Portugal Payroll Explained: IRS, TSU and the 14 Payments

Each month the employer calculates gross pay, withholds IRS on the official table, deducts the employee’s 11% social security, adds its own 23.75% on top, issues a recibo de vencimento and then files and pays. The calculation is arithmetic. The compliance sits in the reporting that follows it, and in the fact that the two authorities involved, the Autoridade Tributária e Aduaneira and Segurança Social, keep separate deadlines and separate channels.

The gross figure includes more than base salary. Social security is charged on salary, on the holiday and Christmas subsidies and on commissions, and the meal allowance joins the contribution base to the extent it exceeds the exempt limit.

Two obligations run alongside the calculation and are easy to forget in a first payroll. Every employee must be covered by workplace accident insurance from their first day under Lei 98/2009, and every employer must organise occupational safety and health services under Lei 102/2009. Contributions to the FGCT compensation fund are suspended until 31 December 2026, so nothing is currently payable into it.

If none of this is work you want to own, it is the whole of what Employer of Record Portugal does: the employee sits on our Portuguese payroll, and the calculation, the payslip, the returns and the payments are ours to get right.

Because two statutory subsidies sit on top of twelve monthly salaries. The subsídio de Natal, the Christmas subsidy, is one month’s pay and is due by 15 December. The subsídio de férias, the holiday subsidy, matches base pay plus the payments tied to how the work is performed, and is paid before the holiday is taken unless the parties agree otherwise. Together they turn an annual salary into fourteen equal instalments in most contracts.

Both subsidies are pro rated rather than all-or-nothing. In the year of hire and the year the contract ends, the Christmas subsidy is proportional to the time worked, and the same applies during a suspension of the contract. An employee who joins in September does not receive a full month’s subsidy in December, and one who leaves in March takes a proportion of both subsidies with them.

Paying the subsidies in twelfths, known as duodécimos, is a common arrangement made by written agreement or under a collective agreement, and it spreads the two extra months across the year instead of paying them in lumps. The rules on how the tax is split in that case sit in the Código do IRS, and the position is worth confirming with your accountant before you set it up, because it changes the monthly withholding even though it does not change the annual total.

For budgeting, the practical point is that an advertised monthly salary in Portugal is usually not a twelfth of the annual cost. A salary quoted at €2,000 a month is €28,000 a year before employer contributions, not €24,000. Our post on the holiday and Christmas subsidies sets out when each one falls due.

IRS is withheld monthly under the tables approved by Despacho n.º 233-A/2026, which apply to employment income and pensions paid from 1 January 2026. There are seven tables for the mainland, and the Azores and Madeira have their own. Table I covers single taxpayers with no dependants, and married couples where both spouses have income. The formula is the same in every table: monthly pay multiplied by the marginal rate, less a fixed amount called the parcela a abater, less €21.43 for each dependant.

The tables start at zero. Monthly pay up to €920 attracts no withholding at all, which matches the national minimum wage. From there the rate climbs: pay up to €1,819 is withheld at 24.10% less €193.33, pay up to €3,305 at 38.36% less €487.66, and pay up to €5,547 at 39.69% less €531.62. The published tables carry the full set of rows.

Withholding is not the final tax. The annual assessment applies the 2026 bands, which run from 12.5% on taxable income up to €8,342 to 48% above €86,634, with a solidarity surcharge of 2.5% on taxable income between €80,000 and €250,000 and 5% above that. Employment income also carries a specific deduction, which for 2026 is €4,587.09, or the employee’s compulsory social security contributions where those are higher. Most employees therefore receive a refund or a bill when the return is assessed.

The subsidies are handled separately and this catches out imported payroll systems. Withholding on the holiday and Christmas subsidies is always calculated on its own and never added to the month’s salary, which stops a single payment pushing an employee into a much higher withholding row. Where a subsidy is paid in instalments, the proportional share of the tax is withheld from each payment.

It does not stop. The Taxa Social Única is charged at 23.75% on the employer and 11% on the employee, a combined 34.75%, and Portugal applies no upper contribution ceiling to employees. The rates run on the full gross however high the salary goes, which is the single biggest difference between budgeting a senior hire in Portugal and budgeting one in a country that caps its contribution base.

The employer withholds the employee’s 11% and pays it across together with its own share, so Segurança Social receives one payment covering both. The base is the same for each: salary, both subsidies, commissions and any meal allowance above the exempt limit.

