Updated on: 2025/08/04 14:35 (UTC)
Overview
Portugal, officially the Portuguese Republic, is a constitutional republic. Portugal’s mainland is in Europe, and the country includes two autonomous regions, the Azores (Açores) and Madeira, that consist of islands in the Atlantic Ocean. The only country that borders mainland Portugal is Spain, which borders Portugal to its north and to its east. Mainland Portugal is bordered to the west and southwest by the Atlantic Ocean and to the southeast by the Gulf of Cádiz.
The Azores archipelago is located in the Atlantic Ocean to the west of mainland Portugal and its closest point is about 1,400 kilometers afar from mainland Portugal. The Madeira archipelago is located in the Atlantic Ocean to the southwest of mainland Portugal and its closest point is about 800 kilometers afar from mainland Portugal.
Portugal’s currency is the euro.
Employers in Portugal are responsible for employment-related taxes, must make Social Security related contributions and must uphold labor-related requirements under the Labor Code.
Foreign workers generally are entitled to the same rights as Portuguese citizens and are covered by specific tax requirements. Labor and workplace laws apply to foreign workers as they do to citizens.
Portuguese residents working in the United States are covered by U.S. tax law with possible treaty and work status exclusions applying. Work within the U.S. states and territories is covered by various labor laws.
CURRENCY DETAILS
The currency of Portugal is the euro (€), which Portugal uses because it is part of the euro area, also known as the eurozone, which is a group of countries that adopted the euro as their currency. The internationally recognized three-letter currency code for the euro is EUR, which also is one of the currency’s two commonly used currency symbols. The English plural form of euro officially recognized by the European Commission is the same as its singular form, although in common English parlance the plural form is euros. In Portuguese, the plural form of euro is euros.
When an amount of euro is written using the currency symbol € in accordance with the European Commission’s standard placement treatment of the symbol, which is the placement treatment used for the English language, the symbol precedes the numerical value with no space between the numerical value and symbol. When an amount of euro is written in Portuguese using the currency symbol €, the symbol follows the numerical value with a space between the numerical value and symbol.
When an amount of euro is written using the currency symbol EUR, the symbol precedes or follows the numerical value with a space or no space between the numerical value and symbol.
One hundredth ( 1 ⁄ 100 ) of a euro is referred to in English as a cent and the English plural form of cent officially recognized by the European Commission is the same as its singular form, although in common English parlance the plural form is cents. In Portuguese, as officially recognized by the European Commission, one hundredth of a euro also is referred to as a cent and its plural form is cents, although in common Portuguese parlance, one hundredth of a euro is referred to as a cêntimo or as a centavo, with the respective plural forms of cêntimos and centavos.
When amounts of euro are written in Portuguese, the comma that in English separates the thousands place from the hundreds place instead is rendered as a dot (.), and the dot that in English separates the ones place from the tenths place instead is rendered as a comma.
TAXES
The federal government generally enacts laws relating to income and social taxes, while municipalities levy purely nonpayroll related taxes.
Portuguese income taxes are collected and administered by the Tributary and Customs Authority (Autoridade Tributaria e Aduaneira, abbreviated as AT).
In addition to IRS, all employers must withhold Social Security from all employees and make Social Security contributions to the Social Security Administration monthly. The social taxes cover benefits such as pensions, sick leave, parental leave, unemployment insurance and family benefits.
In Portugal, the word retention (retenção) often is used instead of the word withholding with regard to the process of deducting taxes from wages as part of payroll.
The tax year is the calendar year, Jan. 1 to Dec. 31.
Coronavirus (Covid-19) Guidance: Employers with up to €10 million in sales in 2018, or in 2019 if they were not in business in 2018, or who are affected by Portugal’s mandatory closure of some businesses, may make income tax withholding deposits due for the second quarter of 2020 in three or six monthly installments. The first installment payment must be made on the day the deposit was originally due, and subsequent payments on the same day of the following months.
All employers with less than 50 employees may postpone social tax deposits due in March, April, and May 2020. Employers with at least 50 and less than 250 employees may postpone social tax deposits if they suffered a decrease of at least 20% in sales in March, April, and May 2020 compared to the same months in 2019. Employers with at least 250 employees may postpone social tax deposits if they suffered the same decrease in sales and are considered a private social solidarity institution (instituição particular de solidariedade social), were affected by Portugal’s mandatory closure of some businesses, or are in the aviation or tourism sectors. In all cases of postponement, one-third of the social tax deposit must be paid when it was originally due, and the remaining two-thirds is paid in either three or six installments from July to September 2020 or from July to December 2020. The postponements may instead be for deposits due in April, May, and June 2020 if the employer paid their social tax liability due in March.
Employers categorized as micro, small, or medium are exempted from all employer social tax contributions due for August and September 2020 and from half of employer contributions due from October to December 2020. Employers categorized as large are exempted from half of employer contributions due for August and September 2020.
Effective Nov. 23, 2020, qualifying employers may postpone their portion of social security contributions for November and December 2020. Payments are due beginning June 2021 in three or six consecutive equal monthly installments. To take advantage of the postponement, employers must be certified as micro, small or medium-sized by a statutory auditor or certified accountant.
According to European Commission guidance, employees who normally work in one European Union member country and live in another are still considered to be insured by the social insurance system of the normal work country while working at home.
Income Taxes
The personal income tax (imposto sobre o rendimento das pessoas singulares, abbreviated as IRS) is an annual tax levied on income received by individuals. The tax is regulated by and payable to the Tributary and Customs Authority.
Coverage: All businesses paying remuneration from employment must withhold income taxes and remit payments to the government.
Generally resident individuals pay tax on their worldwide income, with any double taxation addressed with foreign tax offsets. Residents are generally defined as: those who have remained in Portugal for more than 183 days during the calendar year; those who on Dec. 31 of the year have accommodations in Portugal in circumstances that indicate an intention to use it as their main place of residence; or Portuguese citizens who have relocated to a country considered to be a tax haven by the Portuguese government. Nonresident individuals are only subject to IRS on their income that is considered to have been derived in Portugal. Coverage of taxation of nonresidents is covered under Foreign Workers.
