Portugal

Portugal, a country of rich history and vibrant culture, is located on the Iberian Peninsula in southwestern Europe. It is bordered by Spain to the east and north and the Atlantic Ocean to the west and south, giving it a distinctive coastline known for its breathtaking beauty and maritime prowess. Portugal also includes the archipelagos of Madeira and the Azores in the Atlantic, which are integral parts of its territory and history.

Throughout its history, Portugal has seen a variety of cultural, political, and economic influences that have shaped its national identity. The Moorish occupation, which lasted until the 12th century, left a lasting impact on Portuguese architecture, language, and culture.

Modern Portugal is known for its high quality of life, with a rich cultural heritage that is celebrated through music, literature, and cuisine. Portuguese Fado music, a UNESCO Intangible Cultural Heritage, captures the country's soulful history and its connection to the sea. Portugal's contribution to literature, notably through the works of Fernando Pessoa and Luís de Camões, continues to influence the literary world.

Portugal's economy is diverse, with significant contributions from sectors such as tourism, technology, renewable energy, and agriculture. The country is a leader in renewable energy, particularly wind and solar power, reflecting its commitment to sustainability and innovation.

From its historical roots as a nation of explorers to its current status as a modern, dynamic member of the European Union, Portugal continues to be a country that looks outward to the world while cherishing its traditions and cultural heritage. Its scenic landscapes, warm climate, and hospitable people make it a beloved destination for visitors and a cherished home for those who live there.

General Information

• Full Name: Portuguese Republic
• Population: 10.40 million (World Bank 2022)
• Capital: Lisbon
• Primary Language: Portuguese
• Main Religion: Christianity
• Monetary Unit: Euro
• Main Exports: Textiles and clothing, wood products, electrical equipment
• GNI per Capital: US $41,290(World Bank, 2022)
• Internet Domain: .pt
• International Dialing Code: +351

How Do I Say in Portuguese?

• Hello: Ola
• Good morning: Bom dia
• Good evening: Bom noite
• Do you speak English?: Falas ingles?
• Good bye: Adeus
• Thank you: Obrigado
• See you later: Ate logo

Dates

Dates are usually written in the day, month and year sequence. For example, 1 July 2015 or 1/7/15. 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 centimos.

Expanding your business into Portugal presents a unique opportunity to tap into one of Europe's most dynamic and promising markets. With its strategic location, skilled workforce, and business-friendly environment, Portugal offers a wealth of advantages for companies looking to grow their operations internationally. 

Portugal's strategic position at the southwestern tip of Europe offers direct access to the Atlantic Ocean, making it an ideal gateway for businesses aiming to enter not only European markets but also Africa and the Americas. This geographical advantage is complemented by the country's modern infrastructure, including world-class ports and a comprehensive network of roads and airports, facilitating efficient logistics and distribution channels.

Portugal's economy is encompassed  by a diverse industrial base, with strong sectors in technology, renewable energy, automotive, aerospace, and tourism. The country has seen significant growth in technology and innovation, making it a hub for startups and companies focusing on digital transformation. Portugal's commitment to sustainability and renewable energy also offers lucrative opportunities for investment in green technologies and solutions.

Known for its business-friendly environment, Portugal is underscored by government initiatives aimed at encouraging foreign direct investment (FDI). The country offers a range of incentives for businesses, including tax benefits, financial grants, and competitive corporate tax rates. Portugal's membership in the European Union and adherence to EU regulations provide a stable and predictable legal framework for businesses operating in the country.

As a member of the European Union, Portugal offers seamless access to the EU's single market, allowing for the free movement of goods, services, and labour. The country's well-established trade relations and network of international agreements further facilitate access to global markets, providing businesses with a broad platform for growth and expansion.

In conclusion, doing business in Portugal represents a strategic investment in a country with a growing economy, a supportive business environment, and a wealth of opportunities across various sectors. Portugal's strategic location, combined with its skilled workforce and quality of life, makes it an ideal destination for businesses looking to expand their footprint in Europe and beyond. Whether you're a startup looking to tap into Portugal's innovative ecosystem or a multinational seeking to leverage the country's strategic location and market access, Portugal offers a conducive environment for achieving your business goals.

Investing in Portugal offers a compelling array of benefits for businesses and investors looking to tap into the European and global markets. With its strategic location, stable economy, and dynamic business environment, Portugal stands out as an attractive destination for foreign direct investment (FDI). 

