8 ms·

As I wrote elsewhere, paying into the social security in Portugal with a salary of 80.000 Euros means paying 88% in taxes and social security. Do you think tha

by quonn 3y ago

As I wrote elsewhere, paying into the social security in Portugal with a salary of 80.000 Euros means paying 88% in taxes and social security. Do you think that is reasonable? Additionally everyone I know has their own insurance and pays for all of their health bills. And that‘s only for urgent things, planned surgeries are usually done in the home country anyway.

reaperman 3y ago
88% being the marginal rate? I’m assuming if you’re paid €80,000 in a year you take home more than €9,600 The way you wrote this makes it sound like people only take home €9600 on €80000 and thats rather misleading.
- quonn 3y ago
  It‘s not misleading. You take home 9600 in my opinion. What you call the marginal rate is applied to the full salary as far as I know. And the social security is also applied to the full amount unless the person is employed by a Portuguese company that would pay half. Even the most optimistic tax accountants say around 70% minimum is to be paid with various options applied. That would leave 24.000. Portugal has many loopholes of course, but the idea of the article or OP was that these loopholes are not needed or unfair. While I‘m saying they are needed or otherwise nobody would go there. Now let me add that many nomads also have to pay into various things from their home countries. While there are double taxation agreements the story on health insurance and retirement funds and social security is much more complicated. Unless you cut all ties to home you can come out with even less.
  - cactusplant7374 3y ago
    Even with the double taxation treaty, wouldn't an American pay the difference in Portugal? That would be significantly more?
  - netsharc 3y ago
    3 words make your argument smell: "in my opinion". Are we talking facts or your opinion being represented as facts? So if it's facts, got sources?
    - quonn 3y ago
      Sure. I live there and talked to plenty of local accountants.
    - JetSpiegel 3y ago
      It's a bold face lie, just propaganda. Here's the table from the tax authority for 2022: https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/cirs_rep/Pages/irs68.aspx https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/c... The top marginal rate is 48% at 78834 €, so if you earn 80k€, that 48% is applied to 2k. Regular marginal tax rate stuff. Social Security is separate, just checked my own salary sheet and it's 11% for a regular employee. The employer pays the rest, if you are both employee and the employer you must pay both parts.
  - quonn 3y ago
    @cactusplant: Correct. With a double taxation agreement you always pay the higher tax of both countries. Usually you pay the lower one to one country and the remaining part to the other one. But it depends on the countries and details. So yes, it would be more but it would be doable. While the non-tax issues largely lack these agreements causing more problems.
  - lastdong 3y ago
    Employed by a portuguese company 80000€ / year is taxed average 42.8%, take home after tax: 45728€ This gives you a monthly pay after tax of 3811€ (way above average in the country, which unfortunately is really low)
    - quonn 3y ago
      Right. But as a nomad you cannot just give up your own health insurance and you cannot just stop paying into a foreign retirement fund yourself. Portugal won‘t allow you to deduce that, of course, and it‘s another 1500-2000 per month to subtract in case of private insurance for example. Leaving around < 2000 net. And as I said that‘s without the mandatory social security problem on foreign income.
      - somewhereoutth 3y ago
        Assuming you/your employer are paying social security contributions, then you can give up your own health insurance. People in Portugal tend to have private healthcare plans for everyday stuff, but they are insanely cheap. For urgent/serious things, the public system is effective enough. However you will need to contribute for at least 15 years before you qualify for a pension, and as you say there are no deductions for private pension plans, so you lose out there. I suspect you are being 'taken to the cleaners', but not necessarily deliberately by anyone.
        quonn 3y ago
        I think I have explained the typical situation a few times in this thread but I will try again. 1. Nomads are not employed by Portuguese companies. 2. They could give up their home health insurance, but then they cannot remain residents of their home countries where this is mandatory. And since nomads are nomadic they cannot leave Portugal. The insurance would usually only work there. 3. And the retirement fund is the far bigger chunk. In short, the laws of different countries do not align so the tax deductable things do not align either. This is exactly the reason why the Portuguese government has introduced these measures in the first place.
