Severance payments made to management

A proposal for a new tax regime applicable to severance payments made to management and supervisory board members resident for tax purposes in Portugal has been submitted for approval of the Parliament.

We highlight the following aspects of that proposal:

• Payments made as a result of cessation of functions or termination of the labour contract before it expires will be fully subject to income tax.
• Autonomous corporate income tax, at the rate of 35%, will be due on the referred severance payments, unless they result from productivity goals established in a previous agreement.

In addition, a payment due for cessation of employment by mutual agreement may become subject to Social Security contributions if the individual is entitled to the state unemployment subsidy.