Portugal's geographical position on the western edge of Europe provides a unique advantage as a gateway to the European Union, Africa, and the Americas. Its extensive coastline and deep-water ports, such as in Lisbon and Sines, facilitate global trade, making it an ideal location for businesses looking to expand their international footprint.

Portugal offers a competitive business environment, underscored by a range of government incentives aimed at attracting foreign investment. These incentives include reduced corporate tax rates, financial grants, and tax benefits for R&D activities. The "Golden Visa" program further encourages investment by offering residency to non-EU investors, promoting a diverse and vibrant business ecosystem.

The Portuguese economy is represented by its diversity, with strong sectors such as technology, renewable energy, tourism, textiles, and agribusiness. This economic diversity not only provides a stable foundation for growth but also opens up a multitude of investment opportunities across different industries.

Portugal has rapidly emerged as a hub for innovation and technology in Europe, boasting a thriving startup ecosystem, particularly in Lisbon and Porto. The government's commitment to digital transformation and support for entrepreneurship has fostered an environment conducive to innovation, making Portugal an attractive location for tech companies and startups.

Investors in Portugal benefit from access to a highly educated, skilled, and multilingual workforce. The country's focus on education and training has resulted in a talent pool adept in technology, engineering, and services, with widespread proficiency in English and other languages, facilitating global business operations.

Portugal is renowned for its high quality of life, offering a warm climate, rich cultural heritage, and excellent healthcare and education systems. This not only makes Portugal an appealing destination for international talent but also contributes to a positive and productive working environment.

Foreign Direct Investment (FDI) in Portugal is a cornerstone of the country's economic strategy, attracting investors worldwide with its dynamic sectors, compelling incentives, and dedicated government support. 

Key Sectors for Foreign Direct Investment (FDI) in Portugal

Portugal's diverse economy offers numerous opportunities for foreign investors across various sectors:

• Technology and Innovation: Portugal's burgeoning tech scene, especially in areas like software development, artificial intelligence, and blockchain, is ripe for investment.
• Renewable Energy: With a strong commitment to sustainability, Portugal is a leader in renewable energy, particularly in wind, solar, and hydroelectric power.
• Tourism and Hospitality: Portugal's rich cultural heritage and stunning landscapes make it a perennial favourite for tourism-related investments.
• Real Estate: The real estate market, including residential, commercial, and tourism properties, offers attractive opportunities, buoyed by the country's Golden Visa program.
• Automotive and Aerospace: Portugal's skilled workforce and strategic location make it a competitive destination for the automotive and aerospace industries.
• Agribusiness: The country's agricultural sector, known for its high-quality produce and wine, presents opportunities for investment in food processing and distribution.

FDI Incentives Available in Portugal

Portugal provides a range of incentives to attract and support foreign investment:

• Tax Benefits: Competitive corporate tax rates, reduced VAT rates for certain sectors, and exemptions for R&D activities.
• Financial Grants and Subsidies: Direct subsidies for specific projects, particularly those promoting innovation, job creation, and regional development.
• Golden Visa Program: Offers residency permits to non-EU investors who meet certain investment thresholds, facilitating easier access to the EU market.
• R&D Support: Financial incentives for companies engaging in research and development, aiming to boost innovation.

In Portugal it is mandatory to make payments to the authorities from an in-country bank account.

Banks in Portugal are generally open to the public from 08:30am to 15:00pm and closed on Saturdays and Sundays.

How to Register a Company and Establish an Entity in Portugal

Setting up a legal entity in Portugal is a relatively straightforward process, especially if the company's legal representatives can be present in the country. 

Presence of Legal Representatives

If the legal representatives of the company can be in Portugal, the process can be completed within one to two business days. The steps are as follows:

1. Choose the type of company: Decide whether you want to set up a Private Limited Liability Company (Sociedade por Quotas or Lda.) or a Public Limited Company (Sociedade Anónima or SA). The most common type for small to medium-sized businesses is the Lda.

2. Company name reservation: Register your company name with the National Registry of Companies (Registo Nacional de Pessoas Colectivas or RNPC). This ensures your chosen name is unique and legally acceptable.

3. Drafting and signing the articles of association: Prepare the Articles of Association, which outline the company's structure, purpose, and operational rules. These need to be signed by all shareholders.

