Tax Guide 2024 – PIT

ᐅ Last reviewed 20 January 2024

Taxable persons

(*) The Non-Habitual Residents (RNH) regime was revoked effective as from 1 January 2024. However, the regime is still applicable to those who (i) were already registered as RNH w up to 1 January 2024; or (ii) that by 31 December 2023 met the conditions to be registered  as  RNH. The regime is also applicable to individuals who become tax residents until 31 December 2024 provided certain conditions are met.

(**) With a limit for those who become tax residents as from1 January 2024.

Categories of income

Simplified regime

Taxpayers covered
Taxpayers whose annual gross income in Category B (business and professional income) does not exceed € 200,000, and have not opted for an organized accounts regime can apply for the simplified regime.

Taxable income
The taxable income under the simplified regime will be calculated by applying the following coefficients to the gross income:

In case of services listed in Article 151 of the PIT Code (coefficient of 0.75) and other services not specifically listed (coefficient of 0.35), the taxable income is assessed differently:  the above coefficients are added to the positive difference between 15% of the gross income and the sum of a set of pre-established expenses, incurred with the acquisition of goods and services related with the activity developed and communicated to the tax authorities.

Accordingly, the application of the referred coefficients is partially dependent on a verification of the expenses effectively incurred by the taxpayer. Notwithstanding the eligible expenses effectively incurred, the legislation states that, a deduction of a fixed amount of € 4,104 or, if higher, of the total amount of the social security contributions paid is allowed (for the amount not exceeding 10% of the gross income provided that these were not deducted already).

Practical example
A taxpayer earning a total gross income of € 40,000 derived from the rendering of services (listed in Article 151 of the PIT Code) and incurring expenses in the amount of at least € 1,896, can benefit from the coefficient in full, i.e. 75%.

Withholding tax rates applicable in 2024
 _{Category A (employment income) and Category H (pensions)}
 

• Withholding tax rates – Portugal mainland
• Withholding tax rates – Madeira
• Withholding tax rates – Azores

PIT deductions

^{(1) Assuming that both taxpayers are disabled.}

^{(2) If the expenses mentioned occur simultaneously in i) and ii), the limit is € 1,100 instead of € 800.}

^{(3) The amount of the education and training expenses incurred by students attending education institutions located in inland regions ( as identified in Decree 208/2017 of 13 July), shall be increased by 10%. In addition, the overall cap of the tax deduction for education and training expenses shall be increased from € 800 to € 1,000, if the difference relates to the said expenses.}

^{(4) The limit is increased to the following amounts, being the taxable income, in the case of joint taxation, the amount that results from the application of the divisor foreseen in Article 69 of the PIT Code:} 

^{1. For taxpayers who have a taxable income equal to or lower than the amount from the first bracket of paragraph 1 of article 68, an amount of € 900;} 

^{2. For taxpayers who have a taxable income greater than the value of the first bracket of paragraph 1 of Article 68 and equal to or lower than € 30,000, the limit resulting from the application of the following formula: € 600 + [€ 900 - € 600 ) x [(€ 30,000 - taxable Income)/(€ 30,000 -value of the first bracket)]]}

^{(5) This limit is increased to € 1,000 for 3 years (the first year being the one of conclusion of the contract), if these expenses derive from the transfer of permanent residence to an inland territory (as defined in Decree 208/2017 of 13 July).}

^{(6) A taxpayer granting donations of an amount exceeding € 50,000 (i) which respective tax liability in the year concerned is lower than the amount of the allowed deduction or (ii) that reaches the cap of the deduction (15% of the tax liability), can carry the amount of the deduction forward for the following three years, capped at 10% the tax liability in each of the tax years concerned.}

^{(7) The deduction is allowed in respect to expenses incurred with the following services:}

     ^{- Maintenance and repair of motor vehicles;}

     ^{- Maintenance and repair of motorcycles and related parts and accessories;}

     ^{- Accommodation and food service activities;}

     ^{- Hairdressers and beauty salons;}

     ^{- Veterinarian expenses including medicines.}

^{(8) Includes health and insurance expenses, education and training expenditures, retirement home fees, deduction for requesting the issuance of an invoice, costs with immovable property, alimony expenses and tax benefits. In households with three or more dependents, the above limits are increased by 5% per dependent or civil godson, which is not a taxpayer.
(9) For the remaining cases, the global limit is determined based on the following formula:
€ 1,000 + [(€ 2,500 - € 1,000) * [(€ 80,000 - taxable income) / (€ 80,000 - € 7,703)]]}

PIT benefits
_{Non-habitual residents}

^{Note: The Non-Habitual Residents (RNH) regime was revoked with effectives to 1 January 2024 onward. However, the regime is still applicable to those who (i) weare already registered as RNH on 1 January 1, 2024 or (ii) that by 31 December 31, 2023, meet the conditions for registration as RNH.} 

^{The regime is also applicable to individuals who become tax residents until 31 December 2024 provided certain conditions are met.}

Taxation

Employment and self-employment income, derived from “high value-added activities of a scientific, artistic or technical nature” (included in a list of activities published by the Portuguese Government), received by non-habitual residents in Portugal is subject to a special tax rate of 20%.

