my basket
Cart is currently empty
Total
Proposta de Lei do Orçamento do Estado para 2023 0
20 outubro 2022

State Budget Law Proposal for 2023

The Government presented on the 10th of October the State Budget Law Proposal for 2023 ("State Budget Law Proposal") in the Portuguese Parliament.

 

This State Budget Law Proposal was drafted against a background of war in Ukraine, the rise in interest rates, inflation and the consequent loss of purchasing power of the Portuguese, as well as the fear of a worldwide economic recession and according to the Executive intends to reinforce labour income, stimulate investment and maintain balanced the public accounts.

 

With regards to the main tax measures included in the State Budget Law Proposal, it is important to note that the focus will be on direct taxes in 2023, namely Corporate Income Tax and Personal Income Tax and not so much on indirect taxes such as VAT and excise duties.

 

Given the above, the main tax measures foreseen in the State Budget Law Proposal are highlighted below.

 

 

A. PIT

 

The tax regime applicable to income earned by young workers aged between 18 and 26 (non-dependent) will be strengthen by the increase of the limits and percentages of the partial exemption, as follows:

 

  • 50% in the 1st year (currently 30%), capped at 12,5* Social Support Index (“IAS”) (currently 7,5);
  • 40% in the 2nd year (currently 30%), capped at 10*IAS (currently 7,5);
  • 30% in the 3rd and 4th years (currently 20%), capped at 7.5*IAS (currently 5);
  • 20% in the 5th year, capped at 5*IAS (currently 2.5).

 

PIT rates table

 

The State Budget Law Proposal proposes to introduce an amendment to the general PIT rates table. In this context, it is proposed to update the limits of each taxable income bracket by 5.1%, as follows:

 

Taxable income (€) Rate Portion to be deducted (€)
Up to 7,479 14,5% 0,00
More than 7,479 up to 11,284 21,0% 486,14
More than 11,284 up to 15,992 26,5% 1.106,73
More than 15,992 up to 20,700 28,5% 1.426,65
More than 20,700 up to 26,355 35,0% 2.772,14
More than 26,355 up to 38,632 37,0% 3.299,12
More than 38,632 up to 50,483 43,5% 5.810,25
More than 50,483 up to 78,834 45,0% 6.567,33
More than 78,834 48,0% 8.932,68

 

The marginal rate of the second PIT bracket will also be reduced from 23% to 21%.

 

Deductions to the taxable income – Dependents aged between 4 and 6 years in families with two or more children

 

In case of families with two or more children, the deduction to the taxable income of the second and subsequent dependents who have not exceeded the age of 6 years by 31 December of the year to which the tax relates is increased to € 300 (or € 150, in the case of joint custody), regardless of the age of the first dependent.

 

Subsistence level

 

An amendment to the method of assessment of the subsistence level is being proposed, for those whose gross income is predominantly derived from employment, business and professional activities and pensions, which will consist of a deduction from taxable income (e.g., gross income). It should be noted that under the previous regime, the subsistence level amount was assessed through a minimum amount of the guaranteed net income.

It is also important to note that there will be two transitory regimes, one for 2022 and the other for 2023.

 

Withholding tax

 

A reduction of the withholding tax rate applicable to the remuneration for overtime work from the 101st hour (inclusive) by 50% is being proposed.

In addition, the withholding tax exemption will be extended to employment and business and professional income derived in the Portuguese territory by non-residents to the first 50 hours of overtime work.

 

Withholding tax - Taxpayers with mortgage credits

 

A special withholding tax regime is being proposed for taxpayers with mortgages on their own permanent residence and who earn a monthly remuneration that does not exceed €2,700, which consists of applying the withholding tax rate of the tax bracket immediately below the one that would normally apply to the employment income.

For purposes of the application of this special withholding tax regime, the taxpayer must inform the entity responsible for the payment of the income its option for the reduced rate, at a time before it is paid or made available.

 

Taxation of renewable energy production

 

An incentive to produce renewable energy will be created, which will, up to a limit of € 1,000 per year, exclude the annual income resulting from the sale of surplus energy produced for self-consumption or in small production units from taxation.

 

Taxation of crypto-assets

 

A taxation regime on gains and income from crypto-assets will be created, which will distinguish between (i) professional and business income taxed under Category B, i.e., income from operations related to the issue and trading of crypto assets, and (ii) capital gains taxed under Category G and liable to 28% rate, i.e. gains resulting from investment operations of disposal of crypto assets which do not constitute securities.

In case of a capital gain, a tax exemption is being proposed for gains resulting from the disposal of crypto assets that have been held for a period of 365 days or more. Note that for purposes of the assessment of this period, the holding period of the crypto assets acquired before 1 January 2023 will also be considered.