Some rates differ from the general one. Non-profit employers pay 22.3% rather than 23.75%. Members of statutory bodies are charged at 20.3% for the entity and 9.3% for the member, although managers and administrators stay on 23.75% and 11%, with a minimum contribution base of one IAS, which is €537.13 in 2026. Employees with a recognised disability attract a reduced employer rate of 11.90%, and hiring someone who is long-term unemployed or seeking a first job can carry a temporary reduction on the employer rate.

One charge exists on paper and not in practice. An additional contribution of up to 2% on employers whose use of fixed-term contracts exceeds their sector average is provided for in the Código Contributivo, but the indicator it depends on was never regulated and it is not being collected in 2026. It belongs in a risk register, not a cost model. For a full build-up of what an employee costs, see our note on the cost of hiring in Portugal.

The subsídio de alimentação is paid per day actually worked and has two tax-free limits in 2026: €6.15 a day when it is paid in cash with the salary, and €10.46 a day when it is loaded onto a meal card. Anything above the applicable limit is treated like salary, so it attracts IRS withholding and enters the social security base for both the employer and the employee.

The gap between the two limits is the reason meal cards are so widely used. The card limit is derived from the minimum wage, at 70% of it divided by 22 days and multiplied by 1.70, and it tracks the public sector meal allowance, which was set for 2026 by Portaria n.º 51-B/2026/1 with effect from 1 January. Paying €10.46 a day on a card delivers more to the employee for the same employer outlay than paying the same amount in cash would.

The allowance is not required by the Código do Trabalho. It is nonetheless close to universal in Portuguese offers, and a collective agreement covering your sector may well make it compulsory and set the amount.

Two practical points follow for payroll. The allowance is paid on days worked, so it flexes with absence, holidays and part-time schedules rather than being a fixed monthly line. And because the exempt portion sits outside the contribution base, it has to be recorded separately on the payslip rather than being folded into gross pay.

Three dates govern the month after payment. The Declaração Mensal de Remunerações, which reports employment income and the IRS withheld from it, is filed with the Autoridade Tributária e Aduaneira by day 10. The IRS withheld is paid over by day 20 under article 98 of the Código do IRS. Social security contributions are paid by the 25th under the 2026 contribution cycle. Where a deadline lands on a weekend or holiday it moves to the next business day.

The social security side is mid-reform and the detail depends on the employer. Under the new cycle introduced by Decreto-Lei 127/2025, the monthly remuneration return is replaced by a declaration that Segurança Social pre-calculates and the employer confirms by day 20 of the following month, with silence treated as acceptance and August allowed until day 25. Contract changes go into the same monthly return, which is due by day 10. Employers with ten or more workers move onto the interoperability platform; those with fewer than ten may keep using Segurança Social Direta. Joining is voluntary during 2026 and compulsory from 1 January 2027.

Beyond the monthly cycle there are two annual filings worth diarising. Modelo 10 is due by 10 February and covers income not already reported through the DMR. The Relatório Único, reporting staff, pay, training and health and safety, has a legal window of 16 March to 15 April, although the 2025 report was pushed to 7 June 2026 in practice.

Take an employee on €70,000 a year, paid in fourteen equal instalments of €5,000. The assumptions matter: 2026 rules, resident on the mainland, single with no dependants, not using IRS Jovem or the IFICI regime, and with no meal allowance included. Change any one of those and the numbers move.

On the employer side, TSU at 23.75% on €70,000 is €16,625, giving a total employer cost of about €86,600 plus workplace accident insurance, which is priced by the insurer against the activity and claims record and has to be quoted rather than estimated.

On the employee side, the 11% contribution is €7,700 across the year, or €550 from each €5,000 payment. IRS withholding uses Table I at the €5,547 row, so 39.69% of €5,000 less €531.62 gives €1,452.88 withheld from each instalment, an effective withholding rate of about 29%. Net pay per instalment is therefore €2,997.12.

The annual assessment then trues it up. The specific deduction is the higher of €4,587.09 and the employee’s social security contributions, so €7,700 applies, leaving taxable income of €62,300. Tax on the 2026 bands is €19,344, and a €250 deduction for general family expenses, which assumes enough qualifying spending, brings the liability to about €19,094, roughly 27.3% of gross. No solidarity surcharge arises, because €62,300 is below the €80,000 threshold. Net pay works out at about €43,200 for the year on a final-liability basis, and because withholding across fourteen payments exceeded the liability, the employee can expect a refund of roughly €1,250.

Running that every month, on the right table and with the subsidies withheld separately, is routine for a Portuguese payroll. If you would rather compare providers than build it, our review of the best EOR providers in Portugal sets out what to ask for.