4. Register with the commercial registry office: Submit the Articles of Association and other required documents to the Commercial Registry Office (Conservatória do Registo Comercial). This step legally creates your company.

5. Obtain a Company Tax Identification Number (NIPC): Register your company with the Tax Authority (Autoridade Tributária e Aduaneira). You'll receive a NIPC, which is necessary for all tax-related activities.

6. Social Security Registration: Register the company and its employees with the Social Security Institute (Instituto da Segurança Social). This is mandatory for all employers.

Absence of Legal Representatives

If the legal representatives cannot be in Portugal, the process will take longer, typically between 15 and 30 days. This will require a Power of Attorney (POA). The steps are as follows:

1. Power of Attorney (POA): A POA document must be notarised and legalised (often via apostille) in the representative's home country. This authorises a designated person in Portugal to act on behalf of the company.

2. Company name reservation: The designated representative will register the company name with the RNPC.

3. Drafting and signing the Articles of Association: The representative will prepare and sign the Articles of Association.

4. Register with the commercial registry office: The representative will submit the Articles of Association and other required documents to the Commercial Registry Office.

5. Obtain a Company Tax Identification Number (NIPC): The representative will register the company with the Tax Authority.

6. Social Security Registration: The representative will register the company and its employees with the Social Security Institute.

Non-Resident Companies

Non-resident companies can also operate in Portugal without establishing a legal entity. This is primarily for employment purposes and does not allow for commercial activities. The process involves:

1. Power of Attorney (POA): A notarised and legalised POA is required.

2. Documentation: A set of documents, including identification and proof of the company's existence in its home country, must be submitted. The exact requirements can vary and should be verified on a case-by-case basis. A company like activpayroll, and our Global Mobility and Tax team can help.

Non-EU citizens seeking to work or travel for business in Portugal are required to obtain a visa or work permit. The process involves several steps and specific documentation, which varies depending on the type of work or business activity. Below is a detailed overview of the types of visas and permits required, the application process, and where to apply.

Types of Visas and Work Permits in Portugal

Short-Term Business Visa (Schengen Visa - Type C)

• Purpose: For business trips, conferences, meetings, or other short-term business activities.
• Duration: Up to 90 days within a 180-day period.
• Eligibility: Non-EU citizens planning to stay in Portugal for business purposes for less than 90 days.

Temporary Stay Visa (Type D)

• Purpose: For temporary work assignments, seasonal work, or internships.
• Duration: Up to 12 months.
• Eligibility: Non-EU citizens with a contract or an offer for temporary work in Portugal.

Residence Visa (Type D)

• Purpose: For long-term employment, professional activities, or highly skilled workers.
• Duration: More than 12 months.
• Eligibility: Non-EU citizens with a long-term employment contract or seeking to engage in professional activities in Portugal.

EU Blue Card

• Purpose: For highly skilled workers from non-EU countries.
• Duration: Initially up to 4 years, renewable.
• Eligibility: Non-EU citizens with a higher education degree or professional qualifications and a work contract in Portugal with a salary threshold set by the government.

How to Apply for a Visa to Work in Portugal

• A completed visa application form.
• Original and stamped copy of the work contract by both parties.
• Valid passport with at least two blank pages and valid for at least three months beyond the intended stay.
• Two recent passport-sized photos.
• Proof of accommodation in Portugal.
• Proof of sufficient financial means.
• Health insurance covering the entire stay.
• Police clearance certificate from the home country.
• Any additional documents required by the specific type of visa.

In Portugal the processing time for a visa can vary, but typically it takes around 30 days or more, depending on the country and the specific circumstances of the application.

Upon arrival, the holder of a residence visa must register with the local municipality and apply for a residence permit at the Immigration and Borders Service (Serviço de Estrangeiros e Fronteiras - SEF).

For more detailed information and specific guidelines, businesses and applicants can refer to the following resources:

• Portuguese Ministry of Foreign Affairs: Ministério dos Negócios Estrangeiros
• Portuguese Immigration and Borders Service (SEF): Serviço de Estrangeiros e Fronteiras
• Portuguese Embassy and Consulate Directory: Available on the Ministry of Foreign Affairs website.

In Portugal the tax year runs from 1st January to 31st December.

