Acronyms

In Portugal, the tax system uses several acronyms to refer to various taxes and their corresponding regulations. Here’s a breakdown of the main acronyms in Portuguese tax law:

1. IMI – Imposto Municipal sobre Imóveis (Municipal Property Tax)

• What it is: IMI is an annual tax levied on property ownership. It applies to both urban and rural properties and is assessed based on the property’s taxable value (VPT).
• How it works: The rate varies by municipality and property type. For urban properties, it ranges from 0.3% to 0.45%, and for rural properties, it can be up to 1%.
• Purpose: IMI is used to fund municipal budgets, and the rate can differ based on the location and characteristics of the property.

2. IMT – Imposto Municipal sobre Transmissões Onerosas de Imóveis (Municipal Tax on the Transfer of Real Estate)

• What it is: IMT is a tax applied on the transfer of real estate (whether buying or selling). This tax is levied on the purchase price or market value of the property (whichever is higher).
• How it works: The IMT rates vary depending on the property value and whether it is an urban or rural property. For residential properties, the rates range from 1% to 8%.
• Purpose: IMT taxes real estate transactions and is an important source of municipal revenue.

3. IRS – Imposto sobre o Rendimento das Pessoas Singulares (Personal Income Tax)

• What it is: IRS is a personal income tax levied on individuals in Portugal. It applies to both residents and non-residents with income sourced in Portugal.
• How it works: The tax is progressive, meaning that the rate increases as income rises. For example, rates range from 14.5% to 48% for general income, with special rates for certain types of income (such as investment income or capital gains).
• Purpose: IRS is the primary tax for funding the state budget, applying to all forms of income, including salary, pensions, freelance earnings, rental income, and investments.

4. IRC – Imposto sobre o Rendimento das Pessoas Coletivas (Corporate Income Tax)

• What it is: IRC is a corporate income tax that applies to companies and other legal entities in Portugal.
• How it works: The standard rate of IRC is 21% on the profits of a company. There may be regional surcharges (depending on the location of the business) and special rates for smaller businesses or specific sectors.
• Purpose: IRC is a key tax levied on corporate profits, and it plays a significant role in financing the public budget.

5. IUC – Imposto Único de Circulação (Vehicle Tax)

• What it is: IUC is an annual tax on the circulation of vehicles in Portugal. It applies to both private and commercial vehicles.
• How it works: The amount of IUC depends on factors such as the vehicle’s age, engine size, emission levels, and CO2 emissions. Typically, the tax is higher for newer and larger vehicles.
• Purpose: The tax is used to fund various aspects of infrastructure, including road maintenance and environmental projects.

6. IVA – Imposto sobre o Valor Acrescentado (Value Added Tax)

• What it is: IVA is Portugal’s version of VAT (Value Added Tax), a consumption tax levied on the sale of goods and services.
• How it works: The standard IVA rate is 23%, though there are reduced rates of 6% (e.g., for certain food items and pharmaceuticals) and 13% (e.g., for some tourism-related services).
• Purpose: IVA is a significant source of government revenue, applied to nearly all goods and services sold in Portugal.

7. IHRU – Instituto da Habitação e da Reabilitação Urbana (Institute for Housing and Urban Rehabilitation)

• What it is: IHRU is the government body responsible for overseeing the rehabilitation and urban planning of housing in Portugal.
• How it works: While not a direct tax, IHRU plays an important role in urban development policies and may provide incentives, grants, and subsidies for property renovations and urban regeneration projects.
• Purpose: The institute’s goal is to improve housing quality, support urban regeneration, and enhance accessibility to affordable housing.

8. IS – Imposto de Selo (Stamp Duty)

• What it is: IS is a stamp duty tax applied to a range of transactions, such as property transfers, financial contracts, and loans.
• How it works: Rates vary depending on the type of transaction. For example, a property purchase may attract a stamp duty rate of 0.8% of the value of the property, while certain financial transactions could attract different rates.
• Purpose: Stamp duty is a source of revenue for the government and is often applied to legal or formal documents and financial agreements.

9. IMI – Imposto Municipal sobre Imóveis (Municipal Property Tax)

This was already mentioned as IMI, but it is worth reiterating that the IMI is a key tax on property ownership in Portugal and is assessed annually on both urban and rural properties.

10. DERRAMA – Municipal Surcharge on Corporate Profits

• What it is: DERRAMA is a municipal surcharge on the profits of companies (similar to the IRC).
• How it works: Companies with annual revenues exceeding a certain threshold may be subject to an additional surcharge of up to 1.5% on top of the regular IRC.
• Purpose: The surcharge helps fund municipal budgets and supports local governments in financing public projects.

Conclusion

Portugal’s tax system involves a variety of taxes that apply to both individuals and businesses. Here’s a recap of the main tax acronyms:

• IMI: Property tax
• IMT: Property transfer tax
• IRS: Personal income tax
• IRC: Corporate income tax
• IUC: Vehicle tax
• IVA: VAT (Value-added tax)
• IS: Stamp duty
• DERRAMA: Municipal corporate profits surcharge

Understanding these taxes and their specific rules is crucial for individuals and businesses living in or doing business with Portugal. Whether you are an individual, a property owner, a business owner, or a vehicle owner, each of these taxes has different implications for your financial planning and obligations in Portugal.