PORTUGAL LAW AND PRACTICE Contributed by: Joana Torres Fernandes, José Manuel Pereira da Costa, Danielle Avidago, Javier Mateo, António Pratas Nunes, Joana Loureiro Veríssimo, Madalena Mourão and David Serras Pereira, LVP Advogados
the definition of objective selection criteria, and a mandatory information and consultation phase aimed at assessing the grounds and exploring alternative measures. Following this phase, the employer may issue a final decision, which must be individually com - municated to the affected employees and takes effect after the applicable notice period. Employees affected by collective dismissal are enti - tled to statutory compensation, outstanding payments and, generally, access to unemployment benefits. Termination by mutual agreement may, in certain cases, allow access to unemployment benefits under Decree-Law No. 220/2006, where it occurs in a con - text comparable to redundancy or collective dismissal. All termination mechanisms are subject to judicial review, and employees may challenge the legality of dismissal. 4.5 Employee Representations The Portuguese system is based on the principle of freedom of association, meaning that employees are not required to join or be represented by collective bodies. Employee representation depends on workers’ initia - tive and is not mandatory in all companies. Never - theless, the legal framework provides for information and consultation mechanisms that ensure employee participation. The main forms of representation include workers’ committees, trade union structures and union repre - sentatives, which exercise information, consultation and participation rights. Workers’ committees play a particularly relevant role, especially in matters such as company activity, restructuring processes and collective dismissals. These structures are also involved in health and safety matters, including risk assessment and the implemen - tation of preventive measures. Even in the absence of representative bodies, employ - ers remain subject to information and consultation obligations in certain situations. Employee represent -
atives benefit from enhanced protection, particularly against dismissal. Overall, the Portuguese system combines freedom of association with structured participation mechanisms, ensuring employee involvement without imposing rig - id representation models.
5. Tax Law 5.1 Taxes Applicable to Employees/ Employers
In the context of an employment relationship gov - erned by a subordination agreement, the employee’s salary is subject to progressive personal income tax (PIT) rates ranging from 12.5% to 48%. The applica - ble withholding rate is determined by the employee’s monthly gross salary, and the employer is respon - sible for withholding and remitting the correspond - ing amount to the tax authorities on the employee’s behalf. In addition to income tax, employees contribute 11% of their gross salary to the social security system, an amount equally withheld and remitted by the employ - er. Employers are further required to make their own social security contribution of 23.75%, calculated on the basis of the salary paid to the employee. 5.2 Taxes Applicable to Businesses Taxes Applicable to Businesses Companies that are tax resident in Portugal, namely those with their registered office or place of effective management in Portuguese territory, are subject to corporate income tax (CIT) on their worldwide income. The standard CIT rate currently stands at 19% (for tax periods beginning on or after 1 January 2026), under a phased reduction schedule set to reach 17% by 2028. SMEs and Small Mid Cap companies benefit from a reduced 15% rate on the first EUR50,000 of taxable income, with the standard rate applying to the excess. Non-resident companies without a permanent estab - lishment in Portugal are taxed only on Portuguese- source income, at a flat rate of 25%.
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