  - quonn 3y ago
    @lastdong Of course. By a portuguese company, you say it yourself. The company pays half of the social security. And 42% only sounds low because that‘s that final tax rate in this example after all deductions. Like in most countries that is often 5-7% lower than the nominal tax rate that we think about and compare.
  - p_l 3y ago
    I'd suggest you either check if you're not reading "post-tax income" as tax, or change the accountants. Even most miserable accounting doesn't get 70% on 80k annual salary.
- binarycrusader 3y ago
  I'm not sure I quite understand the structure, but it does look relatively high: https://en.wikipedia.org/wiki/Taxation_in_Portugal https://en.wikipedia.org/wiki/Taxation_in_Portugal The calculator here shows it's not anywhere near 88% though in most cases: https://investomatica.com/income-tax-calculator/portugal https://investomatica.com/income-tax-calculator/portugal Income Before Tax 80 000 € Income Tax - 25 472 € Solidarity Rate Tax 0 € Social Security - 8 800 € Total Tax - 34 272 € Take Home Pay 45 728 € Total Deductions - 8 800 € Average Tax Rate 42,8 % Disclaimer: of course this varies significantly based on freelancing, government employee status, etc.
  - quonn 3y ago
    Because the calculator does not really take into account the 35% social security if the money is paid by a foreign entity to the foreigner directly. @binarycrusader: I can‘t reply below. It‘s not 35% but 34,75%. It‘s easy to find that online and this rate is not depending on the person. A foreigner or nomad does by definition not have a Portuguese employer. They have to pay the employer part themselves. It‘s that simple. @binarycrusader: It‘s mentioned on countless sites related to the NHR and Golden Visa and all of these things. I talked this through with two Portuguese accountants. Is that enough?
    - deleted 3y ago
      [deleted]
    - binarycrusader 3y ago
      Sure, but the social security contributions and tax rates vary wildly based on who your employer is, etc. so it's misleading to claim it's 88% without specifying the specific conditions. Also, according to the WikiPedia page, none of the Social Security Contribution rates are exactly 35%. Would you care to share the exact conditions? I don't read this the same way: can you point to which "Social Security Regime" on the WikiPedia page you believe this falls under?
      - 3y ago
- deleted 3y ago
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somewhereoutth 3y ago
Nonsense. My gross might not be quite 80K, but my total tax burden including social security is about 33%. The healthcare system here is a mix of state provided urgent/serious care - to a high standard - and private but very cheap options for more mundane matters. Furthermore, that social security contribution buys into one of best defined benefit pension schemes still available anywhere.
- quonn 3y ago
  Do you have a Portuguese employer? If so this is not surprising at all. > Furthermore, that social security contribution buys into one of best defined benefit pension schemes still available anywhere. Ridiculous. It‘s not even close to being funded in the long term. It‘s one of the worst on the continent where all of them them some problems.
  - somewhereoutth 3y ago
    To my knowledge the Portuguese government has never failed its obligations to pensioners, why would it do so in the future? The economy is growing and this will all be backed by a stronger more integrated EU anyway. I'm happy to take that bet!
    - JetSpiegel 3y ago
      Same here, the system has been in place for ages and hasn't failed. Last I check it was fully funded until 2060 or so. During the IMF "bailout" pensions were reduced nominally. This was a political choice, and the party that did that will never win an election again as long as all those pensioners live.
seydor 3y ago
you 're probably applying the highest tax bracket to the whole amount, but that's not how it works
- quonn 3y ago
  Absolutely that is how it works in Portugal. You have a deductible that get‘s bigger but the tax is applied in full: https://taxsummaries.pwc.com/portugal/individual/taxes-on-personal-income https://taxsummaries.pwc.com/portugal/individual/taxes-on-pe... More importantly the social security is applied in full as well and it‘s 11% for the employee and 23% for the employer and if there is no Portuguese employer it‘s 34% on top of the regular taxes. There are many options to work around this, all legal and there on purpose. I‘m not denying that. My point is only that these options are necessary and fair.
  - deleted 3y ago
    [deleted]

by quonn 3y ago

reaperman 3y ago

88% being the marginal rate? I’m assuming if you’re paid €80,000 in a year you take home more than €9,600 The way you wrote this makes it sound like people only take home €9600 on €80000 and thats rather misleading.

