Profits of resident companies earned in other countries are subject to corporate income tax. Profit refers to capital gains and profits earned by Portuguese subsidiaries and other firms acting as representatives of foreign businesses in Portugal.
The income tax rate is 21%. In addition, state and municipal surcharges are also charged plus to this rate. The first progressive rate is:
Profit in EUR Rate amount
The first one and a half million 0 %
Subsequent 6 million 3%
Due to surcharges, the final rate can increase to 31.5%, however, only in cases where the company’s profit exceeds 7.5 million euros.
The annual tax period coincides with the calendar year. However, resident enterprises can make a request to the Ministry of Finance regarding other limits of the annual tax period in connection with one or another economic reason.
Income tax must be declared and paid within five months after the annual tax period has ended. Prepayment is made in 7, 9 and 12 months of this period, based on the total tax amount that was calculated for the previous year.
For a tax period that begins on or after 01/01/2013, a restriction is imposed on the ability to deduct a percentage of the amount of taxable income. Based on this limit, the financing cost can be deducted up to the following limit:
3 million euros; or
30% of earned funds before depreciation, interest and taxes (EBITDA) – but a transition period can be applied, respectively, this limit will be 70% for 2013, 60% for 2014, 50% for 2015, 40% for 2016 and 30% for 2017.
Portugal does not impose a capital increase tax. Anything assigned to capital gains must be included in taxable profits for corporate tax purposes. Half of the gains derived from transfers of tangible main and financial funds held for at least a year can be deducted from general taxation. This applies to cases where the total amount of funds that have been transferred is reinvested over a designated period.