GENERAL
Tax rates in Portugal are scaled between 10.5% and 42% but exemptions are granted in certain cases

INCOME TAX - INDIVIDUALS
In Portugal an individual must pay tax on income earned as an employee and/or what he earns as a self-employed person. 
If he is a permanent resident (ie. living in Portugal for more than 183 days per annum), tax will be calculated on income earned both in Portugal and abroad.
A foreign resident (ie. living in Portugal for less than 183 days per annum) is liable for tax only on his income in Portugal.
Nevertheless if the individual has his main residence in Portugal, he will be considered a permanent resident.
As in other countries, an employer is obliged to deduct the amount of tax and national insurance due, from the salary of a worker each month. 
Tax payments are deducted from taxable income as detailed below. 

2007 Income Tax Rates for Individuals

Tax Rate	Income
10.5%	up to 4,544€
13%	4,545€ to 6,873€
23.5%	6,874€ to 17,043€
34%	17,044€ to 39,197€
36.5%	39,198€ to 56,807€
40%	56,808€ to 61,260€
42%	61,261€ and over

CORPORATION TAX

The Corporation tax rate in Portugal for 2007 is 25% ,with an added local municipal tax of 2.5%, thus making a total of  27.5%.
Individuals whose total annual turnover is less than 149,753€, can apply to pay a fixed tax  which is calculated according to the profit coefficients specified in the law.

CAPITAL GAINS

A capital gain earned by a company in Portugal is usually added to regular income of the individual.
In certain cases, on the proceeds on the sale of shares and real estate which were held in possession by a company for more than 1 year, only 50% of the profit is taxable. In this case also, exemption is granted if the proceeds are reinvested. 
Under certain conditions, if the profit made on selling one´s main residence is reinvested in the purchase of a new residence within the period defined in the law, the capital gain too is exempt of tax.
For individuals, no tax is liable on the profit made on the sale of shares in possession for more than 1 year. Alternatively the tax rate is 10%

(In calculating the capital gain derived from the sale of real estate, the purchase price is indexed by an official government coefficient to account for inflation)

TAX YEAR AND PROVISIONAL PAYMENTS

The tax year in Portugal ends on December 31.

Advance payments are required to be made by companies 3 times per annum, in July, September and December.
Another 1% of turnover must be paid by the date of the filing of the accounts. A scale of minimum and maximum amounts are set for this.

Individuals have to file their returns by April 30th and companies by May 31st

EMPLOYEE TAX

An employer is obliged to deduct tax and social security contributions from an employee.

Social Security Insurance covers pension, healthcare and unemployment.
The  employer's contribution is 23.75% of the salary.
The employee's contribution is 11% of the salary.