or ii) each month for companies with revenue over €650,000;
- Capital gains and dividends are fully tax-exempt if i) the receiving company has held over 5% of the distributing company’s share capital for over 2 years and ii) the distributing company is neither based in a listed tax haven or a jurisdiction with a corporate tax rate below 13.8%;
- Withholding tax on interest and dividend and royalties payments to non-EU companies is levied at a 25% rate, unless reduced by a tax treaty. A special rate of 35% applies if the receiving company is based in a listed tax haven;
- Audit requirement is waived for LLCs if they meet two of the three following thresholds: i) total assets below €1.5 million ii) income below €3 million and iii) number of employees below 50;
- All Portuguese companies must file and pay their corporate tax returns in May and a first advance payment is due in September. Late filing and payment result in a penalty of up to 4% and 7% of the amount due;
- Annual losses can be carried forward for up to 12 years, for an annual amount up to 70% of that year’s taxable income;
- Portuguese real estate is subject to a property tax, at rate of up to 0.8% of the value of land and buildings. A special 7.5% rate applies to property held by entities based in blacklisted tax havens;
- Transfers and sales of real estate are subject to property transfer tax levied on the property value at rates of up to 8%. Please note that purchasing entities based in a blacklisted tax havens are subject to a 10% rate;
- A resident company transferring its tax residence abroad must pay an exit tax on transferred assets, which are treated as capital gains;
- Portugal benefit from double taxation treaties with 63 countries, including Australia, Canada, China, Singapore and USA, enabling resident businesses to reduce down to 5% withholding tax rates on payments abroad;
- Healy Consultants Compliance Department will assist our Clients with i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budget and sensitivity analysis;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfill those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance
The business environment has recently improved in Portugal, as the government has understood that reducing regulation burden on business is key for the economy to recover from the financial crisis. However, most of our Clients still find it complex to comply with the Labor code. Further information follows:
- Annual financial statements are to be i) approved by March the 31st of the following year by the shareholders and ii) submitted by June the 30th to the Ministry of Finance;
- Although Portugal does not have exchange controls, transfers over €10,000 must be notified to the Central Bank, in order to disrupt money-laundering activities;
- Portugal implements stringent anti-money laundering regulation, which notably mandates resident businesses to inform the authorities of transfers and operations likely to cover such activities;
- Listed companies are required to i) annually disclose the composition of their managing board to the authorities and ii) provide proof that at least 25% of its directors are “independent”, ie holding less than 2% of the company’s share capital;
- Companies with turnover over €3 million must i) disclose all operations involving transfer pricing and ii) document the pricing method and the value of goods and services transferred. Please note that transfer pricing is allowed only between i) a subsidiary and ii) its parent company holding over 10% of share capital.
- Portuguese employees are hired on i) open-ended contracts for permanent positions or ii) fixed-term contracts for temporary positions. Fixed-term contracts are limited to durations of up to 3 years;
- Employers in mainland Portugal must pay their employees i) at least the minimum wage, currently fixed at €485 monthly, and ii) provide them with a yearly bonus of at least €970 (2 months of pay);
- Employees are entitled to 22 days of paid annual leave, for which the employer must furthermore provide a “vacation subsidy” which amount shall be stated by prevailing collective agreement;
- Employers must remit 24.75% of each employee’s gross salary to Social Security and the Working Compensation Fund. Employees are however only required to contribute to Social Security at a rate of 11%;
- Employers must provide their permanent employees with 35 hours of training per year;
- All dismissals (except for gross willful misconduct) must be i) noticed by up to 2 months in advance for employees on permanent positions and ii) compensated by up to 18 days of salary per year spent with the company for all employees.
Collective bargaining and labor unions regulations
- All Companies must have at least i) 1 union delegate and ii) an advisory Work Council, which both can sign collective agreements with company management in enterprises with more than 150 employees;
- Union delegates are entitled to ask all employees to attend meetings during working hours, for up to 15 hours per year;
- Employers must abide by collective agreements, which cover a large set of employment issues including i) pay ii) pay increase schemes iii) working hours and holidays iv) health v) use of temporary contracts and vi) pensions;
- Collective agreements must be renewed every five years i) at the company level or ii) at the industry level. In the latter case, the collective agreement will be applicable to non-signatories companies only if signed by an employers’ association representing over 50% of the industry’s companies.
Other company regulation
- According to the Restrictive Trade Practices Act, businesses must maintain a price catalogue and are forbidden to sale goods and services at a loss, with fines up to i) €15,000 for SMEs and ii) €2.5 million for large companies;
- Portugal-based companies and their employees convicted of bribing a foreign or Portuguese official are subject to penalties including i) up to €300,000 fine and ii) up to 8 years of imprisonment;
- The Portuguese Protection of Personal Data Act forbids companies from using personal information about individuals without their permission;
- Portugal legal system is party to the New York Convention on Recognition and Enforcement of International Arbitral Awards. Arbitration in other countries which follow this convention will be enforceable in Portugal.