Income Tax in Portugal

Businesses operating in Portugal must ensure that monthly income tax contributions for their employees are submitted by the 10th of the following month and paid by the 20th. This timely submission and payment are crucial for compliance with Portuguese tax regulations.

Income tax in Portugal varies based on several factors, primarily the employee’s marital status and number of dependents. These factors influence the tax brackets and rates applied to each employee's income, as outlined in the official income tax tables for mainland Portugal and the Azores.

1. Marital status: Employees are categorized based on whether they are single, married, or in a civil partnership. The tax rates differ accordingly, with married individuals or those in civil partnerships potentially benefiting from lower tax rates due to combined income considerations.

2. Number of dependents: Employees with dependents may be eligible for additional tax deductions, reducing their overall taxable income. This benefit aims to provide financial relief to families.

3. Income brackets: Portugal’s income tax system is progressive, meaning that higher income levels are taxed at higher rates. The specific rates and brackets are updated annually and are detailed in the income tax tables.

Personal Income Tax Rates in Portugal in 2024

Income tax in Portugal is progressive, meaning the rate increases as income rises. For 2024, the income tax brackets are as follows:

Table 1 - Single without dependents or married with both spouses working

Formula: (Monthly Salary x Rate) - Amount to Deduct - (Additional Amount per Dependent x number of dependents). R = Monthly Salary.

Table 2 - Single with one or more dependents

Formula: (Monthly Salary x Rate) - Amount to Deduct - (Additional Amount per Dependent x number of dependents). R = Monthly Salary.

Table 3 Married single-earner

Formula: Salary x Rate - Amount to Deduct - Additional Amount per Dependent x number of dependents. R = Monthly Salary.

Table 4 - Single or married with both spouses working without dependents - Disabled

Formula: (Monthly Salary x Rate) - Amount to Deduct. R = Monthly Salary.

Table 5 - Single, with one or more dependents - Disabled

Formula: (Monthly Salary x Rate) - Amount to Deduct - (Additional Amount per Dependent x number of dependents). R = Monthly Salary.

Table 6 - Married with both spouses working, with one or more dependents - Disabled

Formula: (Monthly Salary x Rate) - Amount to Deduct - (Additional Amount per Dependent x number of dependents). R = Monthly Salary.

Table 7- Married single-earner - Disabled

Formula: (Monthly Salary x Rate) - Amount to Deduct - (Additional Amount per Dependent x number of dependents). R = Monthly Salary.

Table 8 - Pensions - Single or married with both spouses working

Formula: Salary x Rate - Amount to Deduct. R = Monthly Salary.

Table 9-  Pensions - Married single-earner

Formula: Salary x Rate - Amount to Deduct. R = Monthly Salary.

Table 10 - Pensions - Single or married with both spouses working - Disabled

Formula: Salary x Rate - Amount to Deduct - Additional Amount to Deduct for Disabled Armed Forces. R = Monthly Salary.

Businesses can access the latest income tax tables and detailed guidelines for Portugal on the official website of the Portuguese Tax and Customs Authority (Autoridade Tributária e Aduaneira). It is recommended to consult these resources regularly to stay updated on any changes in tax regulations.

By adhering to these guidelines, businesses can ensure compliance with Portuguese income tax regulations, thereby avoiding potential penalties and ensuring smooth operation within the legal framework.

For more detailed information, you can refer to sources such as the Portuguese Government’s official portal and the Portuguese Tax and Customs Authority’s website​

Key Benefits Provided by the Social Security System in Portugal

The social security system in Portugal covers a range of benefits. Health insurance provides coverage for medical expenses and hospital care. Unemployment benefits offer financial assistance during periods of unemployment. Family benefits include maternity, paternity, and family allowances. Disability benefits provide financial support for individuals unable to work due to disability. The system also covers retirement, survivors, and disability pensions.

Social Security Contributions in Portugal for 2024

In Portugal, social security contributions for businesses must be submitted and paid within specific deadlines to ensure compliance with national regulations. The monthly social security contributions must be submitted by the 10th of the following month, and payments are due by the 20th of that month.

The total contribution rate is 34.75% of the employee’s income. This amount is divided into two parts: the employee's share and the employer's share. The employee’s share is 11%, which is directly deducted from their payslip. The employer's share is 23.75%, which the company must pay. This system ensures that both employees and employers contribute to the social security benefits provided by the state.