Employees: Generally, an employee is considered to be any dependent employee receiving remuneration for work performed. Individuals not considered to be dependent employees, and thus not subject to income tax withholding, include: Public managers, administrators or managers of companies, representatives of the permanent establishment and others as defined by the AT.
Rates and Thresholds: Income tax rates are levied on a progressive scale for residents, with rates ranging from 14.5% to 48%. In the country’s progressive income tax system, portions of an individual’s income are allocated to the country’s personal income tax brackets, and each portion of income allocated to a tax bracket is taxed at the tax rate applicable to that tax bracket. Exceptions to the generally applicable personal income tax rates are in effect for residents of Portugal’s autonomous regions .
Effective starting April 1, 2020, Portugal’s personal income tax rates for residents of mainland Portugal in Europe and minimum and maximum amounts of annual income for each tax bracket are as follows:| Range of Annual Income (Euro) | Income Tax Rate |
|---|---|
| Up to €7,112 | 14.5% |
| More than €7,112 and up to €10,732 | 23% |
| More than €10,732 and up to €20,322 | 28.5% |
| More than €20,322 and up to €25,075 | 35% |
| More than €25,075 and up to €36,967 | 37% |
| More than €36,967 and up to €80,882 | 45% |
| More than €80,882 | 48% |
| Range of Annual Income (Euro) | Income Tax Rate |
|---|---|
| Up to €7,091 | 14.5% |
| More than €7,091 and up to €10,700 | 23% |
| More than €10,700 and up to €20,261 | 28.5% |
| More than €20,261 and up to €25,000 | 35% |
| More than €25,000 and up to €36,856 | 37% |
| More than €36,856 and up to €80,640 | 45% |
| More than €80,640 | 48% |
In addition to basic income tax rates, individuals are subject to a solidarity surtax of 2.5% on annual income of more than €80,000 and up to €250,000, and a solidarity surtax of 5% on annual income of more than €250,000.
The 2021 withholding tables and the 2020 withholding tables for wages paid to employees in mainland Portugal on a monthly basis were published in Portugal’s official gazette, the Diary of the Republic (Diário da República). The income tax rates for withholding from employment income, number of brackets, and ranges of income for each tax bracket differ from the aforementioned set of personal income tax brackets generally applicable to overall employment income. Multiple tax deduction tables are available, with the particular table applicable for tax on employment income paid to an employee based in part on the employee’s marital status and number of dependents.
Foreign workers are taxed at flat rates which vary based on economic activity. Generally, foreign workers are subject to a flat tax of 25% for income from employment, business income, and professional income.
Registration: All employers must register with the Tributary and Customs Agency prior to commencement of taxable activities. To do so, employers should submit a declaration of commencement of operations, change and termination.
Taxable Amounts: Taxable income is calculated based on all remuneration paid minus allowable deductions. Some allowable deductions include: deductions for dependents, union dues, social security contributions, vocational training expenses and subscriptions to professional bodies.
Withholding Methods: Taxes must be withheld from employees’ wages and paid monthly to the AT according to the withholding tax tables available on the AT website. While final IRS rates are consistent throughout the European mainland of Portugal, rates for the autonomous regions of the Azores and Madeira are different from those in effect for the European mainland of Portugal. Taxes withheld are based on estimations of income tax liability taking into account deductions for dependents, union dues, social security contributions, vocational training expenses and subscriptions to professional bodies. Employers should request information regarding the calculation of withholding liabilities from employees prior to first payments of salary.
Returns and Remittance: All employers are required to remit and file taxes monthly, make annual tax filings to the AT and submit annual summaries of taxes withheld to employees. Monthly filings on taxes withheld should be submitted to the AT by the 10th of the month, while taxes withheld should be remitted by the 20th of every month following the month in which taxes were withheld. An annual Summary of Taxes Withheld should be submitted to employees by Jan. 20 and annual tax returns should be submitted to the AT by the last day of February.
Employee Share Plans: According to the law firms DLA Piper and White & Case LLP, employees participating in employee share plans are subject to taxation on the spread of an option at purchase. Additionally, the gain from the sale of a share is generally subject to taxation, according to the law firms.
The spread of an option is generally subject to social taxes according to the firms.
Employees taking part in a share plan who cease to be a resident in Portugal are subject to immediate taxation of any transfer of a share.
Recordkeeping: Tax records generally must be kept for a minimum of four years. This period may be extended if a criminal inquiry is initiated, or if the Portuguese tax authorities determine that an entity’s funds are connected to a tax haven and weren’t declared as such to the tax authorities.
Penalties: Late payments are subject to interest charges according to the annual average of the monthly average of the 12-month Euribor rate plus 5%. The interest rate is determined annually and published in the Portuguese Official Journal on or before Dec. 31 of the year prior to that in which the revision applies. The late payment interest rate is doubled (around 14%) if the taxpayer is compelled to pay the debt by a final court decision, or the tax authorities are compelled to refund the tax paid by a final court decision.
Any taxpayer that fails to deliver to the tax authorities, totally or partially, more than €7,500 of tax withheld, may be imprisoned for up to three years or face a penalty with a maximum duration of 360 days, at a daily amount ranging from €1 to €500 for individuals and from €5 to €5,000 for corporate entities, for the crime of embezzlement.
A taxpayer convicted of fraud may be imprisoned for up to three years or face a penalty of up to 360 days’ duration.
Social Taxes
All employers must withhold Social Security contributions from employees and make additional Social Security contributions. The Portuguese Social Security system is administered by the Ministry of Labor, Solidarity and Social Security (Ministério do Trabalho, Solidariedade e Segurança Social, abbreviated as MTSSS) and includes old age pensions, sick leave, parental leave, unemployment insurance and family benefits.
