Do you own or run your own company in Portugal? If so, then you’re required to pay tax on your profits. This article will help you make sense of the corporate taxes you need to pay throughout the year. Your business’s corporate tax rate depends on the size of your annual profit and how long it takes you to earn it; but even if the numbers look scary at first glance, you should know that there are several exemptions and loopholes that may allow you to reduce your rates dramatically.
General Information
The tax system in Portugal is complex, with some exceptions. Among other types of taxes, companies need to pay corporate taxes and value-added tax (VAT). Annual profits are calculated by deducting expenses from the gross turnover. If your company turns over more than €10,000 a year, you will also need to register for VAT. The government’s goal for this law is for more small- and medium-sized enterprises (SMEs) to enjoy simplified taxation. This will mean that they can compete better with international players.
Corporate Tax
The size of your corporation’s tax is determined by how profitable it is. In addition, if you are making over €10,000 annually, you’ll need to register for VAT. Corporations that make less than €2,500 per year aren’t subject to any type of taxation. If a corporation falls in this category and wants to reinvest some profit into the company; then they are allowed to distribute dividends and not incur any corporate taxes on the earnings.
Value Added Tax (VAT)
A Value Added Tax (VAT) is a type of indirect tax levied on consumers of goods and services. Generally speaking, the VAT is charged by manufacturers; who are the ones responsible for paying the tax at each stage of production and on sales proceeds. The rate at which businesses will have to pay this type of tax depends on their size and turnover rate. Businesses that earn more than €10,000 per year will be required to register for VAT as well.
All companies registered for VAT must charge it separately from any other taxes; they might also be levying (including corporate income tax). In the event that you sell your products overseas; they may already contain Value Added Tax because many countries levy it on imported goods (in order to avoid double taxation).
Finding a Law Specialist
If you need legal advice or assistance, be sure to contact the experts at RHJ Law. We’re able to guide you through what you need to know before moving to Portugal.
Our legal team at RHJ Law assists non-EEA nationals to obtain residency in Portugal. Our English speaking team of lawyers, accountants and more specialise in helping entrepreneurs and families to set up, manage and grow their life in Europe.
Working with our trusted partners; we can advise you on where to settle and how to go about purchasing property in Portugal.
We look forward to hearing from you soon!