Performance bonuses are considered part of an employee's income under the IRS code (CIRS) and are subject to tax. This means that any bonuses awarded must be included in the total income calculations for social security contributions and income tax purposes.

Pensions in Portugal are primarily managed and funded by the Portuguese state. Employees and employers contribute to the social security system, which in turn provides various benefits, including pensions, health insurance, unemployment benefits, family allowances, and disability benefits.

Social Security Contributions in Portugal in 2024

For an employee earning €2,000 monthly, the social security contributions would be calculated as follows:

• The employee’s contribution is 11% of €2,000, which amounts to €220. This amount is deducted directly from the employee's salary.
• The employer’s contribution is 23.75% of €2,000, which totals €475. This amount is paid by the employer.
• Therefore, the total contribution for social security from both the employee and employer is €695.

Reporting Obligations for Businesses in Portugal

In Portugal, businesses have several reporting obligations to ensure compliance with national laws and regulations. Here are the key reporting deadlines:

Annual Declaration of Income and Deductions to Employees:

Employers must provide employees with a detailed statement of their annual income and deductions. This declaration helps employees prepare their personal income tax returns.

Deadline: By 20th January
Reference: Article 119 of the IRS Code (CIRS)

Statistical Report "Relatório Único":

This comprehensive report includes information on the company’s workforce, training activities, labour conditions, and other employment-related data. It is a crucial document for statistical and compliance purposes.

Deadline: By 15th April (the deadline may vary)

Holiday Booking Report:

These reporting obligations are essential for maintaining transparency and compliance with Portuguese labour and tax laws. It is important for businesses to adhere to these deadlines to avoid penalties and ensure smooth operations. For detailed guidance, businesses can get free advice from activpayroll's Tax and Global Mobility team - ask here.

Social Security Compliance and Reporting in Portugal

It is crucial for businesses to ensure that all social security contributions are accurately calculated and reported. Contributions must be submitted by the 10th of the following month, and payments must be made by the 20th to avoid any fines or interest charges. Maintaining detailed payroll records is essential for supporting the reported contributions and ensuring compliance with all regulatory requirements.

How to Submit and Pay Contributions in Portugal

Businesses can submit and pay their social security contributions online through the Portuguese Social Security website. This platform provides a convenient way to ensure timely submission and payment, helping businesses stay compliant with Portuguese laws.

For further information and detailed guidance, businesses can visit the Portuguese Social Security website. Ensuring compliance with these regulations is essential for avoiding penalties and ensuring smooth business operations within the legal framework of Portugal.

It is legally acceptable in Portugal to provide employees with online payslips. This practice is common and allows for efficient and accessible payroll management.

Employers must withhold social security contributions and income tax from employees’ salaries. These deductions must be calculated accurately according to the prevailing tax rates and social security laws.

Salary Payments

In Portugal, salaried employees receive 14 payments per year. These payments include the standard 12 monthly salaries plus two additional payments: one for vacation pay (the 13th payment) and one for Christmas pay (the 14th payment).

Example calculation:

• €50,000.00 / 14 = €3,571.43 per payment.

Payroll Reports in Portugal

In Portugal, employers are required to keep payroll reports for a minimum of five years. These records are essential for compliance with legal and tax obligations and must be readily available for inspection by authorities.

Portuguese Payslip Example

Hiring New Employees in Portugal

When hiring a new employee in Portugal, businesses must follow specific procedures to ensure compliance with local regulations.

Informing Social Security

In Portugal, employers must inform social security about the new hire between 24 hours and up to 15 days before the employee's start date. This notification is crucial for the proper registration and coverage of the employee under the Portuguese social security system.

Requirements for EU Citizens

For new employees who are citizens of European Union countries, the following documents are required:

• A copy of the working contract.
• A valid passport.
• A legal identification document from their home country (such as a DNI or Citizen Card).

These documents ensure that the employee is legally registered and authorized to work in Portugal.

Requirements for Non-EU Citizens

For new employees from countries outside the European Union, the process involves obtaining a work permit from their home country through the Portuguese Embassy or Consulate. The requirements and process are as follows:

• Working Permit Application: The employee must request the work permit in their home country at the Portuguese Embassy or Consulate.
• Required Documents: An original copy of the working contract.
• Accommodation: The company must provide accommodation for the first 30 days of the employee’s stay in Portugal.
• Work Permit Duration: The initial work permit is usually valid for 6 months. Subsequent permits are typically valid for 12 months.
• Work Commencement: The employee can only begin working in Portugal after obtaining the work visa permit.