Employers are required to contribute to two separate funds to compensate workers after termination: the Work Compensation Fund (Fundo de Compensacão do Trabalho, abbreviated as FCT) or an equivalent mechanism and the Guarantee Fund for Work Compensation (Fundo de Garantia de Compensacão do Trabalho, abbreviated as FCGT). Any equivalent mechanism an employer seeks to implement as an alternative to the FCT must be established under the supervision of the Bank of Portugal and the Portuguese Insurance Institute.
The FCT and FCGT funds are to pay for half of an employee’s termination compensation and are administered by the Ministry of Labor, Solidarity and Social Security’s Institute for Capitalization Fund Management (Instituto de Gestão de Fundos de Capitalização da Segurança Social, abbreviated as IGFCSS) and the Financial Management Institute (Instituto de Gestão Financeira da Segurança Social, abbreviated as IGFSS).
Coverage: Generally, all employers must make Social Security contributions and withhold contributions from employees. Some exceptions exist, such as employers of those between the ages of 16 and 30 on their first employment contract for the first months of their contract.
All employers are required to make monthly contributions to FCT or an equivalent mechanism and FCGT for termination compensation.
Rates and Thresholds: Social Security contributions widely vary depending on the type of employer and employee, with the list of rates for each employer and employee category available from a Social Security guide for contribution rates published by the Ministry of Solidarity and Social Security.
The April 2020 and January 2019 Social Security guides for contribution rates were released by MTSSS’s General Directorate of Social Security (Direção-Geral da Segurança Social, abbreviated as DGSS).
For general workers at for-profit organizations, employers are assessed a standard Social Security contribution rate of 23.75% of employee salary, and employees are assessed a standard Social Security contribution rate of 11%.
Nonprofit employers are assessed a Social Security contribution rate of 22.3% of employee salary, and employees of nonprofit employers are assessed a Social Security contribution rate of 11%.
Domestic workers, agricultural workers, disabled workers and marine employees are subject to different contribution rates.
Employers must contribute 0.925% of employee salary to the FCT or equivalent mechanism fund for termination payment.
Employers also must contribute 0.075% of employee salary to the FCGT.
Registration: Registration to pay Social Security is mandatory for all employers. Employers are automatically enrolled with the MTSSS by registering with the Tributary and Customs Authority to pay income tax. However, all employers must register their employees with the MTSSS 24 hours before the onset of employment. Once registered, employers must provide new employees with an admission statement.
Employers must register with an FCT or equivalent mechanism and an FCGT fund upon entering a work contract with an employee.
Taxable Amounts: Generally, taxable income for the purposes of calculating Social Security liabilities includes all remuneration paid to employees. This includes salaries, grants, prizes, meal allowances, subsidies, transportation costs of employees paid for by employers and other forms of compensation. Some exceptions include compensation for holidays, some severance payments, medical grants and other types of compensation.
Returns and Remittance: Employers must submit a Declaration of Remuneration (Declaração de Remunerações, abbreviated DR) to the MTSSS by the 10th of each month after remuneration was paid and must make payments between the 10th and 20th of the month. The Declaration of Remuneration also is known as the Monthly Declaration of Remuneration (Declaração Mensal de Remunerações, abbreviated as DMR).
The Declaration of Remuneration may be submitted through Social Security Direct (Segurança Social Direta), which is accessible from the General Directorate of Social Security’s Monthly Declaration of Remuneration access channel.
Payments can be made at approved banks, ATMs, or directly to the MTSSS. If the 20th of the month falls on a weekend, the payment will be due on the next business day.
Contributions to the FCT or an equivalent mechanism and FCGT are paid on the same schedule as all other Social Security contributions each month.
Recordkeeping: Generally, tax records must be kept for four years. This period may be extended if a criminal inquiry is initiated.
Penalties: Failure to uphold Social Security requirements will result in the following penalties:
A fine of €75 to €750, in the case of employers with fewer than 50 employees, and €100 to €1,000, in the case of employers with at least 50 employees, would apply to those employers that:
- submit a late report of the beginning, suspension, or termination of commercial activities, but submit it within 10 days of the deadline;
- submit the registration of new employees up to 24 hours past the deadline;
- fail to report the termination, suspension, or change in type of employment contract of a given employee;
- submit the DR or payment late, but within thirty days of the deadline; or
- submit an incomplete DR.
A fine of €450 to €3,600, in the case of employers with less than 50 employees, and €600 to €4,800, in the case of employees with 50 employees or more will apply to those employers who:
- Submit a report of the beginning, suspension, or termination of commercial activities, which is more than 10 days overdue,
- submit the registration of new employees more than 24 hours past the initial deadline, or
- file the DR or make payments more than 30 days past the deadline.
A fine of €1,875 to €18,750, in the case of employers with less than 50 employees, and €2,500 to €25,000, in the case of employees with 50 employees or more will apply to those employers who fail to include a worker in the DR.
All late payments are subject to interest in addition to penalties. Criminal charges can be brought against unpaid Social Security debts in excess of €7,500, or if employers make withholdings without making payments.
If an employer fails to register with an FCT, equivalent mechanism, or an FCGT; the employer is subject to a fine and penalty of up to two years of probation of activity.
Other Taxes
Additional Contribution for Excessive Turnover (Contribuição Adicional por Rotatividade Excessiva): Effective starting Jan. 1, 2020, employers that have a higher number of workers on fixed-term contracts than an annual industry average determined by the government are assessed an additional payroll tax on the employment income paid to employees with fixed-term contracts. The rate of this additional tax is progressive, based on the difference between an employer’s number of fixed-term contracts and the industry average, with a maximum tax rate of 2%. Employers are to be notified by the General Directorate of Social Security of their responsibility to pay the payroll tax for each year in the first quarter of the following year and are to make payments within 30 days of the notification, meaning the first payments are to be made in 2021. Employment income paid to employees who are temporarily replacing workers on parental leave or temporarily replacing workers who are unable to work because of illness for at least 30 days is exempt from the tax.
State/Jurisdiction Taxes
Residents of Portugal’s two autonomous regions, the Azores and Madeira, generally are subject to Portugal’s income tax and social tax provisions, with exceptions regarding income tax rates.
