Portugal’s parliament approved the 2018 Budget Law (Bill No. 100/XIII) on 27 November 2017.
The approved Budget Law introduces adjustments to the individual income tax brackets including new 23% and 35% tax brackets as follows:
- up to EUR 7,091 – 14.5%
- EUR 7,091 up to 10,700 – 23.0%
- EUR 10,700 up to 20,261 – 28.5%
- EUR 20,261 up to 25,000 – 35.0%
- EUR 25,000 up to 36,856 – 37.0%
- EUR 36,856 up to 80,640 – 45.0%
- over 80,640 – 48.0%
The approved bill has brought new foreign permanent establishments rules according to which taxpayers are required to provide justification for any losses, expenses and negative capital variations.
Taxation rules of capital gains has been extended so that gains from the transfer of foreign shares or similar rights may be taxed in Portugal if more than 50% of their value is derived from immovable property situated in Portugal.
The Budget Bill introduces a change in the reinvestment incentive for SMEs so that up to 10% retained earnings may be deducted if reinvested within three years with a deduction cap of EUR 7.5 million per tax period (cap equal to 50% of annual tax liability also applies). The bill also introduces a new rule allowing taxpayers to treat unclaimed tax credits as losses or expenses.
Measures of the Budget Law will generally apply from 1 January 2018.
