Portugal Accounting - Our Services
Payroll in Portugal
At Portugal Accounting, we make it easier for both local and international clients to set up and incorporate companies in Portugal. Our end-to-end services cover all key steps, from gathering the necessary documentation to securing the official company registration certificate.
Pay your team in Portugal
Establishing payroll operations in Portugal is simple with our expert support. We ensure a fast and efficient setup process for your team while taking full responsibility for compliance with all local regulations—freeing you from administrative burdens.
Portugal’s strategic location within the European Union, along with its proximity to key EU markets, makes it an ideal destination for international companies seeking to expand their remote workforce. The country offers a rich talent pool, particularly in the fields of engineering and business, making it a highly attractive option for global recruitment.
Setting up payroll in Portugal
Before payroll processing can begin in Portugal, employers must complete a series of mandatory registrations with the appropriate government authorities, including:
- Inland Revenue Department (IRD): Registration to obtain an employer tax identification number
- Tax Office: Registration for tax obligations
- Social Security: Employer registration for social security contributions
- Compensation Funds: Registration with applicable compensation and guarantee funds
Employee Registration Requirements:
- Social Security Registration: New employees must be registered with Social Security at least 24 hours prior to the commencement of their employment contract. This registration must be completed online.
- Workplace Accident Insurance: Employers are legally required to obtain workplace accident insurance to ensure coverage for employees in the event of a work-related injury.
- Payment Regulations: While employee salaries can be paid from a foreign bank account, all tax-related payments must be made through a Portuguese bank account to comply with local regulations.
Employment Benefits in Portugal
Employees in Portugal are entitled to a range of statutory benefits, which include:
- Christmas Bonus: An additional monthly salary, to be paid no later than December 15th each year.
- Holiday Bonus: An extra salary paid prior to the employee’s annual leave period.
- Annual Leave and Public Holidays: 22 working days of paid annual leave, in addition to 13 public holidays.
- Maternity Leave: 120 or 150 consecutive days, depending on the chosen leave plan.
- Paternity Leave: 28 consecutive mandatory days of paid leave.
- Marriage Leave: 15 consecutive days of paid leave.
- Sick Leave: A three-day waiting period applies before Social Security begins paying sickness benefits, which can be granted for up to 1,095 days. Benefit rates vary between 55% and 100%, depending on the duration and conditions of the leave.
Payroll Requirements in Portugal
- Monthly Payroll Processing: Payroll must be processed on a monthly basis.
- Timely Salary Payments: Employee salaries must be paid no later than the last calendar day of each month.
- Payslip Issuance: It is mandatory to provide employees with a payslip at the end of each pay period. Payslips may be issued either in paper format or electronically.
- Payslip Details: Payslips must clearly outline all components of the employee’s remuneration, including gross salary, bonuses, and any deductions for taxes and social security contributions.
Income tax and social security in Portugal
Tax withholding and reporting:
- Employers are required to withhold personal income tax (IRS) from employee salaries on a monthly basis and remit the withheld amounts to the Portuguese Tax Authority no later than the 20th of the following month.
- A monthly income declaration, known as the Declaração Mensal de Remunerações (DMR), must be submitted online by the 10th of the following month to report these withholdings.
- Additionally, employers must prepare an annual income tax declaration, detailing the total amount of tax withheld and remitted throughout the year. This declaration is due by 20 January.
- The Portuguese tax year runs from 1 January to 31 December. Employees are individually responsible for submitting their personal tax return by 30 June.
Social security contributions:
- Social security contributions are also processed monthly. Employees contribute 11% of their gross salary, while employers contribute an additional 23.75%.
- These contributions cover a range of benefits including pensions, unemployment, family, and sickness support.
- Employers must withhold the employee’s share and submit both their own and the employee’s contributions to Social Security by the 20th of the following month.
- A separate Social Security DMR must be submitted by the 10th of the following month, also electronically.
- Employers must also file an annual social reporting statement (Relatório Único), which includes information on employee training, workplace safety measures, and other employment-related data. This report is typically due in April, with the exact date varying annually.