Azores: The personal income tax rates applicable to the income tax brackets for residents of the Azores generally are lower than the rates applicable for residents of mainland Portugal.
Effective since Jan. 1, 2018, the income tax rate applicable to residents of the Azores for the first bracket is 30% lower than the rate applicable for residents of mainland Portugal, the rates applicable to residents of the Azores for the second and third brackets are 25% lower, and the rates applicable for the other brackets are 20% lower, with the resulting rates determined through these reductions rounded to the nearest hundredth of a percent.
Effective for 2021, Portugal’s personal income tax rates for residents of the Azores and minimum and maximum amounts of annual income for each tax bracket are as follows:| Range of Annual Income (Euro) | Income Tax Rate |
|---|---|
| Up to €7,112 | 10.15% |
| More than €7,112 and up to €10,732 | 17.25% |
| More than €10,732 and up to €20,322 | 21.38% |
| More than €20,322 and up to €25,075 | 28% |
| More than €25,075 and up to €36,967 | 29.6% |
| More than €36,967 and up to €80,882 | 36% |
| More than €80,882 | 38.4% |
| Range of Annual Income (Euro) | Income Tax Rate |
|---|---|
| Up to €7,091 | 10.15% |
| More than €7,091 and up to €10,700 | 17.25% |
| More than €10,700 and up to €20,261 | 21.38% |
| More than €20,261 and up to €25,000 | 28% |
| More than €25,000 and up to €36,856 | 29.6% |
| More than €36,856 and up to €80,640 | 36% |
| More than €80,640 | 38.4% |
The 2021 tax deduction tables and 2020 tax deduction tables for wages paid to employees in the Azores on a monthly basis were released in Portugal’s Diary of the Republic (Diário da República). The income tax rates for withholding from employment income, number of brackets, and ranges of income for each tax bracket differ from the aforementioned income tax bracket sets generally applicable to overall income. Multiple tax deduction tables are available, with the particular table applicable for tax on employment income paid to an employee based in part on the employee’s marital status and number of dependents.
Madeira: Effective since Jan. 1, 2019, the same personal income tax brackets are applicable to residents of Madeira as to residents of mainland Portugal, but the tax rate for each bracket generally is lower than the rate applicable for residents of mainland Portugal, except for the rate applicable to the highest tax bracket. Madeira’s personal income tax rates are subject to annual adjustment. Effective until Dec. 31, 2018, the personal income tax brackets and rates applicable to residents of Madeira were the same as those applicable to residents of mainland Portugal, except that the tax rate for the lowest bracket was reduced.
Effective for 2021, the personal income tax brackets applicable to residents of Madeira are as follows:| Range of Annual Income (Euro) | Income Tax Rate |
|---|---|
| Up to €7,112 | 10.15% |
| More than €7,112 and up to €10,732 | 16.1% |
| More than €10,732 and up to €20,322 | 24.51% |
| More than €20,322 and up to €25,075 | 32.55% |
| More than €25,075 and up to €36,967 | 34.78% |
| More than €36,967 and up to €80,882 | 44.78% |
| More than €80,882 | 48% |
| Range of Annual Income (Euro) | Income Tax Rate |
|---|---|
| Up to €7,091 | 11.6% |
| More than €7,091 and up to €10,700 | 20.7% |
| More than €10,700 and up to €20,261 | 26.5% |
| More than €20,261 and up to €25,000 | 33.75% |
| More than €25,000 and up to €36,856 | 35.87% |
| More than €36,856 and up to €80,640 | 44.95% |
| More than €80,640 | 48% |
The 2021 tax deduction tables and 2020 tax deduction tables for wages paid to employees in Madeira on a monthly basis are available from the AT. The income tax rates for withholding from employment income, number of brackets, and ranges of income for each tax bracket differ from the aforementioned income tax bracket sets generally applicable to overall income. Multiple tax deduction tables are available, with the particular table applicable for tax on employment income paid to an employee based in part on the employee’s marital status and number of dependents.
COMPENSATION AND BENEFITS
Portuguese laws on compensation and benefits are regulated by the Ministry of Economy and Labor; the Ministry of Labor, Solidarity and Social Security; and the Ministry of Justice.
The Labor Code governs treatment of workers in Portugal, including minimum wages, overtime, time-off work and other benefits.
Retirement plan requirements for employers are included in the Social Taxes coverage.
Every employer must annually file a Comprehensive Report (Relatorio Unico) online with the Ministry of Strategy and Planning by April 15. The report becomes available March 16th and includes details of employee contracts, employer economic and financial information, employees’ hours worked, and occupational health and safety services, among other details.
The Portuguese Labor Code is a combination of all Portugal’s current labor legislation. It is published regularly by the Commission of Equality in Labor and Employment, an office of the Ministry of Economy and Labor. The Labor Code contains the rights of duties of employers and workers including wage, working hours, vacation, termination and other regulations.
Coronavirus (Covid-19) Guidance: A wage-replacement program, the Extraordinary Measure to Support the Maintenance of Employment Contracts (Medida Extraordinária de Apoio à Manutenção dos Contratos de Trabalho) replaces employees’ wages if they cannot work or have had their working hours reduced. Employers may apply to Social Security for the program if they are required to close because of Portugal’s mandatory closure of some businesses. Employers may also apply if business activity is otherwise entirely or partially suspended; or if the business’s income decreases by at least 40% in the 30 days before the employer applies, compared to either the previous two months or the same period of the previous year. Affected employees may receive a subsidy of two-thirds of their normal gross wages for up to three months, with a maximum of three times the official national monthly minimum wage, or €1,995. Social Security pays 70% of the subsidy, up to a maximum of €1,396.50 per month, and the employer pays the remaining 30%. Subsidies are only subject to employee, not employer, social taxes.
Until June 30, 2021, Social Security also is to partially replace the wages of employees whose working hours are reduced and whose employer suffered a decrease in income of at least 25% in the month immediately before applying. The subsidy provided is 80% of wages related to the employee’s normal hours not worked, or 100% if the employee’s working hours decrease by more than 60%. If the employer has suffered a decrease in income of at least 75%, an additional subsidy is provided of 35% of the wages related to the employee’s hours actually worked. However, the maximum combined total of both subsidies is three times the official national monthly minimum wage, or €1,995.
