PORTUGAL Law and Practice Contributed by: Francisco Cabral Matos, Rita Pereira de Abreu and Margarida Campelo, VdA
cial activities and qualify as small and medium-sized enterprises (SMEs) or as Small Mid-Cap companies (as defined in the annex to Decree-Law 372/2007), a reduced rate of 15% may apply to the first EUR50,000 of taxable income. A further reduced rate of 12.5% applies to entities qualifying as start-ups under Law 21/2023. This reduced rate applies to the first EUR50,000 of tax - able income. Both the SME/Small Mid-Cap and the start-up reduced rates are subject to the EU de minimis state aid rules. In addition, corporate vehicles will be subject to Municipal Surtax of up to 1.5%, and State Surtax if taxable profits exceed EUR1.5 million, as follows: • 3% on taxable profits exceeding EUR1.5 million; • 5% on taxable profits exceeding EUR7.5 million; and • 9% on taxable profits exceeding EUR35 million. Portugal has specific tax regimes applicable to entities with headquarters and places of effective manage - ment in the Autonomous Region of Madeira and the Autonomous Region of the Azores, which provide for a 30% reduction of the standard CIT rate (resulting in an effective tax rate of 13.3% in 2026). Entities licensed to operate within the Madeira Free Trade Zone by 31 December 2026 benefit from a reduced rate of 5%. Non-resident entities (with no permanent establish - ment in Portugal) receiving income sourced in Por - tugal are typically subject to taxation in Portugal on such income. The applicable withholding tax (WHT) is generally 25%, but it may be 35% in certain cases when such income is paid to an entity resident in a blacklisted jurisdiction. However, the specific WHT treatment must be assessed in light of the applicable double tax treaty, as it may provide for a WHT exemp - tion or rate reduction. Portuguese legislation provides that certain types of expenses/costs must be subject to autonomous taxa -
tion. Autonomous tax rates range from 5% to 70%, with the principal categories being: • Undocumented expenses: 50% (or 70% for entities that are wholly or partially exempt from CIT, or that do not carry on commercial, industrial or agricul - tural activities as their principal activity). • Payments to entities in blacklisted jurisdic - tions: 35% (or 55% where such payments relate to certain defined categories). • Vehicle-related expenses: 8% for vehicles with acquisition cost below EUR37,500; 25% for vehi - cles with acquisition cost between EUR37,500 and EUR45,000; and 32% for vehicles with acquisition cost of EUR45,000 or above. • Termination payments: 35% on amounts exceeding certain thresholds. The autonomous taxation rates are increased by 10% where the taxpayer reports a tax loss for the relevant period, although transitional provisions apply for 2026. Transparent entities, even though not subject to CIT, remain subject to autonomous taxation. Natural persons resident in Portugal for tax purpos - es are subject to personal income tax (PIT) on their worldwide income. Taxable income is generally aggre - gated and subject to tax at the general progressive PIT rates, which range from 12.5% to 48%. In addi - tion, a surtax may be due on the part of the individual’s taxable income exceeding EUR80,000 as follows: (i) 2.5% on the portion of the taxable income exceed - ing EUR80,000 up to EUR250,000; and (i) 5% on the remaining portion of the taxable income exceeding EUR250,000. There is no wealth tax in Portugal.
2. Corporate Tax Regime 2.1 Taxable Profits
Resident companies are subject to taxation on their worldwide income. The Portuguese definition of tax - able profits includes operating income and capital gains. Taxable income therefore corresponds to the profit and loss accounts prepared under the applica -
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