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Corporation tax

Corporate income tax is levied on the taxable worldwide profits of Portuguese resident Companies including capital gains and on the Portuguese profits of branches and other permanent establishments located in the country. A company will be considered as a Portuguese tax resident if it is incorporated in this country or if it is centrally managed and controlled from this country. However, these tests are subject to modification in many of the Portuguese tax treaties. These decide the question of tax residence, where a company qualifies as Portuguese tax resident under the domestic law of this country and also as a resident of another country under the laws prevailing there. Taxable profit up to Ђ 12.500,00 will be taxed at a reduced rate of 12.5%; the excess will be taxed at 25%. A local surcharge of up to 1.5% is levied on the taxable income amount.

 

The general tax rate for companies incorporated in Madeira is 20%. Companies incorporated in the Azores are taxed at a general rate of 17.5%.
A company's taxable profits are based on its annual published accounts subject to certain tax adjustments. In principle, the tax year corresponds to the calendar year. However, branches of foreign companies can opt for a different tax year; likewise, resident companies can request to the Finance Minister the adoption of a different tax year, based on economic reasons.

Corporation tax is declared and payable five months after the end of the tax year. A pre-payment of the final tax due must be made by the seventh, ninth and twelfth months of the tax year, based on the tax assessed in the precedent year.
We provide an overview of rules related to the computation of corporate taxable income in Appendix I to this guide.

Business structure Place of business or branch Partnerships Taxation

 

The starting point for assessing a company's annual tax liability is the company's profit or loss, as shown in its published financial statements. Adjustments are made for non deductible or non taxable items to arrive at the company's taxable income. Such adjustments include non-deductible provisions, fines, depreciation over the officially published depreciation rates, undocumented expenses, deduction for profits distributed to employees and deduction for available tax benefits.

Certain types of expenses, such as representation expenses and passenger car expenses, are subject to an autonomous 10% tax charge. Travel allowances are subject to an autonomous 5% tax charge. Undocumented and confidential expenses are subject to a 50% surcharge (70% surcharge in case of exempt entities). A company must self-assess its own tax liability and tax payments. Accounting records and related supporting documentation must be kept for a period of 10 years.

The Portuguese tax authorities reserve the right to raise enquiry questions in connection with the tax calculations or tax return. Specialist professional advice may well be required in this eventuality.

 

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