Minimum Wage
Portugal’s official national monthly minimum wage is designed to accommodate 14 payments for a year instead of 12, including one payment per calendar month, a Christmas bonus equivalent to one month of wages, and a vacation subsidy equivalent to one month of wages. Portugal’s unofficial but prorated and commonly accepted national monthly minimum wage to accommodate 12 monthly payments for a year is determined by dividing the official annual national minimum wage by 12.
Effective for 2021, the official national monthly minimum wage in Portugal that is designed to accommodate 14 payments for a year is €665, while the unofficial but prorated and commonly accepted national monthly minimum wage to accommodate 12 payments for a year is €775.83. Effective for 2020, the official national monthly minimum wage in Portugal that is designed to accommodate 14 payments for a year is €635, while the unofficial but prorated and commonly accepted national monthly minimum wage to accommodate 12 payments for a year is €740.83.
The monthly minimum wage for the autonomous region of Madeira is annually established as at least 2% higher than the official national monthly minimum wage.
Effective for 2021, the monthly minimum wage for Madeira is €682. Effective for 2020, the monthly minimum wage for Madeira was €650.88.
The monthly minimum wage for the autonomous region of the Azores is annually established as at least 5% higher than the official national monthly minimum wage.
Effective for 2021, the monthly minimum wage for the Azores is €698.25. Effective for 2020, the monthly minimum wage for the Azores was €666.75.
In Portugal, the national minimum wage also is known as the national minimum salary (salário mínimo nacional, abbreviated as SMN), or the minimum guaranteed monthly compensation (retribuição mínima mensal garantida, abbreviated as RMMG), and the regional minimum wage also is known as the regional minimum salary (salário mínimo regional, abbreviated as SMR).
Overtime
Generally, employers must begin to pay overtime when requiring employees to work more than 8 hours in a day or 40 hours in a week. Overtime pay must supersede normal pay by 50% for the first hour of overtime performed per day and 75% for the second hour performed per day. Overtime pay for work performed on a worker’s weekly day of rest must supersede normal pay by 100%.
Overtime is limited to 175 hours per year for employees of small companies and 150 hours per year for larger companies. Overtime performed by part-time workers is limited to 80 hours per year, although it may increase to 130 hours per year with an individual written agreement and 200 hours per year with a collective agreement.
Employers must report the amount of overtime performed by employees to the Ministry of Strategy and Planning on the Comprehensive Report.
Hours of Work
A standard workweek in Portugal is 40 hours, usually consisting of five eight-hour workdays, although the 2009 Labor Code emphasizes that employers have some flexibility in extending or reducing the workday under certain circumstances. Employers must provide workers with a rest period of between one and two hours, such that workers do not work more than five consecutive hours. Employees must have at least 11 consecutive hours between two consecutive daily working periods.
In the case of a collective agreement, working hours may be extended to at most 12 hours in a day and 60 hours, so long as the weekly average does not exceed 50 hours per week in a two month period. In the case of an individual written agreement, working hours may be increased up to 10 hours per day and 50 hours per week.
Night shift work is defined as a seven hour work period, which includes the period between midnight and 5 a.m. Night shift work can under no circumstances exceed 11 hours in a day.
Holidays
Portugal specifies 13 mandatory paid public holidays, but the autonomous regions may add to these.
The public holidays are:
- Jan. 1: New Year’s Day
- Good Friday
- Easter Sunday
- April 25: Liberation Day
- May 1: Labor Day
- June 10: Portugal Day
- Corpus Christi
- Aug. 15: Assumption
- Oct. 5: Foundation of the Republic
- Nov. 1: All Saints’ Day
- Dec. 1: Restoration of Independence
- Dec. 8: Immaculate Conception
- Dec. 25: Christmas
Leave
Employees are guaranteed a minimum of 22 days of paid leave each calendar year. Employers must provide new hires with two days of paid leave for every month worked for the initial year of their contract. This leave may be taken after six months of work.
Sick leave: Sick leave is paid for by Social Security at partial pay, although many employers supplement this pay. Employees who have made at least six months of contributions to the Social Security system, including at least 12 days in the four months before the illness, are entitled to sick leave. The maximum duration of sick leave is 1,095 days (365 days for the self-employed). There is no time limit with respect to benefits for cases of tuberculosis.
Child care leave: Parents who have been employed and made contributions to the social security system for at least six months and who want to stay home to care for a child who is 6 years old or younger have the following options:
- three months of paid parental leave,
- a half-time work schedule for a period of 12 months, or
- a combination of leave and reduced schedule that results in a total period of three months of leave.
Employees who take this leave are paid 25% of their average wage. Employees who have a child under 12 years of age who has an accident or illness or who have a child of any age who has a chronic illness or disability are entitled to 30 days of leave per year to provide care. For parents who have more than one child, allowable leave increases by a day a year for each additional child. Employees also are entitled to 15 days of leave per year to provide urgent and essential care for a child over the age of 12.
Effective starting Jan. 1, 2020, parents may take periods of leave paid at 65% of their average wage for up to six months, renewable for up to four years, to care for children with cancer, chronic illnesses, or disabilities.
Compassionate leave: Employees are entitled to five consecutive days of paid leave following the death of a spouse, parent, stepparent, child, or domestic partner. They are entitled to two days of paid leave following the death of a sibling, grandparent, or grandchild.
Family leave: Employees are entitled to 30 days of paid leave per year to provide urgent and essential care for a family member younger than 12 and 15 days to provide assistance to an older family member.
Marriage leave: Employers must provide employees with 15 consecutive days of paid leave after they get married.
Paid parental leave: Paid parental leave is provided by Social Security. Mothers are entitled to 30 days of parental leave before the birth. After the birth of a child, mothers are required to take 42 days of leave.
