Portugal Global Payroll & Tax Information Guide

June 20, 2022 | 5 Mins Yana Todorova

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Payroll in Portugal – 2022 Updates

For 2022 the following payroll updates were taken by the Portuguese authorities:

    • The Cost-of-Living Adjustment (increase) is €1.75 per week (€91.00 per annum) for full-time employees.
    • National minimum wage – As of 1 January 2022, the national minimum weekly wage for whole-time employees is €182.83 for workers who are 18 years of age and over.
    • In 2022, an employee with a 40-hour working week will be entitled to 224 hours of paid vacation leave.
    • Changes in Income Tax Rates
    • The income tax rate applicable on income derived from qualifying part-time employment has been revised from 15% to 10%. The maximum amount of qualifying part-time employment income that can qualify for this rate in any year is €10,000. Qualifying emoluments exceeding this amount are taxable at the standard applicable rates of income tax.
    • The income tax rate applicable on qualifying overtime emoluments remains 15%. However, this is now applicable to a maximum amount of emoluments of €10,000, rather than a maximum of 100 hours of overtime. Overtime emoluments exceeding this amount are taxable at the standard applicable rates of income tax.
    • Changes in Social Security Contributions

Portugal Payroll – Basic Facts

Income Tax

Employers are obliged to deduct employee contributions from the employees’ gross wage and transfer tax deductions on a monthly basis to the Social Security Administration. These contributions cover benefits including sick leave, pensions, family benefits, parental leave and unemployment insurance. All employers are obliged to file taxes and remit on a monthly basis and must summarize withheld amounts and present to employees by January of each year. The tax year in Portugal runs from January 1st through to December 31st.

Income Tax Rate

Taxable income for employees based on the employees’ gross wage minus any allowable deductions. These deductions can include, union costs, social security contributions, deductions for dependents and subscriptions to professional bodies.

Portuguese Personal Income Tax Rate for 2022

Annual Income

Income Tax Rate

 

 

Up to €7,116

14.5%

 

 

€7,117 to €10,736

23%

 

 

€10,737 to €15,216

26.5%

 

 

€15,217 to €19,696

28.5%

 

 

€19,697 to €25,076

35%

 

 

€25,077 to € 36,757

37%

 

 

€36,758 to €48,033

43.5%

 

 

€48,034 to €75,009

45%

 

 

€75,010 +

48%

 

 

Corporate Tax

A flat CIT rate of 21% applies on the global amount of taxable income realized by companies who are resident for tax purposes in mainland Portugal (also applicable to Portuguese PEs of foreign entities).

Withholding Tax

Dividends and interest: Dividends and interest are liable to taxation at a flat rate of 28%. However, the taxpayer may opt to be liable to tax on dividends and interest received at the marginal rates varying between 14.50% and 48% (in 2021).

Royalties: Royalties payments to non-residents without a permanent establishment in Portugal are subject to a final withholding tax at a rate of 25%. Reduced rates may apply depending on the specific DTT..

Social Tax

Social security contributions are shared by the employee and the employer. The contributions are due on the employee's gross remuneration at rates of 11% and 23.75% by the employee and the employer, respectively. These contributions cover family, pension, and unemployment benefits.

Compensation and Benefits

Minimum Wage

In 2022, the national minimum wage in Portugal remained fixed at €822.5 per month, that is 9,870 euros per year, considering 12 payments per year. In addition, on December 15th of each year employers are obliged to issue a Christmas bonus to employees equating to the employees monthly wage. For each pay period, employers must provide employees with a payslip detailing basic pay, any deductions made and benefits.

Overtime

If an employee works more than 8 hours per day or 40 hours per week, employers are obliged to pay the employees wage with an additional % for the first hour completed and 75% thereafter. Overtime for employees within small companies is limited to 175 hours per year. The limit for larger businesses is 150 hours per year. Any overtime completed by employees must be reported to the Ministry of Strategy and Planning.

Hours of Work

The average work week is approximately 40 hours per week, breaking down as 8 hours a day over 5 days. For each 8-hour day, employers must provide employees with a one-to-two-hour break period.

Holidays

Almost all employees working a 5-day week within Portugal are entitled to a total of 22 days paid leave per calendar year inclusive of 9 mandatory paid public holidays.

Leaves

Employees wishing to take maternity leave are entitled to up to 12 days off with their full salary paid by Social Security. The total number of days can be taken in its entirety after giving birth or can be divided into 30 days of leave prior to birth and the remaining 90 days after the birth. In the case of paternity leave, fathers are entitled to take up to 5 days total leave. Sick leave can be taken by employees once they have made at least six months contributions to Social Security. Payment of sick leave is partially paid by Social Security and in most cases, employers supplement this pay.

Foreign workers in Portugal

Visa Requirements

EU Citizens are entitled to free entry and stay in Portugal with no time limit. If an EU member wishes to stay longer than 3 months, an application should be made to the Foreign Nationals & Borders Service or the local municipal council for a residency permit. Citizens outside the EU must apply for a temporary visa, residents visa or residence permit to live and work in Portugal. A resident’s visa allows the employee to stay in the country for a total of four months. If the employees wish to stay longer, a residence permit must be applied for.  

Taxes

Foreign workers in Portugal are entitled to the same rights in terms of tax and workplace laws as Portuguese citizens. Tax is a flat rate of 25% for income from employment, professional services, and business.

For more information about how our Global Payroll Control Platform integrates with local payroll providers in Portugal, contact us today.

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