By following these guidelines, businesses can ensure that they are compliant with Portuguese immigration and labour laws, thereby facilitating a smooth onboarding process for new employees.

For further details and specific guidance, businesses can consult the Portuguese Social Security website and the Portuguese Immigration and Borders Service (SEF).

When an employee leaves your company, it is important to follow the appropriate procedures to ensure compliance with Portuguese labour laws and to facilitate a smooth transition for the departing employee.

Final Payments

All payments due to the departing employee should be made on their last working day. In practice, some companies opt to process these payments on the last business day of the employee’s final working month. This includes any outstanding salary, unused holiday pay, and other entitlements.

Notifying Social Security

Employers in Portugal must notify social security of the employee's departure by the 10th of the month following the employee's last working day. This notification is crucial for updating the employee's social security status and ensuring accurate records.

Judicial Payments and Tax Authority Communication

If the departing employee has any judicial payments (such as garnishments) being retained from their salary, it is required to communicate the termination to the relevant court or tax authority. This ensures that all legal obligations are met and that the responsible authorities are informed of the change in the employee’s status.

By adhering to these guidelines, businesses can ensure they are compliant with Portuguese labour laws and facilitate a seamless departure process for their employees. For more detailed information and specific guidance, businesses can visit the Portuguese Social Security website.

Holiday Accrual and Calculations in Portugal

The amount of the vacation allowance in Portugal may vary depending on the Collective Agreement but must not be less than the employee’s current remuneration. The standard basis for this calculation is 22 days of annual leave.

The formula to calculate the vacation allowance is as follows:

Monthly Base Salary/22×Months Worked (up to 11)×2=Vacation Allowance Amount

Reference Remuneration

The sum of the employee’s fixed remuneration. If an employee is entitled to more than 22 vacation days, the vacation allowance equals the reference remuneration. For employees entitled to less than 22 days (e.g., newly hired employees), the vacation allowance will be proportional to the number of days worked.

For employees with a high variable component (e.g., sales commissions, shift allowances), the average of the variable component is added to the reference remuneration when calculating the vacation allowance.

Regulations (Art. 237-247 Código do Trabalho)

• Year of Admission: Two working days per month, up to a maximum of 20 days. Leave can only be taken after six months of work.
• Following Years: 22 working days annually. In the year following admission, a maximum of 30 working days can be taken. In the case of dismissal in the second year of seniority, it is pro rata, two working days per month.

Maternity Leave in Portugal

In Portugal, maternity leave is designed to provide significant support to new mothers, ensuring both financial stability and job protection.

Expectant mothers are entitled to begin their maternity leave up to 30 days before the expected due date. After the birth, they are entitled to 120 days of mandatory leave, which can be extended to 150 or 180 days if shared with the other parent.

During the initial 120 days, Social Security pays 100% of the reference salary. If the leave is extended to 150 days, the benefit is paid at 80% of the reference salary, unless the leave is shared between both parents, in which case the benefit remains at 100%. For an extension to 180 days, the leave is paid at 83% of the reference salary, provided it is shared between parents.

To qualify for maternity leave benefits, employees must have contributed to social security for at least six months.

Pregnant employees have the right to attend prenatal medical appointments without losing pay and are not required to work extra hours or night shifts from 112 days before to 112 days after the birth. Additionally, they are protected from dismissal without a justified cause, which must be reviewed by the Commission for Equality in Labour and Employment (CITE). High-risk pregnancies receive extra protections, including potential extended leave.

Employees must provide a medical certificate confirming the expected due date and complete the necessary social security forms to apply for maternity leave.

Paternity Leave in Portugal

Fathers in Portugal are entitled to 28 working days of mandatory paternity leave. This includes seven consecutive days immediately after the birth, with the remaining 21 days to be taken within the first six weeks. Additionally, fathers can take up to five optional working days alongside the mother’s maternity leave.

Paternity leave is paid at 100% of the reference salary by Social Security.

To be eligible for these benefits, fathers must have made social security contributions for at least six months.

During paternity leave, fathers are protected from dismissal and have the right to attend medical appointments related to the pregnancy.

To apply for paternity leave, fathers must inform their employer in writing, specifying the start date for their leave, and submit the required social security forms.

