Portugal Tax Rates - Krushnar

(20+) Facebook

Hi all!

I know everyone here is excited about Portugal's "free" healthcare and paying very little to nothing to receive great care here. Many post about how "civilized" it is that healthcare is "free." I agree that PT's healthcare is very good and very affordable.

Some food for thought, PT healthcare is not "free." It has been (and is) paid for by Portuguese citizens and Portuguese businesses that pay extraordinarily high taxes in Portugal (higher than average EU), taxes that many immigrants/expats generally (realistically - no judgement, here) do not pay. It is a socialist system where the cost is shared but the burden falls primarily on PT workers and businesses.

Please know that the VAT/IVA paid on groceries (6%), electricity (13%), restaurant meals and general household items (up to 23%) does go to the government but it is a small share of the PT government piggy bank when compared to workers paying VAT plus personal income tax and and often, business taxes. Most have paid higher VAT rates in the recent past, and all have paid VAT for more time than those of us recent residents.

Below is the personal income tax rate in Portugal. I know some are not happy about the recent NHR 10% tax on a RothIRA and similar US investments. But as you can see by the chart, this 10% is less than what most workers pay -- and who, on average, live on less.

"In Portugal, the average household net-adjusted disposable income per capita is USD 21 203 a year, lower than the OECD average of USD 33 604 a year. There is a considerable gap between the richest and poorest – the top 20% of the population earn nearly six times as much as the bottom 20%." (OECD Better Life Index)

This means the average household in Portugal pays a 35% tax rate with €2,515 as their highest possible deduction level. Portuguese citizens making €36,968+ per year are taxed at 45%. If you make over €80k, you're taxed an additional 2.5-5% "solidarity rate" -- meaning the government views that if you're doing well, you need to pay more to support your fellow citizens who are not. The lowest personal income rate in Portugal is 14.5% for those making over ~€4k per year.

Corporate/business tax rates in Portugal are equally high -- set to pay for the system that supports 10M people. Portugal is composed of 99% SMEs -- small and medium-sized businesses -- not large corporations. The average SME in PT employs 2.9 people. These businesses pay 34% social security tax per employee - on top of their 21% corporate revenue-based tax. A 1-person small business in Portugal pays 11% out of pocket each month for their "employee" SS and another 23% from gross revenue to pay for the "business share" of SS. (I know this well. I do this every month.)

I know many of us pay taxes on property purchases, on luxury goods, on tourism services - which is great. We all want PT to do well so we can stay here for as long as we want, and as they let us. There's no "almoço livre" I hope everyone remembers that PT's valued healthcare isn't free.

Last note: I'll be the first to say I wish PT would reduce business tax rates as they encourage corruption and discourage foreigner business setup. But when I look at these numbers, I see the money that supports where I live has to come from somewhere. Not being a tax policy expert, I don't know what to suggest.