The Portuguese Individual Income Tax Code ("CIRS")


The CIRS covers the taxation of income earned by individuals. It purports to treat all categories of income in an equal manner, although it has introduced several exceptions:

  • Certain categories of income are subject to a fixed withholding tax rate and the taxpayer is given the possibility to incorporate such income in his overall taxable income if the applicable tax rate is lower than the fixed withholding tax rate (for example, earnings derived from interest payments, corporate participations, capital gains derived from the sale of corporate participations),
  • Certain categories of income are subject to a fixed withholding tax rate but the taxpayer is not given the possibility above mentioned (for example earnings derived from gambling).


The CIRS considers that an individual is resident in Portugal provided that:

(a) he has remained in Portugal for a period of more than 183 days in a given year, or

(b) he has remained in Portugal for a period of less than 183 days in a given year, provided that on 31 December of that year such individual had a home available to him which is equipped in such a manner that shows his intention to use it as a permanent home, or

(c) he is a member of the crews of ships or aircrafts which are at the service of entities resident in Portugal, or

(d) he is a resident outside Portugal but he is at the service of the Portuguese State.

Furthermore, Portuguese tax laws deem resident any individual which is part of a family, provided one of the persons in charge of such family resides in Portugal (it should be noted that article 1671, number 2, of the Portuguese Civil Code establishes that both husband and wife are in charge of the family unit). The consequences of such a provision is that a Portuguese emigrant, working and living abroad, will be deemed resident in Portugal if his wife resides in Portugal.

For the purposes of the Portuguese Double Tax Treaties ("DTT"), a different concept of residency may apply as will be seen at the appropriate chapter (see our Scheduled Chart). In what concerns the taxation of Portuguese emigrants, residing in Countries which have executed a DTT with Portugal, we are of the opinion that such Portuguese emigrants could not be deemed residents in Portugal because their liability to tax in Portugal does not derive from a criterion which is similar to those mentioned in the said DTTs.


The Individual Income Tax is levied on all types of income earned by an individual which is resident in Portugal. The concept of worldwide taxation is used.

For the purposes of tax deductions and expenses, the CIRS divides such income into 9 different categories:

Category A: income derived from an employment relationship,

Category B: income derived from independent services,

Category C: income derived from a commercial or industrial activity,

Category D: income derived from an agricultural activity,

Category E: income derived from corporate participations, interest payments, technical assistance and know-how,

Category F: income derived from real estate,

Category G: income derived from capital gains,

Category H: income derived from pensions,

Category I: Other income including income derived from gambling.


In order to determine the amount of income which is subject to a tax rate, the CIRS deducts several items from the aggregated income of the above mentioned categories, some of which items are specific of each category whereas others are deductions applicable to the overall income of the resident taxpayer.

Specific deductions include (but are not necessarily limited to):

(a) In the case of an employment relationship, 65% of such income up to a maximum amount (in 1996) of Esc. 465.000$ (approximately USD: 3.100,00),

(b) In the case of independent services, commercial, industrial or agricultural activities, all costs which are connected with the production of such services or the execution of such activities. It should be noted that certain costs may be limited to a maximum amount (fixed as a given percentage of the income related to such specific category),

(c) In the case of real estate income, all costs which are connected with the maintenance of such real estate.

(d) In the case of capital gains derived from the sale of real estate, or from the sale of certain rights (for example: intellectual or industrial property as well as leases), 50% of such capital gains.

General deductions include expenses related to health, housing and education. They relate to what is considered as social expenses, i.e., expenses made by the taxpayer which have a certain social use.

It should be noted that, for the purposes of determining the taxable income (and the applicable tax rate) of both husband and wife, the CIRS has a provision establishing the splitting of their respective incomes.


Tax rates vary in accordance with the gross worldwide income of the resident taxpayer minus the specific and general deductions above mentioned ("taxable income").

If such taxable income is below a certain minimum net amount (i.e., below the amount which corresponds to the Government fixed minimum wage) then no tax is levied.

Above such minimum income, tax rates apply at a range varying from 15% to 40% of such taxable income. Certain categories of income may be subject to fixed withholding tax rates (see Introduction above). Such is the case of income derived from corporate participations (25%), from interest payments (20%), from know-how (15%), from capital gains derived from the sale of corporate participations (10%) or from gambling (35%).

Once the amount of tax due by the resident taxpayer is determined, the taxpayer is still allowed to certain deductions (deductions to the due tax and not to the gross income, as referred above). Such deductions relate to the personal situation of each family unit (i.e., number of children), or to situations connected with double taxation.


There is a general principle under the CIRS that income be subject to a withholding tax upon its payment, the amount of which is then deducted from the amount of tax due at the end of the year. In other words, the taxpayer pays his taxes along the year and not on one single instalment at the end of the said year (the reason being that the Government needs a certain regularity in collecting taxes).

Tax returns must be delivered by the resident taxpayer until the following dates:

(a) 15 March of the following year for resident taxpayers which earn income of only either category A or H,

(b) 30 April of the following year for resident taxpayers who earn other categories of income as well as for those who earn income of both category A or H and some other category.

Upon reception of the tax returns, the Tax Administration Authorities check the amounts due and notify the resident taxpayer for the payment of his taxes.

Please note that the contents of this Article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contact Miguel Teixeira de Abreu, Abreu, Cardigos & Partners, Lisbon, Portugal.