Shared Parental Leave in Portugal

Portugal also offers shared parental leave, providing an additional 30 days if both parents share the initial leave.

Shared leave can be taken in various configurations, such as one parent taking 30 consecutive days while the other works, or both parents taking 15 days together and then alternating.

During shared leave, parents receive 100% of the reference salary for up to 150 days. If extended to 180 days, the additional 30 days are paid at 83% of the reference salary. Parents can also extend their initial leave by up to three months immediately after the initial parental leave ends, with Social Security paying 25% of the reference salary during this period, which can increase to 40% if the leave is shared.

Both parents are protected from dismissal during any period of shared parental leave, ensuring job security.

To apply for shared parental leave, parents must notify their employer in writing, specifying the start and end dates of the leave, and submit the necessary social security forms, including medical certificates if applicable.

Sick Leave in Portugal

In Portugal, the system for handling sick leave is designed to support employees during periods of illness while ensuring that employers manage their workforce effectively.

Social Security begins covering an employee’s salary from the fourth day of sick leave onwards. The percentage paid by Social Security varies depending on the duration of the sick leave:

• For sick leaves lasting between 4 and 30 days, Social Security pays 55% of the reference salary.
• For sick leaves lasting between 31 and 90 days, the coverage increases to 60% of the reference salary.
• For sick leaves lasting between 91 and 365 days, Social Security covers 70% of the reference salary.
• For sick leaves extending beyond 365 days, the coverage can go up to 75% of the reference salary, provided the illness is considered serious and chronic.

Employer's Role: Employers have the option to pay for the first three days of sick leave as a benefit, although this is not mandatory. This provision allows employers to provide additional support to their employees during the initial phase of their illness. It is worth noting that the choice to pay for these initial days does not affect the Social Security coverage that begins on the fourth day.

Eligibility and Certification: To qualify for sick leave benefits, employees must have been employed and contributing to Social Security for a minimum of six months. The sick leave must be certified by a medical doctor, and the relevant documentation must be submitted to Social Security to process the benefit payments.

Protection and Job Security: Employees on sick leave are protected from dismissal. Employers are required to maintain the employee’s position during their absence, ensuring that the employee can return to their role once they are fit to work. This protection helps secure the employee’s job and provides peace of mind during recovery.

Employees must inform their employer as soon as possible about their inability to work due to illness. They must obtain a medical certificate confirming their condition and submit it to both their employer and Social Security. The certificate should detail the nature of the illness and the expected duration of the leave.

Employer Compliance

Employers must accurately record sick leave in their payroll systems and ensure that all necessary documentation is submitted to Social Security. Compliance with these regulations ensures that both the employer and the employee are protected and that the employee receives the benefits to which they are entitled.

Remote Working in Portugal

For remote working arrangements, employers must provide compensation of up to €1 per day, or €1.50 per day for employees under a collective bargaining agreement.

This compensation is exempt from social security and IRS.

In Portugal teleworking cannot be refused to workers who need to look after children up to three or eight years old, except for employees of companies with up to ten workers - in the case of single-parent families. Workers with children with disabilities, chronic illnesses or cancer who live with them are also entitled to teleworking, regardless of the child's age.

Victims of domestic violence are another exceptional situation. They can demand to be teleworker in cases where they have filed a complaint against the aggressor and have had to leave the house.

Non-primary informal caregivers, Workers who have been granted the status of informal non-main caregiver by Social Security may request teleworking for a maximum period of four years, consecutive or not.

National Service in Portugal

Portugal abolished compulsory military service in November 2004. Currently, military service in Portugal is voluntary

In 2024, the national minimum wage in Portugal is set at €820 per month.

This increase of €60 from the 2023 represents a 7.9% rise, the largest annual increase in Portugal's history. 

The standard working week in Portugal runs from Monday to Friday. Typical working hours for commercial offices are from 09:00 to 18:00, including a lunch break, which usually lasts between one to two hours.

Businesses may operate different hours depending on their industry and specific company policies.

For more detailed information, you can refer to the Portuguese Labour Code and other relevant resources.

There are multiple statutory and public holiday's in Portugal. Below are the statutory national and public holidays in Portugal for 2024.

