Income Tax Rates for 2016
In 2016 individuals will be taxed at the following rates:
|Up to €7,035||14%|
|Between €7,035 and €20,100||28.5%|
|Between €20,100 and €40,200||37%|
|Between €40,200 and €80,000||45%|
Income between €80,000 and € 250,000 is subject to an additional solidarity tax of 2.5%. For income over € 250,000 the additional solidarity tax is charged at 5%.
If the tax payer is married the combined income of the couple is halved to apply the above table and the tax calculated doubled.
These rates apply to employment and self employed income.
In the case of self employed income the tax payer can opt to be taxed either using the simplified system or on their real profit. In the case of the simplified system it is assumed for service providers that their taxable income is 75% of their income. If the tax payer has self employed income of over € 150,000 they will automatically fall into the real profit system.
Other types of income can either be accumulated with the employment and self employed contractor income and taxed at the above rates or taxed autonomously at a flat rate. If the income is taxed at a flat rate and the tax payer opts not to have this income accumulated with their other income there is no need for the tax payer to present a tax return and pay any additional tax.
The following types of income are taxed at a flat rate of 28%;
In calculating the capital gains on property there are a number of factors which reduce the liabilty.
The cost price of the property is ajusted to take into account inflation based on a index which is published earlier. It is also possible to deduct obligatory costs incurred in the purchase and sale as well as the estate agent's fees. For residents if the proceeds are reinvested from one year before the sale to three years in a property which will become the tax payer's home loacated anywhere in the EU no tax is payable. Properly documented improvements made to the property in the 12 years prior to sale are also deductible. For Portuguese residents who choose not to reinvest the proceeds only 50 percent of the gain is taxable.
Tax Deductions in 2016
The system allows the tax payer to deduct a number of types of expenses to reduce their tax liability. The total amount of deductions which vary between €0 and € 1,250 depends on the income of the tax payer.
Main Residence deduction - Interest paid on mortgages on the tax payer's main residence is limited to € 296 or 15% of the mortgage paid if lower. In the case of rent paid under an authorised contract the limit is 15% of the rent up to a maximum of € 502 which can be increased to € 753 if the tax payer has a low income.
Education - The tax payer can deduct their and their families education costs up to €800 or 30% of the cost if lower. In families with more than 3 dependents the deduction is increased by € 142.50 for each dependent.
Heath Expenses - The tax payer can deduct health expenses ,exempt from or liable to VAT at the lower rate of 6%, of up to € 1,000 or 15% of the cost if lower.If the family grouping has more than 3 dependents then the limit is increased by € 125.77 for each dependent. If the tax payer has incurred heath costs at ther higher VAT rate and has a doctor's prescription the above limits can be increased by € 65.
We have worked with HK Consulting since 2010 and we have always been very satisfied with the work they deliver. It has been punctual and reliable information and we can recommend HK to anyone.