Effective starting Jan. 1, 2020, fathers are required to take 20 days of leave after the birth, including the first five days immediately after the birth and 15 additional days that do not need to be consecutive and that must be taken within six weeks of the birth. Fathers also may take five optional days during the mother’s period of leave. Effective until Dec. 31, 2019, fathers were required to take 15 days of leave, including the first five days immediately after the birth and 10 additional days within 30 days of the birth, and fathers also had 10 optional days during the mother’s period of leave. In cases of multiple births, the father’s period of leave is extended by two days for each additional child.
After the initial leave, both parents are entitled to either 120 or 150 days of leave. If a 150-day period is chosen and each parent separately takes a period of 30 days of leave or two periods of 15 days of leave, the total period is extended to 180 days.
New mothers returning to work are entitled to flexible working hours until 12 months after the birth.
In cases of multiple births, leave is increased by 30 days for each additional child.
In the case of adoption of a child under 15 years old, parents are entitled to the same leave as biological parents in the case of a birth.
Wage Payment
Generally, wages must be paid in biweekly installments or shorter periods. Compensation must be paid at the workplace or in another agreed upon location. It must be paid on a working day, during working hours or immediately after. Employers must provide employees with pay slips detailing the employee’s information, basic pay and benefits, and deduction every pay period.
Bonuses and Special Benefits
Employers must pay employees a Christmas bonus usually equal to one month of wages, which must be paid by Dec. 15. Workers hired partway through the year get a bonus proportional to their time of service.
Employers also must pay to each employee a vacation subsidy, also known as a vacation allowance, holiday bonus, or holiday allowance, which must be paid before the employee takes vacation leave. Despite sometimes being referred to as a holiday bonus or holiday allowance, this subsidy is not equivalent to the Christmas bonus and instead is designed to provide employees with additional funds to spend during their vacation, as an addition to the paid leave they receive. The amount of this subsidy generally is equal to one month of wages.
Termination Pay
Employers must provide employees on indefinite contracts with 15 to 75 days of notice prior to the termination of an employee, with the exact time varying depending on length of service. Employers must provide employees on fixed contracts 30 days of notice if the employees’ contract term is at least six months and 15 days if the employees’ contract term is less than six months. Employees must provide employers with 30 days’ notice of termination of a contract if they have up two years of employment and 60 days if they have more than two years of seniority.
During the period of notice, employers must provide employees with two days of paid leave per week. If employees fail to provide proper notice they must pay employers an indemnity equivalent to the employees’ pay during the notice period.
Employers contribute to unemployment insurance and termination pay compensation through funds administered separately by Social Security’s Institute for Capitalization Fund Management (Instituto de Gestão de Fundos de Capitalização da Segurança Social) and Financial Management Institute (Instituto de Gestão Financeira de Segurança Social). More information on these funds is available under Social Taxes.
Severance Payment: In the case of terminations for just cause, for labor contracts signed after Nov. 1, 2011 and for all work performed after Oct. 31, 2012, employers must provide employees with indefinite contracts with the equivalent of 18 days of pay for every year of service for the first three years and 12 days of pay for each year of service after the first three years. For defined contracts, employers are required to pay employees 18 days of pay for each year of service. Employers must provide employees with one month of pay for every year of service up to Oct. 31, 2012, for labor contracts that were signed before Nov. 1, 2011.
Employers who terminate employment contracts without just cause must compensate employees with the equivalent of 15 to 45 days of pay for each year of service, depending on the degree of the infringement. Additionally, when there is a court order for reinstatement due to unlawful dismissal, employees may request between 15 to 45 days of pay in lieu of reinstatement.
Employees who terminate employment contracts without just cause are responsible for limited damages caused to their employers.
Workers’ Compensation
While workers’ compensation is only required for self-employed individuals, employers are liable for work related accidents and illnesses. Therefore, it is common practice to arrange for workers’ compensation with a private insurer.
Recordkeeping
The statute of limitations on lawsuits relating to labor laws in Portugal is one year. However, the statute of limitations in criminal infringements of Portugal’s labor law can extend up to 15 years, depending on the severity of the crime.
FOREIGN WORKERS
Foreign workers are entitled to the same rights as Portuguese citizens and are generally covered by the same tax and workplace laws.
Visas: Citizens of European Union states have the right to free entry and free stay in Portugal with the presentation of an EU passport or an identity card. There is no time limit for staying in Portugal, but EU nationals who intend to stay longer than three months should apply to a local office of the Foreign Nationals and Borders Service or a local municipal council for a residency permit.
Portugal is a member of the Schengen Visa Agreement, which allows citizens of member states, such as the United States, to enter and remain in Portugal for a period of up to 90 days in a six month period. Those wishing to remain longer or entering into a formal employment relationship must obtain a residency visa and/or residency permit.
Non-EU foreign nationals and will need a temporary visa, resident visa, or resident permit to work in Portugal. Generally, temporary visas are nonrenewable and allow nonresidents to work on a fixed term contract for a given employer and is valid for the terms of the contract, up to a maximum of four months.
A resident visa allows foreign workers to stay in Portugal for up to four months. Requirements for getting a residency visa vary depending on whether the individual seeks to work for an employer, is a self-employed service provider, or seeks to engage in scientific research or an activity that requires high-level technical knowledge.
For staying longer than four months, foreign workers must obtain a residence permit. To obtain a residence permit, foreign nationals must have an employment contract among other documents. Getting a residence permit depends on the availability of jobs, and hiring preferences are given to Portuguese nationals and workers from other European nations. The government sets quotas on the number of non-EU immigrants allowed to enter the country to work as employees.
Foreigners also may enter Portugal to work through the Golden Residence Permit Program (“Golden Visa”) and utilize a Non-Habitual Tax Regime. The Golden Visa is a fast-track procedure for a third-country national to receive a residence permit with a minimum period of stay in Portugal if the individual is undertaking qualified investment activities. The Golden Visa requires a certain amount of real estate investment, investment of shares or creation of jobs for an individual to qualify. The Golden Visa can be a first step in moving an individual’s tax residence to Portugal.
