Last updated: 2 Jul 2011

Taxation

Professional advice should be sought in the complex and specialised field of taxation. Individuals are subject to a single income tax called Imposto sobre o Rendimento de Pessoas Individuais (IRS).

Companies pay a single income tax called IRC or corporate income tax. All income, whatever the source, is taxed by one of these tax regimes, unless operations exist in the tax haven area of the Acores Islands or the free trade zone in Madeira. Portugal has one of the lowest corporate tax rates in the European Union (EU). The rate is now 34 per cent (down from 36 per cent), with an additional municipal tax in certain areas of up to 10 per cent.

Value Added Tax is a consumption tax that applies to activities regarding the supply of goods or services including importation, has been in force in Portugal since it joined the European Union in 1986. Value added tax, assessed on the duty-paid value, is levied on all items, as follows:

• a reduced rate of five per cent is applied to essential items (includes oil based fuels, most foodstuffs, a range of pharmaceuticals and medical supplies)
• intermediate rate - 12 per cent
• basic rate - 17 per cent
• luxury tax on alcoholic beverages, tobacco, petrol and vehicles

Top Business Risks

• Bribery of Foreign Officials
• Tariffs and regulations
• Doing business in Portugal

OECD Guidelines for Multinational Enterprises

Multinational Enterprises should be aware of the OECD Guidelines for Multinational Enterprises that provide voluntary principles and standards for responsible business behaviour in a variety of areas, consistent with applicable domestic laws. These Guidelines are endorsed and promoted by the Australian Government. For more information, go to the AusNCP website.

Bilateral agreements

Australia has social security agreements with several countries that address the issue of 'double super coverage' for employees sent to work overseas. To take advantage of these agreements, Australian employers sending employees overseas to work must apply to the Tax Office for a Certificate of coverage.

For more details, please visit the Australian Taxation Office website.