Social Security in Portugal
Social Security in Portugal
The Portuguese Social Security program provides benefits paid by contributions by the employer and employee, by the self-employed, and in specific cases by those that wish to enroll in the system.
When moving to Portugal, an expat should be aware of the types of benefits he/she is entitled to and its obligations as an employee or self-employed individual.
There are three aspects a new expat should take into consideration before moving to Portugal.
Social Security contributions are usually collected from workers based on their earnings. Social Security is withheld at 11% on the employee’s salary and the employer contributes an additional 23,75%. Employers are also required to report to the Social Security Authorities the hiring of any new worker and enrollment into the system is compulsory.
Social Security pensions are assessed based on past contributions and paid to retired or disabled workers. Benefits include pensions due to old age, long-term sickness or chronic illness, maternity leave, unemployment benefits and healthcare.
Social Security benefits are available to:
- a) Portuguese nationals;
- b) European Union nationals;
- c) Resident individuals holding a visa or residence permit and their spouses and/or dependent relatives.
Last, specific Social Security benefits such as pensions are liable to Personal Income Tax. Nevertheless, specific benefits may apply for non-habitual tax residents.
The global worker
A worker that is assigned to several countries may spend significant amounts of time working in more than one country. Thus, he/she may be required to contribute to the Social Security systems of more than one country during his/her career.
This may lead to a shocking issue. At retirement age, a worker may not be entitled to a pension, since in some cases he/she must and cannot satisfy the benefits-eligibility requirements in each country.
In the absence of a Social Security Treaty, one jurisdiction may not take into account amounts contributed to foreign systems.
This is where totalization and coordination are key. Only Social Security Treaties or EU provisions allow for coordination and totalization.
Coordination ensures that a salary or wage is liable to contributions only where the work is performed during a secondment.
Totalization makes sure a worker’s worldwide contributions are considered by each State in order to trigger the payment of benefits such as pensions. Portugal has entered several Social Security Treaties.
A European Union scheme is in place to coordinate and totalize contributions within the Union.
Finally, several Double Taxation Treaties were signed by the Portuguese State to avoid double income taxation of salaries and pensions.
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