For each adult accompanying a long-stay visa holder for residence in Portugal, the visa holder must demonstrate to the Portugal Ministry of Foreign Affairs that the visa holder is able to support that adult with a salary amount of at least 50% of the official national minimum wage, with that salary amount being paid to the visa holder in excess of the official national minimum wage and any other salary amounts for supporting an adult or child. For each child younger than 18 accompanying a long-stay visa holder for residence in Portugal, the visa holder must demonstrate to the Ministry of Foreign Affairs that the visa holder is able to support that child with a salary amount of at least 30% of the official national minimum wage, with that salary amount being paid to the visa holder in excess of the official national minimum wage and any other salary amounts for supporting an adult or child.
Effective for 2021, as the official national monthly minimum wage is €665, the monthly additional amount that a visa holder needed to be paid for each adult accompanying the visa holder is €332.50 and the monthly additional amount that a visa holder needed to be paid for each child accompanying the visa holder is €199.50. Effective for 2020, as the official national monthly minimum wage was €635, the monthly additional amount that a visa holder needed to be paid for each adult accompanying the visa holder was €317.50 and the monthly additional amount that a visa holder needed to be paid for each child accompanying the visa holder was €190.50.
Foreign workers seeking to qualify for a Portugal residence visa by claiming as their purpose of stay that they will be performing highly-skilled work in the country must demonstrate to the Ministry of Foreign Affairs that their employment income for work in Portugal will be at least three times the social support index (indexante dos apoios sociais, abbreviated as IAS).
Effective since Jan. 1, 2020, as the monthly social support index is €438.81, a worker needs to be paid at least €1,316.43 per month to qualify for a Portugal residence visa based on performing highly-skilled work in the country.
The Non-Habitual Resident tax regime is favorable for investors in Portugal, as individuals qualifying for the regime may qualify for a 20% flat rate tax on some categories of income (income is divided into six categories in Portugal).
Portuguese employers hiring a worker from outside the European Union must notify a regional employment center. Under Portuguese law, the employer must hire any qualified unemployed native-born worker registered with the employment center before considering an offer to a foreign worker.
Taxes: Foreign workers are taxed at flat rates which vary based on economic activity. Foreign workers generally are subject to a flat tax of 25%, for income from employment, business and professional income. Workers under the Non-Habitual Resident tax regime may qualify for a 20% flat tax rate. Taxpayers that cease to be residents in Portugal are subject to immediate taxation on the transfer of shares.
Wages/Payments: Foreign workers must have their wages paid in the same manner as domestic workers. Additionally, Portugal does not place any restrictions on the currency of salary payments, so long as it is paid in legal tender.
WORKING IN THE UNITED STATES
Foreign workers from Portugal must meet general visa requirements and be certified to be employed in the U.S. General visa requirements for the U.S. are included in the separate
Portugal is eligible for the visa waiver program for business visitors, which allows Portuguese citizens to travel to the U.S. for 90 days or less for business-specific purposes without having to obtain a B-1 business visa. Stays longer than 90 days will require a visa. Individuals may return to the U.S. under the visa waiver program if a “reasonable length of time” has passed. The determination for a reasonable length of time is at the discretion of the Department of Homeland Security.
U.S. employers also must check the names of all new-hires and employees against the Specially Designated Nationals and Blocked Persons List, administered by the Treasury Department’s Office of Foreign Assets Control (OFAC). Because OFAC prohibits financial transactions with individuals on the list, employers cannot employ them and may face fines for failing to comply.
For tax purposes, Portuguese citizens are subject to U.S. employment-based taxation on income earned in the U.S. unless they can claim an exemption under certain tax treaty provisions or they work under specific visa types that exempt earnings from taxes. Portugal has both a tax treaty and a social tax totalization agreement with the U.S.
State and local taxation of Portuguese workers also can apply, although some states within the U.S. recognize international tax treaties that can eliminate that income tax liability for foreign workers.
The U.S. labor laws apply to all workers employed and providing services in the country.
Work eligibility as an employee is contingent upon Department of Homeland Security and Labor Department approval and the employee receiving a U.S. Social Security number from the Social Security Administration.
Tax Residency: In general, employees working in the U.S. on a temporary basis are considered nonresidents for tax purposes unless they qualify for resident status. Employees can be granted permanent resident status through the so-called green card test or if they meet the substantial presence test under the U.S. tax code. More information on these requirements is in the
Permanent residents are subject to U.S. tax requirements the same as U.S. citizens and are taxed under the U.S. system on their worldwide earnings.
Income Taxes:
Generally, nonresidents in the U.S. who are from Portugal and are working in the U.S. are subject to U.S. taxes based on their U.S.-sourced income. Income is taxed differently based on whether it is categorized as wage income or nonwage income, which includes interest and dividends.
A Form W-4, Employee’s Withholding Certificate, must be filed by each employee with their employer. All nonresidents in the U.S. who are from Portugal and are working in the U.S. must claim “single” in Step 1c, regardless of marital status; write “Nonresident Alien” or “NRA” in the space under Step 4c of the form; and may not claim “exempt” in the space under Step 4c.
Nonresident alien employees may adjust withholding using Step 2b or 2c of the Form W-4; certain employees also may be able to use Steps 3, 4a, or 4b. More information about Form W-4 requirements for nonresident alien employees is available in the
Although the versions of Form W-4 issued in 2020 or later significantly differ from the versions issued in 2019 or earlier, nonresident employees that filed a valid version of Form W-4 from 2019 or earlier with their employer do not need to file another Form W-4 with the employer unless they need to implement a change for their withholding. On Forms W-4 issued in 2019 or earlier, nonresident alien employees were required to check the “single” box on line 3, regardless of marital status; write “Nonresident Alien” or “NRA” above the dotted line on line 6; and were not permitted to claim “exempt” on line 7 of the form.
An additional amount is added to a nonresident alien employee’s wages for calculating federal income tax withholding, with the amount based on pay period frequency and the date of the employee’s most recently filed Form W-4. The table of additional amounts applicable to Forms W-4 from 2020 or later and the table applicable to Forms W-4 issued before 2020 are available in the
Nonwage income and self-employed foreign workers can be subject to income tax withholding at a flat rate of 30%.
