Portuguese Residents To Be Hit By New “Extraordinary Tax”

19.07.11

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Taxes have been on the rise across Europe as governments aim to repair their budget deficits. After having been forced to accept a ?78 billion bailout from the EU and International M

Taxes have been on the rise across Europe as governments aim to repair their budget deficits. After having been forced to accept a ?78 billion bailout from the EU and International Monetary Fund, the Portuguese government has no choice but to implement further tax hikes.

It has now announced plans to impose an ?extraordinary tax? on all personal income received by Portuguese residents in 2011. This one-off surtax will be charged at a fixed rate of 3.5% on all taxable income over ?6,700.

This includes: employment income; business and other professional income; pensions; investment income; rental income; capital gains (including on the sale of shares) and other income subject to a fixed rate of tax.

If you are employed in Portugal or receive income from a Portuguese pension scheme, then a 50% withholding tax will be deducted from the additional half month bonus salary you receive at Christmas. This is after the deduction of the usual withholding tax and social security contributions and is charged on income above the minimum wage of ?485.

The withholding tax is not necessarily the final amount of tax that you owe, but instead is considered as a payment on account. Your total income tax liability will be assessed when you submit your 2011 income tax return next year, at which point you will either have to pay the difference or receive a reimbursement from the tax office.

This system will help the government collect the tax much faster than if it waited for the 2011 tax returns to be submitted.

If you do not receive Portuguese employment or pension income you will pay this extra 3.5% tax next year once your income has been assessed on your 2011 tax return.

Contact Blevins Franks for more information on this new tax and for advice on tax mitigation in Portugal.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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