From October, only salaries and pensions below €870 to be exempt from tax
Portugal’s new AD government has put its money where its mouth is with regard to income tax (IRS). The new tables have already been published on the ‘finanças’ website – and show that reductions mean that in August and September ‘practically everyone gains’. People on salaries below €1,136 and on pensions below €1,116 will not have to pay any income tax at all.
This all changes in October, when those exempt from tax ‘return’ to being only people on the minimum wage/ pensions below the minimum wage.
But for the next two months, for an unmarried person, or a married couple without children, monthly salaries of up to €1,136 will be exempt from IRS, while married couples with children, or who do their tax returns separately, will not have to pay on salaries of up to €1,081.
Once October comes round and everyone starts paying again, IRS will be reducing in almost every category (there are eight categories going from €8,059 per year, to €83,696).
As an example, in the third category (covering earnings from €12,160 to €17,233), IRS will be charged at 15.982% instead of the previous 21.5%. In the eighth category (covering earnings from €44,987 a year to €83,696) IRS will be levied at 34.929%, a reduction from the previous 44.60%.
Pensioners particularly will come off well with these changes, as in August they are also set to receive an ‘extraordinary supplement’ of €200.
These are all down to changes that the government promised during the election campaign, designed to give citizens ‘additional spending power’ (if only with regards to perception). In reality, people are not saving ‘massively’: we are talking of savings in low single figures, albeit the cost to the state will be around €500 million.
Employers should apply the new rates to August salaries, with the government order coming into force on the 1st of August. But if they fail to do so, they will be able to ‘rectify the situation in deductions made in the following months’ until December, according to the government’s dispatch.
As Cláudia Reis Duarte, secretary of state for fiscal affairs, has explained, there are basically three distinct income tax tables for this year: the first which runs up until July 31; a second which will ‘retroact to January’ the effects of the reductions approved in the middle of the year – and a third that will put the new IRS tables into effect from October onwards.
Source material: Correio da Manhã/ Rádio Renascença