Additionally, foreign workers may be taxed differently based on the specific type of visa they hold.
Tax treaties: Portugal and the U.S. have a tax treaty with provisions addressing host country taxation of the nonresident workers. A summary of those benefits is listed in the Tax Treaty Exemption Comparison Chart. To claim the treaty benefit, the nonresident must file Form 8233, Exemption From Withholding on Compensation for Independent (and Certain Dependent) Personal Services of a Nonresident Alien Individual, with the employer.
Students, trainees and teachers in particular must include a statement with Form 8233 to claim a tax treaty exemption from withholding of tax on compensation for dependent personal services. This statement affirms that the student, trainee, teacher or researcher is temporarily in the U.S. for purposes of studying or has accepted an invitation by the U.S. government (or by a political subdivision or local authority) for the purpose of teaching or engaging in research for a period not expected to exceed two years by a university or other recognized educational institution in the U.S. It also must affirm that the individual will receive compensation for services performed in the U.S. The student exemption is not to exceed $8,000 a year; no limit is placed on the teacher compensation for Portuguese residents.
Examples of the statements necessary to claim a treaty exemption from U.S. taxes are included in Internal Revenue Service Publication 519, U.S. Tax Guide for Aliens.
Social Taxes: Most foreign workers are subject to paying into the U.S. Social Security system. Foreign nationals who are exempt from paying income tax and who do not have the eligibility to receive a social security number may not be required to pay social taxes. Foreign workers contributing to Social Security for a certain time period may be eligible to receive benefits.
Generally, foreign workers in the U.S. that have specific visas as exchange visitors or students or who are temporarily in the U.S. for agricultural work are not subject to social taxes on income that is obtained from the purpose in which they originally entered the U.S.
Totalization Agreements: Social Security totalization agreements can allow foreign workers and U.S. nationals working abroad to avoid paying into two social security systems while being subjected to losing benefits for their home country system. Under totalization agreements, generally, foreign workers will only pay into one of the social security systems- either the home or the foreign system- but not both. Foreign nationals, utilizing a totalization agreement, also can count years of contributions paid to different social security systems to all of the systems they have contributed to in order to be eligible for benefits in one country.
Portugal and the U.S. have entered into a totalization agreement and a summary of those provisions is included in
Wage Payment: Under certain visas for certain types of employment, employers are required to pay foreign workers the higher of either the prevailing wage or the actual wage that is paid to U.S. workers that have similar skills and qualifications.
There are no particular requirements that employees be paid in U.S. dollars.
TREATY ARRANGEMENTS
Portugal has entered into more than 70 income tax treaties, including an income tax treaty with the United States. Portugal also has a totalization agreement with the United States for social tax coverage purposes.
The countries with which Portugal has a bilateral income tax treaty in effect are Algeria, Andorra, Austria, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Côte d’Ivoire, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Estonia, Ethiopia, Finland, France, Georgia, Germany, Greece, Guinea-Bissau, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Kuwait, Latvia, Lithuania, Luxembourg, Malta, Mexico, Moldova, Morocco, Mozambique, Netherlands, Norway, Oman, Pakistan, Panama, Peru, Poland, Qatar, Romania, Russia, São Tomé and Príncipe, San Marino, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela, and Vietnam.
Portugal also has income tax treaties in effect with the special administrative regions of Hong Kong and Macau.
Portugal has totalization agreements for social tax purposes with more than 30 countries, including the United States. Other countries with which Portugal has agreements are Andorra, Argentina, Australia, Bolivia, Brazil, Cabo Verde (Cape Verde), Canada, Chile, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, India, Mexico, Moldova, Morocco, Mozambique, Nicaragua, Panama, Paraguay, Peru, Philippines, Romania, Spain, Tunisia, Ukraine, Uruguay, and Venezuela. It also has an agreement with Canada’s Quebec province.
RESOURCES
All resources are in English unless otherwise noted.
General
Portugal Agency for Investment and Foreign Trade (Agência para o Investimento e Comércio Externo de Portugal, abbreviated as AICEP)
CIA World Factbook: Portugal
U.S. State Department: U.S. Relations With Portugal
Currency Details
Unicode Consortium: Currency Symbols
International Organization for Standardization: Currency Codes - ISO 4217
United Nations: United Nations Terminology Database: Portugal
Taxes
Tributary and Customs Authority: (Portuguese)
- Tax Codes (Portuguese)
- Withholding Tables (Portuguese)
Ministry of Labour, Solidarity and Social Security: General Directorate of Social Security (Portuguese)
- Social Security Contribution Rates (Portuguese)
European Foundation for the Improvement of Living and Working Conditions: Work Compensation Fund (FCT) and Guarantee Fund for Work Compensation (FGCT)
Law No. 93/2019, Introducing the Additional Contribution for Excessive Turnover (Portuguese)
DLA Piper: Global Equity Desk Reference - Employee Stock Purchase Rights
Decreto-Lei n. 99/2020 de 22 de Novembro [Decree-Law no. 99/2020 of Nov. 22], Changes the exceptional and temporary measures relating to the COVID-19 disease pandemic
Compensation and Benefits
Labor Code (Portuguese)
Law No. 90/2019, Regarding Parental Leave (Portuguese)
Government of Portugal, Increase to the National Minimum Wage for 2021 (Portuguese)
Foreign Workers
Embassy of Portugal in Washington, D.C.
Working in the United States
U.S. Department of Labor:
- Foreign Labor Certification
- Hiring Foreign Workers
U.S. Internal Revenue Service:
- IRS Notice 1392, Supplemental Form W-4 Instructions for Nonresident Aliens
- IRS Publication 15, Circular E, Employer’s Tax Guide
- IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities
- IRS Publication 519, U.S. Tax Guide for Aliens
- IRS Publication 901, U.S. Tax Treaties
U.S. Department of State, Visa Waiver Program
Treaty Arrangements