quonn 3y ago
It‘s not misleading. You take home 9600 in my opinion. What you call the marginal rate is applied to the full salary as far as I know. And the social security is also applied to the full amount unless the person is employed by a Portuguese company that would pay half. Even the most optimistic tax accountants say around 70% minimum is to be paid with various options applied. That would leave 24.000. Portugal has many loopholes of course, but the idea of the article or OP was that these loopholes are not needed or unfair. While I‘m saying they are needed or otherwise nobody would go there. Now let me add that many nomads also have to pay into various things from their home countries. While there are double taxation agreements the story on health insurance and retirement funds and social security is much more complicated. Unless you cut all ties to home you can come out with even less.
- cactusplant7374 3y ago
  Even with the double taxation treaty, wouldn't an American pay the difference in Portugal? That would be significantly more?
- netsharc 3y ago
  3 words make your argument smell: "in my opinion". Are we talking facts or your opinion being represented as facts? So if it's facts, got sources?
  - quonn 3y ago
    Sure. I live there and talked to plenty of local accountants.
  - JetSpiegel 3y ago
    It's a bold face lie, just propaganda. Here's the table from the tax authority for 2022: https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/cirs_rep/Pages/irs68.aspx https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/c... The top marginal rate is 48% at 78834 €, so if you earn 80k€, that 48% is applied to 2k. Regular marginal tax rate stuff. Social Security is separate, just checked my own salary sheet and it's 11% for a regular employee. The employer pays the rest, if you are both employee and the employer you must pay both parts.
- quonn 3y ago
  @cactusplant: Correct. With a double taxation agreement you always pay the higher tax of both countries. Usually you pay the lower one to one country and the remaining part to the other one. But it depends on the countries and details. So yes, it would be more but it would be doable. While the non-tax issues largely lack these agreements causing more problems.
- lastdong 3y ago
  Employed by a portuguese company 80000€ / year is taxed average 42.8%, take home after tax: 45728€ This gives you a monthly pay after tax of 3811€ (way above average in the country, which unfortunately is really low)
  - quonn 3y ago
    Right. But as a nomad you cannot just give up your own health insurance and you cannot just stop paying into a foreign retirement fund yourself. Portugal won‘t allow you to deduce that, of course, and it‘s another 1500-2000 per month to subtract in case of private insurance for example. Leaving around < 2000 net. And as I said that‘s without the mandatory social security problem on foreign income.
    - somewhereoutth 3y ago
      Assuming you/your employer are paying social security contributions, then you can give up your own health insurance. People in Portugal tend to have private healthcare plans for everyday stuff, but they are insanely cheap. For urgent/serious things, the public system is effective enough. However you will need to contribute for at least 15 years before you qualify for a pension, and as you say there are no deductions for private pension plans, so you lose out there. I suspect you are being 'taken to the cleaners', but not necessarily deliberately by anyone.
      - quonn 3y ago
        I think I have explained the typical situation a few times in this thread but I will try again. 1. Nomads are not employed by Portuguese companies. 2. They could give up their home health insurance, but then they cannot remain residents of their home countries where this is mandatory. And since nomads are nomadic they cannot leave Portugal. The insurance would usually only work there. 3. And the retirement fund is the far bigger chunk. In short, the laws of different countries do not align so the tax deductable things do not align either. This is exactly the reason why the Portuguese government has introduced these measures in the first place.
- quonn 3y ago
  @lastdong Of course. By a portuguese company, you say it yourself. The company pays half of the social security. And 42% only sounds low because that‘s that final tax rate in this example after all deductions. Like in most countries that is often 5-7% lower than the nominal tax rate that we think about and compare.
- p_l 3y ago
  I'd suggest you either check if you're not reading "post-tax income" as tax, or change the accountants. Even most miserable accounting doesn't get 70% on 80k annual salary.
binarycrusader 3y ago
I'm not sure I quite understand the structure, but it does look relatively high: https://en.wikipedia.org/wiki/Taxation_in_Portugal https://en.wikipedia.org/wiki/Taxation_in_Portugal The calculator here shows it's not anywhere near 88% though in most cases: https://investomatica.com/income-tax-calculator/portugal https://investomatica.com/income-tax-calculator/portugal Income Before Tax 80 000 € Income Tax - 25 472 € Solidarity Rate Tax 0 € Social Security - 8 800 € Total Tax - 34 272 € Take Home Pay 45 728 € Total Deductions - 8 800 € Average Tax Rate 42,8 % Disclaimer: of course this varies significantly based on freelancing, government employee status, etc.
- quonn 3y ago
  Because the calculator does not really take into account the 35% social security if the money is paid by a foreign entity to the foreigner directly. @binarycrusader: I can‘t reply below. It‘s not 35% but 34,75%. It‘s easy to find that online and this rate is not depending on the person. A foreigner or nomad does by definition not have a Portuguese employer. They have to pay the employer part themselves. It‘s that simple. @binarycrusader: It‘s mentioned on countless sites related to the NHR and Golden Visa and all of these things. I talked this through with two Portuguese accountants. Is that enough?
  - deleted 3y ago
    [deleted]
  - binarycrusader 3y ago
    Sure, but the social security contributions and tax rates vary wildly based on who your employer is, etc. so it's misleading to claim it's 88% without specifying the specific conditions. Also, according to the WikiPedia page, none of the Social Security Contribution rates are exactly 35%. Would you care to share the exact conditions? I don't read this the same way: can you point to which "Social Security Regime" on the WikiPedia page you believe this falls under?
    - 3y ago
deleted 3y ago
[deleted]

