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Taxes and Business Etiquette in Portugal

Portugal’s economy has slowly been recovering from the financial crisis, but it is still fairly vulnerable compared to other European economies. There are, however, lots of growing sectors that make working in Portugal a feasible option. Our guide has details.
Wine is still one of the most renowned export goods of Portugal.

Taxation: It All Depends on Your Income

Income generated through taxes is obviously one of the main ways the government intends to get the national deficit under control. The standard VAT of 23% (with reduced rates for e.g. most foodstuffs (6%) and wine (13%)) is among the highest in the EU.

Personal income tax in Portugal — Imposto sobre o Rendimento das Pessoas Singulares or IRS — is based on progressive rates that range from 14.5% to 48%, depending on your income. If you spend more than half the tax year (= the calendar year) or 183 days in Portugal, you will be taxed as a resident. This means that all your income, regardless of whether it was produced in Portugal or not, will be taxed in the country. If you spend less time in Portugal, only the income derived from Portuguese sources will be taxed.

An in-depth guide to Portuguese tax legislation can be found in this 2017 report from Deloitte.

Portuguese Business Etiquette

As culturally unique as Portugal is, it is still part of the Mediterranean to a certain extent and shares a number of common features when it comes to business etiquette and workplace relationships. The most important is probably the emphasis on building up a personal relationship and a certain degree of trust between business partners before any actual business takes place. Take the time to get to know your counterpart. The same applies to your colleagues — greeting everyone and striking up a little chat is perfectly normal in Portugal.

Business attire in Portugal tends to be very formal, so be prepared to wear a suit when going to work. Try to stick to this rule unless you are very certain that casual clothing is acceptable at your workplace. Try to keep things tasteful, as appearances in the business world are just as important as building up relationships and trust.

Punctuality is highly valued in Portuguese businesses, although there might be times in which your counterpart shows up later for a meeting, for example. Still, you should always try to be on time, especially at the beginning of the work day. Working overtime is a very common phenomenon and might even be expected from you, so be prepared to stay in the office beyond the official business hours.


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