 

B. Social Security

 

Ancillary obligations

 

It is being proposed that the communication of the admission of employees to the Social Security authorities is carried out within 15 days prior to the start of the employment contract.

In addition, an amendment of the deadlines for compliance with ancillary obligations and payment to Social Security authorities, which run or end in August, is being proposed, as follows:

 

  • The obligations associated to the legal relationship of contribution and payment of Social Security debts, whose deadline expires during the month of August, may now be complied until the last day of said month, regardless of being a business day;
  • The deadline for the filling of the remuneration form is extended to the 25th day of said month;
  • The deadlines for inspection procedures resulting from the application of the contributory regimes of the Social Security welfare system will be suspended during the month of August.

 

C. CIT

 

Carry forward

 

The time limitation for the deduction of tax losses assessed in a given tax period (currently set at 5 years) is being eliminated. The State Budget Law Proposal also establishes that the deduction to be made in each tax period is reduced from 70% to 65% of the respective taxable income. In this regard, it should be noted that a 10 percentage points increase in the limit for the deduction to taxable income will be maintained for tax losses assessed in the 2020 and 2021 tax periods.

 

Tax losses

 

The filling of an application to the Tax Authorities requesting authorisation to ensure the maintenance of tax losses in cases of change in ownership of more than 50% of the share capital or majority voting rights will no longer be required. In this context, the deduction of tax losses will only not be possible if the main objective of the operation or one of its main objectives was tax evasion, which may be considered in cases where the operation was not carried out for valid economic reasons.

 

CIT rate

 

The amount to which the reduced CIT rate (17%) will be applied will be increased from € 25,000 to € 50,000, to enable small mid-cap companies (Small Mid Cap) to benefit from this reduced CIT rate.

A transitional regime for the application of the reduced CIT rate is also being provided for the cases where, by virtue of a merger, demerger, asset contribution and exchange of shares, carried out between entities previously qualified as SMEs or Small Mid Cap in the period ranging between 1 January 2023 and 31 December 2026, the beneficiary company no longer meets the conditions for that qualification.

 

Autonomous tax rate

 

The expenses with electric vehicles will be subject to autonomous taxation at a rate of 10%, whenever the acquisition cost exceeds € 62,500 (currently these expenses are not subject to autonomous taxation). In addition, the autonomous tax rates applicable to expenses with plug-in hybrid and CNG-powered passenger light vehicles will be reduced, as follows:

  • 5%, in the case of vehicles with an acquisition cost of less than € 27,500;
  • 5%, in the case of vehicles with an acquisition cost of € 27,500 or more and less than € 35,000; and,
  • 15% in the case of vehicles with an acquisition cost of €35,000 or more.

 

Finally, the 10 p.p. increase in the autonomous tax rate applicable to entities that assess tax losses will not apply in the 2022 and 2023 tax periods, provided that:

  • the taxpayer has obtained taxable profit in one of the three previous tax periods;
  • compliance with the obligations to file Form 22 and the IES, regarding the two previous tax periods, in an timely manner;
  • these correspond to the tax period of beginning of activity or to one of the two following periods.

 

Support for costs incurred with electricity and gas

 

 

Costs and losses related to electricity and natural gas consumption incurred or borne by resident CIT taxpayers whose main activity is of a commercial, industrial or agricultural nature, non-resident CIT taxpayers with PE and PIT taxpayers with organised accounts (Category B) may be increased by 20% of their amount when assessing the 2022 taxable income, in the part that exceeds those of the previous tax period, less any support received.

The aforementioned increase will correspond to 40% if the expenses are related to the purchase of certain goods used in agricultural production activities (fertilisers, meal, cereals and seeds, irrigation water, among others).

 

D. STAMP TAX

 

Taxation of crypto assets

 

Commissions and consideration charged by or through crypto assets services providers will now be subject to Stamp Tax at a rate of 4% when the provider or client is domiciled in Portugal.

It is also established that the intermediary in Portugal will be responsible for the tax assessment in cases where the service provider is outside Portugal. In case there is no intermediary, the person responsible for paying the tax will be a representative appointed by the service provider.

It is also provided that gratuitous transfers of crypto-assets will now be subject to Stamp Tax, at a rate of 10%, when the crypto-assets are deposited in institutions with registered office, effective management or EE in Portugal.

Finally, it is foreseen that Stamp Tax will be due on the gratuitous transfer of non-deposited crypto assets, when the transferor or the beneficiary (in the case of the remaining gratuitous transfers) is domiciled in national territory.

 

Consumer credit

 

The 50% increase in Stamp Tax rates applicable to the granting of consumer credit will cease to apply.