somewhereoutth 3y ago

Nonsense. My gross might not be quite 80K, but my total tax burden including social security is about 33%. The healthcare system here is a mix of state provided urgent/serious care - to a high standard - and private but very cheap options for more mundane matters. Furthermore, that social security contribution buys into one of best defined benefit pension schemes still available anywhere.

quonn 3y ago
Do you have a Portuguese employer? If so this is not surprising at all. > Furthermore, that social security contribution buys into one of best defined benefit pension schemes still available anywhere. Ridiculous. It‘s not even close to being funded in the long term. It‘s one of the worst on the continent where all of them them some problems.
- somewhereoutth 3y ago
  To my knowledge the Portuguese government has never failed its obligations to pensioners, why would it do so in the future? The economy is growing and this will all be backed by a stronger more integrated EU anyway. I'm happy to take that bet!
  - JetSpiegel 3y ago
    Same here, the system has been in place for ages and hasn't failed. Last I check it was fully funded until 2060 or so. During the IMF "bailout" pensions were reduced nominally. This was a political choice, and the party that did that will never win an election again as long as all those pensioners live.

seydor 3y ago

you 're probably applying the highest tax bracket to the whole amount, but that's not how it works

quonn 3y ago
Absolutely that is how it works in Portugal. You have a deductible that get‘s bigger but the tax is applied in full: https://taxsummaries.pwc.com/portugal/individual/taxes-on-personal-income https://taxsummaries.pwc.com/portugal/individual/taxes-on-pe... More importantly the social security is applied in full as well and it‘s 11% for the employee and 23% for the employer and if there is no Portuguese employer it‘s 34% on top of the regular taxes. There are many options to work around this, all legal and there on purpose. I‘m not denying that. My point is only that these options are necessary and fair.
- deleted 3y ago
  [deleted]