Our guide to Payroll in Portugal

Doing Business in Portugal

The Government of Portugal welcomes inward investment and has a strong track record of encouraging and securing investment from Asia. All foreign and local investors are treated equally and are both eligible for investment incentives. Some of the world’s most prestigious businesses currently invest in Portugal, including tech-giants like Microsoft, Apple, Siemens and IBM, and manufacturing entities including Volkswagen, Leica and Ikea. The government’s reformist agenda has helped encourage FDI in all sectors, while businesses benefit from highly developed transport and communication networks, a transparent regulatory system, and integration with the EU single market. A range of financial incentives, including training expenses and further tax relief, are also available for businesses setting up in Portugal.

Basic Facts about Portugal

How to Say

• Hello: Olá
• Good Morning: Bom dia
• Good Evening: Boa noite
• Do you speak English?: Fala inglês?
• Goodbye: Adeus
• Thank you: Obrigado/a
• See you later: Até logo

Dates and Numbers

Dates are usually written in the day, month and year sequence.  For example, 1 February 2023 or 1/2/23.

Numbers are written with a period to denote thousands and a comma to denote fractions.  For example, 3.000,50€ (three thousand Euros and fifty centimes).

Registrations and Establishing an Entity

If a company wants to set up a legal entity in Portugal and the legal representatives of the company are in Portugal, this is a process that can be done within one to two business days.

If the legal representatives cannot be in Portugal, the process will take longer, between 15 and 30 days and this process will require a POA.

The setup of the legal entity includes the registration with the tax authority and the social security.

There is also the option of non-resident companies, which does not require any legal entity establishment; however, there can be no commercial activity from this entity. This is for employment purposes only.

This process will require POA, and a set of documentation that needs to be checked on a case-by-case basis.

To establish a company in Portugal, a legal entity must be formed. The company must be registered at the Commercial Registry Office and with the Portuguese Tax Authority and Social Security Institute.

Common legal structures for companies include:

• Sociedade por Quotas (Lda. – Private limited company)
• Sociedade Anónima (S.A. – Public limited company)

A local bank account must also be opened to manage payroll and tax payments.

The working week in Portugal is Monday to Friday. The working hours for commercial offices are typically from 0900 to 1800 hours.

Income Tax

Monthly income tax contributions are to be submitted by the 10th and to be paid until the 20th of the following month.

The tax rates vary from 0% for the minimum wage up to 47.17% for income above 20.221€ (monthly). These rates may vary subject to the employee’s marital status and number of dependents.

Social Security Contributions

Monthly social security contributions are to be submitted by the 10th and are to be paid until 20th of the following month.

Payroll

It is legally acceptable in Portugal to provide employees with online payslips. 
In Portugal, there are 14 payments made to salaried employees each year, the 13th payment is vacation pay and the 14th is Christmas pay.

For example, an employee’s salary is €50,000.00. The 14 payments would be calculated in the following way:
€50,000.00/14 = €3,571.43.

Payslip Example

Reports

New Employees

When an employee is hired, social security must be informed between 24 hours up to 15 days prior to) the employee work admission start date.

If the new starter is a European Union citizen, they will be required to provide the following:

• A copy of the working contract
• Passport
• A legal document from their country (DNI, Citizen Card, Etc.).

If the new start is a citizen from any other country outside the EU, the request for the working permit must be done in their own country in the Portuguese Embassy or Consulate. 

The authorities will require an original of the working contract and the company will have to provide accommodation for the first 30 days. Usually, the initial work permit is for 6 months, and any subsequent permits will be 12 months.  The employee can only start working in Portugal after having obtained the working visa permit.

Leavers

All payments due to the leaver should be done on the last working day. It is a practice for some companies to pay on the last business day of the last working month.

Notification must be made to the social security until the 10th of the following month.  If the employee has any judicial payment being retained from their salary it is required to communicate also to the court or to the tax authority.

Minimum Wage (2026)

The minimum wage for 2026 is €960.00 per month, €13,440.00 per year.

Holiday Accrual / Calculations

The amount of the vacation allowance may vary, depending on the Collective Agreement, but must not be less than the employee’s current remuneration. The allowance is proportional to the leave entitlement, having as basis 22 days.

Monthly Base Salary / 22 * Months worked (up to 11) * 2 = Vacation Allowance amount.

The reference remuneration is the sum of the employee’s fixed remuneration.

If the employee is entitled to more than 22 vacation days, the vacation allowance is equal to the reference remuneration; if the employee is entitled to less than 22 days (for example, newly hired), the vacation allowance amount will be less than the reference amount and proportional to the worked days.

For employees with a high variable component (sales commissions, shift allowance and so on), the system calculates the average of the variable component and adds it to the reference remuneration when calculating the vacation allowance.

According to the Calculation Holidays - Art. 237 – 247 Código do Trabalho - the regulations are as follows:

In the year of admission:

• Two (2) working days in each month, up to 20 (maximum); Leave can only be taken after six months of work complete.

In the following years:

• 22 working days;
• In the year following admission, maximum 30 working days can be taken;

• In case of dismissal in the second year of seniority, it is pro rata, two working days in each month.

The non-EU citizens are required to have a Visa or a work permit that should be requested in the Employees home country prior to the start of the working contract. An original and stamped (by both parties) copy of the working contract will need to be delivered to the Portuguese Embassy or consulate.  This process may take 30 days or more depending on the country.

It is mandatory to make payments to the authorities from an in-country bank account.

Banks are generally open to the public from 08:30 to 15:00 hours and closed on Saturdays and Sundays.

Local bank accounts are required for payroll.

Reporting must be done via the Social Security and Tax Authority e-platforms.

Public holidays (13 mandatory + up to 2 local holidays) affect pay and scheduling.

Payroll deadlines: Income tax and social contributions must be paid by the 20th of the following month.

Employment laws are governed by the Portuguese Labor Code (Código do Trabalho).

Further Information

For more information, or assistance with Portugal Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.