Flash News NA 28/06/2024
Taxes in Portugal – Young People Special resume
Have you started working? Here are some of the things that are not taught at school!
Have you finished your studies or decided to take a break and jump into the world of work!
You should know then that when you will have to start declaring your income to the State and probably paying your taxes.
You can, however, continue to be considered as a dependent of someone (Parents, guardians, etc.) regarding the PIT (IRS) - Personal Income Tax, if you are not over 25 years old and if your annual income does not exceed 14 times the national minimum wage, which in 2024 is €820.00/month. (A total of €11,480.00 for income obtained in 2024 to be declared in 2025).
First point, what is the PIT(IRS) – Personal Income Tax, as the name suggests, this is the tax that the Portuguese tax authority will charge you for having obtained income each year.
Then going back, a little, you began to work; You can normally do this as an employee or as a self-employed person.
Employed or dependent work is characterized by the existence of a contract between two parties: workers and employers.
In this case, you will only have to declare your income annually in PIT (IRS) model 3 each year on the dates announced by the Tax Authority. (In 2024, the PIT (IRS) campaign for 2023 income ran from 04/01/2024 until 06/30/2024).
If you only have category A income type, it is most likely that your declaration will be automatic, which means that by the end of the delivery period you must check that everything is correct and validate your income declaration – PIT (IRS) Model 3.
In this modality, it will be the company that hires you and pays you the salary, which every month will withhold and deliver to the State on your behalf the PIT (IRS) (the rate will depend on your income) and the amount corresponding to Social Security (11% on your income).
Just a curiosity, in addition to the amount that the company retains from you, it will also pay 23.75% of your income to Social Security every month.
We now look at the other modality, that is, Independent Work. Imagine that you had an idea or that you provide services sporadically or even that you are a PERSONAL TRAINER and that you invoice directly to your students.
In this case, you will not be linked to any entity by an employment contract and therefore you will have to handle the VAT and Social Security declarations and make the respective payments.
VAT what is it? Well, you may have guessed, it's another tax. VAT stands for Value Added Tax. And what is Added Value?
For most products and services, it is mandatory to apply 23%, which corresponds to the normal VAT rate. (There is also a reduced rate of 6% and an intermediate rate of 13%).
Normally, for those just starting out, the income obtained will not be very large in most cases.
If you earn up to €14,500.00 in 2024 or if it is your first year of activity, you will be exempt from VAT – Value Added Tax and from paying Social Security contributions.
This was just a small look at a whole new world of contributions and taxes for those starting to work in Portugal.
To obtain more detailed information, you can always consult the Tax Authority websites www.portaldasfinancas.gov.pt and the Social Security website www.seg-social.pt.
Welcome to the world of work! We believe in you and that your project, idea or professional career will be a success!
If you need help in fulfilling these obligations, you can also use the services of a Chartered Accountant. At Nominaurea we have the right professionals to help you with your personal tax management, we look forward to hearing from you!