Additionally, the regime also establishes a tax exemption for foreign-sourced income, such as employment income, self-employment income, rental income, interest, dividends as well as other investment income, under specific conditions.

Foreign source pensions (and similar income) are subject to a fixed rate of 10%

The regime is applicable for a period of ten consecutive years.

Conditions
The regime applies to individuals who become Portuguese tax residents, under Portuguese domestic law, in a specific year and have not qualified as tax residents in Portugal in any of the previous five years.

Specificities
The status of non-habitual tax resident becomes effective upon registration with the Portuguese tax authorities. Application should be filed until the 31st March of the year following that which the taxpayer becomes tax resident in Portugal.

Tax Incentive Scheme for Scientific Research and Innovation (IFICI)

The regime shall provide for: 

• A special 20% rate on net employment income (category A) and business and professional income (category B) from the activities identified in the applicable legislation. 

An exemption on foreign sourced employment income, business and professional income, investment income, rental income and capital gains.

Conditions

The regime applies to individuals who (i) become Portuguese tax residents, under Portuguese domestic law, in a specific year, (ii) have not qualified as tax residents in Portugal in any of the previous five years, (iii) do not benefit or have benefited from the RNH regime or the former resident regime and (iv) who carry out activities provided for in the applicable legislation.

_{Tax regime for former tax residents}

Taxation
50% relief from taxation on employment and self employment/business income.

For those who become tax residents from 1 January 2024 onward, the relief is capped at € 250,000.

Conditions
The regime applies to taxpayers that became or become resident in the Portuguese territory from the years  2019 to 2026 provided that: 

• They were not resident in the Portuguese territory in any of the 5 prior years.

• Have been resident in the Portuguese territory at any time before the referred five year period.;

• Have their tax situation regularized.

The regime applies for 5 years, including the year of return.

_{Youth Personal Income Tax (“IRS Jovem”)}

Income from Category A (employment income) and Category B (self employment/business income); income from Category A (employment income) earned by young people aged between 18 and 26 years who are not dependents, is partially exempt from PIT, in the first five years following the conclusion of a cycle of education corresponding to or higher than Level 4 of the National Qualification Framework, subject to making said option in the annual PIT return.

The age to make the option is extended to 30 years old if the cycle of education corresponds to Level 8 of the National Qualification Framework.

The exemption applicable corresponds to 100% of the income earned in the first year, 75% in the following year, 50% in the third and fourth year and 25% in the last year, capped respectively at 40 x Social Support Index (IAS), 30 x IAS, 20 x IAS and 10 x IAS.

The exemption applies in the first year in which the income is obtained following the conclusion of a cycle of education and in the following four years, provided that the option is taken up to the limit age.  Or in consecutive or alternate years, provided that the maximum age of the taxpayer does not exceed 35 years.

_{Share plans or equivalent rights}

Gains derived from share plans or equivalent rights created by the employer for the benefit of the employees may be taxed at only 50% of their value at the rate of 28%, provided certain conditions are met.

_{Intellectual property}

Author rights obtained by a Portuguese tax resident who is the respective original owner, benefit from a 50% tax relief. However, the amount excluded from taxation is capped at € 10,000.

_{Venture capital funds}

Capital gains derived from the sale of participation units are taxed at a 10% rate.

_{Collective investment vehicles in forest resources}

Capital gains derived from the sale of participation units in real estate investment funds, or shares in real estate investment companies in forest resources, are taxed at a 10% rate.

_{Capital gains realized by non residents}

An tax exemption applies to the disposal of:

• shares, other securities and autonomous warrants issued by Portuguese tax resident companies;

• derivatives negotiated at a regulated stock exchange;

• participation units in venture capital funds.

Exceptions apply in case of:

• residents in countries, territories and regions that provide a favorable tax regime under Portuguese tax law;

• disposal of shares in companies whose assets comprise more than 50% of real estate located in Portugal.

_{Employer contributions to social security regimes}

Employers' contributions to pension funds (or other complementary social security regimes) are PIT exempt at the moment of the contribution, provided certain requirements are met.

_Sportsmen

• Prizes and awards granted to disabled athletes, high performance athletes and their coaches are tax exempt, as long as granted by one of the entities referred to in the legislation;

• Sports training grants awarded to non-professional sports agents (players, referees, judges) are tax exempt, up to € 2,375, provided that certain conditions are met;

• Compensations paid to non-professional referees and umpires are excluded from taxation, up to € 2,375, provided that certain conditions are met.

_{Tax benefits to expatriates}

A tax benefit is granted to employees that are displaced to a foreign country, which is not their usual workplace, for a period of 90 days, 60 of which are consecutive. This benefit consists of a PIT exemption, applicable to the amount of the remuneration paid to the employee by the Portuguese employer, exclusively as a compensation for moving and staying abroad (up to € 10,000).

_{“Programa Semente” / Start-ups}

This tax benefit is applicable to individuals making eligible investment under “Programa Semente”, allowing a PIT credit of 25% of the eligible investment. This investment is limited to shareholdings not exceeding 30% of the share capital or of the voting rights. It should be represented by cash contributions actually paid, and, among other requirements, the annual amount of the eligible investment cannot exceed € 100,000.00 per taxable person.

^{_{© 2024 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.}}