Portugal's tax rates for individuals is progressive and ranged from 10.5% - 42% in 2008. Exemptions are granted to taxpayers with certain types of income.

The 2008 standard rate of tax for a corporation in Portugal was 25% , and with the addition of a local tax of up to 1.5% , 26.5% in total. The standard corporate tax in the country in 2008 was 25% with the addition of up to 1.5% municipal tax making a total of 26.5%. Companies in the free trade zone of Azores and Madeira are eligible for a reduced tax rate depending on the type of company and the year in which the company was set up in the free trade zone.

An individual in Portugal is liable for tax on his income as an employee and on income as a self-employed person. In the case of an individual who qualifies for a "permanent resident" of Portugal, tax will be calculated on his income earned in Portugal and overseas. A foreign resident working in Portugal however will only be taxed on his income earned in Portugal. To be considered a Portuguese resident, tthe person must reside in Portugal for at least 183 days in a year. If the individual has a home in Portugal that is his main residence, he will be considered a Portuguese resident.

The tax year in Portugal is the year ending on December 31st. It is common for three advance payments to be made in the previous year in the months of July, September and December. A fourth advance payment of 1% of the turnover must be made by the date of filing the report. Individuals and companies need to file financial statements by April 30th and May 31st respectively.