 

E. EXCISE DUTIES

 

Tax on Petroleum Products (ISP)

 

A partial reimbursement of ISP borne by goods transport and public passenger transport companies for business diesel and business gas when fuelled by duly licensed vehicles and used exclusively for such activities is being proposed.

An increase in the tax rates of various petroleum and energy products (fuel oil, gas, diesel, etc.) used in the production of electricity, electricity and heat (cogeneration) and city gas is also envisaged, both in terms of ISP and in terms of the addition of CO2 (increase from 75% to 100% in the rate of the addition on CO2 emissions).

 

Tax on alcohol, alcoholic drinks and drinks containing sugar or other sweeteners (IABA)

 

A general increase of the rates for beer, sugar-added non-alcoholic beverages, spirits and other fermented, still and sparkling beverages by 4% is being foreseen.

 

Tobacco Tax

 

A general increase in the rates applicable to all types of tobacco is expected, which will vary between 4% and 9% compared to the rates currently in force.

 

F. VEHICLE TAX

 

An across-the-board 4% increase in Vehicle Tax rates is proposed for both the cylinder capacity component and the environmental component.

 

G. SINGLE CIRCULATION TAX (IUC)

 

The IUC rates are expected to increase by 4% in general.

The additional IUC applicable to diesel vehicles in Categories A and B will be maintained for 2023.

 

H. MUNICIPAL TAX ON THE TRANSFER OF REAL ESTATE PROPERTY (IMT)

 

Cripto assets

 

In cases where real estate transactions are carried out for exchange of crypto assets, the assessment of the transaction or contract amount, for IMT purposes, should take into consideration the taxable value of the crypto assets ascertained under the Stamp Tax Code.

 

Transfer of an urban property or autonomous fraction of an urban property for permanent residence purposes

 

The brackets used for the determination of the applicable IMT rate to the transfer of an urban building or autonomous fraction of an urban building exclusively for permanent residence purposes will be updated in around 4%.

In cases where the acquisition of an urban building or autonomous fraction of an urban building for permanent residence, IMT will only be due if the value on which the tax is levied is greater than € 97,064.

 

I. TAX BENEFITS

 

CIT – Net job creation

 

A tax incentive for the net creation of jobs is being proposed, which will allow entities to increase the expenses incurred with the hiring of residents in inland territories, by way of fixed remuneration and social security contributions by 20%.

 

CIT – Wage valuation

 

For purposes of assessing the taxable income for CIT and PIT taxpayers with organised accounts, a tax incentive is being created in the context of wage valuation, according to which, in certain situations, it will be possible to increase by 50% the costs borne with the salary increase of employees with an open-ended employment contract, as assessed by a dynamic collective work regulation instrument.

 

CIT – Capitalisation of companies

 

The creation of the Tax Incentive Regime for the Capitalisation of Companies is proposed, which provides for a deduction of an amount corresponding to the application of a rate of 4.5% to the amount of net increases in eligible shareholders' equity, from the taxable profit of commercial companies or civil companies under commercial form, cooperatives, public companies, and other corporate bodies governed by public or private law with their registered office or effective management in Portuguese territory.

The aforementioned deduction will take place in the tax period in which the increases occur, as well as in the following nine tax periods and cannot exceed the higher of the following limits:

 

a) € 2,000,000; or,

b) 30% of the profit before depreciations, amortizations, net financial costs net of taxes, in accordance with article 67 of the CIT Code.

 

The part of the deduction that exceeds the limit provided for in paragraph (b) shall be deductible in the assessment of the taxable profit of one or more of the subsequent five tax periods, after the deduction in respect of that period, with the limits identified above.

 

J. OTHERS

 

Debt to Social Security authorities

 

The State Budget Law Proposal foresees the inclusion and consequent disclosure of Social Security debtors whose tax situation is not regularised.

 

Deferral and suspension of deadlines

 

The postponement and suspension of deadlines in respect of acts to be carried out in administrative offence proceedings, which are underway at the Social Security authorities and which end during the month of August are expected to be postponed to the first working day of September.

 

Contributions

 

The following extraordinary contributions are proposed to be maintained:

 

  • Contribution to the audiovisual sector;
  • Contribution on the banking sector;
  • Additional solidarity levy on the banking sector
  • Contribution on the pharmaceutical industry;
  • Extraordinary contribution on the suppliers of medical devices industry of the National Health Service;
  • Extraordinary contribution on the energy sector (CESE).

 

 

Additionally, it is established that the Government will regulate, by decree-law, the regime of the extraordinary contribution for the conservation of forest resources.

 

António Vicente Marques – Sociedade de Advogados, RL

Lisbon, 20 October de 2022

Share this article on social media