Working Accident Insurance

It is mandatory for all companies in Portugal to have working accident insurance for their employees. The insurance amount varies depending on several factors, including the nature of the business, the number of employees, the specific functions of the employees, and their monthly remunerations. This insurance covers medical expenses and compensation related to workplace accidents, ensuring financial protection for both employees and employers.

Medicine at Work Service
Companies are required to provide a Medicine at Work service, which includes regular health checks and occupational health services. This can be organized internally by the company or outsourced to a provider. The annual cost of this service depends on similar variables as the working accident insurance, such as the business type, number of employees, and the nature of their work.

Lunch Allowance

Most companies in Portugal provide a lunch allowance to their employees. The tax-free limit for this allowance is up to €6.00 per working day. If the allowance is paid via a meal card, the tax-free limit increases to €9.60 per working day. This benefit helps employees with daily meal costs and offers a tax-efficient way for companies to provide additional compensation.

Annual Salary Payments

In Portugal, salaried employees receive 14 payments each year. This includes 12 monthly salary payments, a 13th payment which is vacation pay, and a 14th payment which is Christmas pay. These additional payments are designed to help employees manage expenses during holiday periods and vacation times.

Expense Management

Companies must maintain accurate records of all employee-related expenses to ensure compliance with tax regulations. Proper documentation and regular audits are essential to manage these benefits effectively. Expenses should be recorded in detail, including receipts and justifications for each transaction, to facilitate smooth processing and compliance with Portuguese tax laws.

Fringe Benefits

Fringe benefits in Portugal, while not mandatory, can be offered by employers as additional compensation. These can include meal allowances, transportation subsidies, and health insurance.

Health Care and Health Insurance

Portugal has a national health system, so providing private health insurance is not mandatory. However, many companies offer health insurance as a benefit to attract and retain employees.

Key Employment Tax and Employment Law Changes for 2024 in Portugal

Employment Tax Changes

End of the Non-Habitual Resident (NHR) Regime

The Non-Habitual Resident (NHR) regime, which provided tax advantages to new residents, ended on December 31, 2023. However, a new regime, often referred to as NHR 2.0, has been introduced for 2024. This new regime targets specific professions such as scientific research and higher education, providing a 20% flat tax rate on personal income and exemptions on certain foreign-sourced income.

Youth Personal Income Tax (IRS Jovem)

Changes to the IRS Jovem were implemented to support young workers. In the first year of work, young people will not pay any income tax. In the second year, they will pay tax on 25% of their income, 50% in the third and fourth years, and 75% in the fifth year. This measure aims to ease the financial burden on young workers entering the job market.

Employment Law Changes in Portugal

Minimum Wage Increase

The national minimum wage has been increased to €820 per month, representing a 7.9% rise. For the autonomous region of the Azores, the minimum wage is set at €861.

Social Security Contributions

Social security contribution rates remain unchanged for 2024: 11% for employees and 23.75% for employers.

Compensation for Termination

The calculation of maximum limits for compensation in cases of collective redundancy or elimination of job positions has been updated, reflecting changes aimed at providing fairer compensation to affected employees.

Traineeship Allowance

The minimum amount for the traineeship allowance has been adjusted, ensuring that trainees receive fair compensation during their training period.

Anti-Harassment Policies

Employers with seven or more employees are now required to adopt and implement an anti-harassment policy, in line with efforts to create safer and more inclusive workplaces.

Whistleblower Protections

The EU whistleblowing directive has been integrated into Portuguese law, requiring companies to establish reporting channels and procedures to protect employees who report corporate malpractice. Retaliation against whistleblowers is prohibited.

Gender, Ethnicity, and Disability Reporting

Companies must display information on employee rights regarding equality and non-discrimination. Additionally, they are required to maintain a database of recruitment procedures, report annually on the number of disabled employees, and assess pay gaps if notified by the Labour Inspection Authority.

Maternity and Paternity Leave Enhancements in Portugal

Maternity Leave

Mothers are entitled to 120 or 150 days of parental leave, which can be shared with the father. The leave is paid by Social Security, and the mother must take at least 42 consecutive days after childbirth. Additional leave is available in cases of multiple births or complications.

Paternity Leave

Fathers are entitled to 28 compulsory days of leave, with seven days immediately after childbirth. They also have the right to seven optional days. Paternity leave is paid by Social Security and can be taken intermittently within 42 days of the child's birth.

Flexible Working for Caregivers

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.