Taxes for businesses: What are they?

Fiscal management is one of the fundamental pillars for the success of any company. Understanding the different types of taxes and their implications is essential for ensuring legal compliance and optimizing the tax burden. In this article, we will explore the main taxes that companies in Portugal must know and comply with.

1. Corporate Income Tax (IRC)

IRC is a tax that is levied on corporate profits. From 2025, the general corporate tax rate in Portugal will be 20%, but it may vary depending on the location and turnover of the company.

Corporate Income Tax Rates

• General Rate: The general corporate income tax rate is 20%.

• Reduced rates: For small and medium-sized enterprises (SMEs) with incomes up to €50,000, a 16% tax applies on the first €50,000 of profit.

Note: Companies will have to make payments on account during the year 2025 to advance the delivery of the IRC to the State, but the amounts are calculated according to the previous year’s tax (2024, still based on the IRC rate of 21%).

2. Value Added Tax (VAT)

VAT is an indirect tax that is levied on the consumption of goods and services. Companies are responsible for collecting VAT from their customers and delivering it to the State.

Types of VAT

• Standard Rate: 23% (most goods and services).
• Intermediate Rates: 13% (some food and beverage products).
• Reduced Rate: 6% (essential products such as bread, milk and medicines).

VAT Obligations

Companies must file periodic VAT returns, which can be monthly or quarterly, depending on the turnover.

3. Municipal Property Tax (IMI)

IMI is a tax that is levied on the patrimonial value of the properties that companies own. This tax is paid annually and is calculated based on the valuation of the property.

IMI rates

• The rates vary between 0.3% and 0.45%, depending on the municipality for urban buildings and can be higher for rustic buildings.

4. Stamp Duty

Stamp Duty is a tax that is levied on a variety of acts, contracts, documents, titles, books, papers and other facts provided for in the General Table of Stamp Duty. The rates vary according to the nature of the act or contract, being a wide-ranging tax.

Sample Fees

• Credit agreements: up to 0.6% of the amount.
• Real estate transfer: 0.8% of the transaction value.

5. Social Security Contribution

Companies are required to contribute to the Social Security of their workers. The contribution rate is 23.75% on the gross salary of employees, with workers contributing 11% in addition to the contribution that is due to the company. This contribution is essential to ensure social protection for workers, including pensions, unemployment benefits and other social benefits.

6. Pours

The state surcharge is a progressive taxation on the part of taxable income exceeding €1,500,000, subject to IRC. This taxation applies both to legal persons resident in Portugal, who carry out commercial, industrial or agricultural activities, and to non-residents with a permanent establishment in Portugal.

Surcharge Rates

• Profits between €1,500,000 and €7,500,000: additional 3% fees apply.
• Profits between €7,500,000 and €35,000,000: additional 5% fees apply.
• Profits over €35,000,000: additional 9% fees apply.

This is a progressivity by brackets, since the corresponding rate is applied to each bracket or part of the taxable profit.

7. Autonomous Taxation

Autonomous taxation is levied on specific expenses, which are not deductible in determining the taxable profit of the company. The purpose of this tax is to prevent the misuse of expenses that could decrease taxable income.

Types of Expenses Covered

• Representation expenses: Expenses related to promoting the company, such as dinners and events.
• Remuneration to directors: Payments made to directors or managers who are not under an employment contract.
• Insurance premiums: Premiums paid on personal insurance of the partners or directors.

Applicable Fees

• Rates can vary depending on the expense category, and can be 10%, 35%, or 50% in some situations.

The rates vary depending on the type of expense and the company’s tax situation.

8. Other Taxes and Fees

In addition to the aforementioned taxes, companies may be subject to other taxes, such as specific fees related to the activity carried out, environmental and/or licensing fees.

In short, understanding and managing taxes effectively are crucial to a company’s financial health. Staying up-to-date on tax obligations and seeking expert advice can help minimize risks and take advantage of tax benefits. Ultimately, good tax management contributes to the sustainability and growth of the company. In addition to the taxes mentioned, it is important for companies to be aware of possible changes in tax legislation and seek expert advice to optimize their tax management. Staying informed and compliant with tax obligations not only avoids penalties but also contributes to the company’s long-term reputation and success.

Find out how ValuingTools can help your company’s future. Leader in valuation and sale of companies in Portugal. Rely on our experience and expertise to achieve the best results. Contact us today and take the next step towards success.