By Filomena Ramilo features@algarveresident.com
Filomena Ramilo is the Senior Manager of Moneris Granja.
There is no doubt that The Memorandum of Understanding on Specific Economic Policy Conditionality advised certain rules that our government did not accept or implement.
As soon as the 2012 State Budget is approved, we will understand which rules have not been accepted.
Here are some of Troika’s proposals:
For IRS:
• Introduction of a limit on deductions to lower levels and elimination of deductions to the highest levels.
• Introduction of a maximum limit in the deduction of medical expenses.
• Changes in deductions with permanent habitation expenses.
• Elimination of some deductions.
• Review of the impact rules about benefits in kind.
• Subsidies on unemployment, sickness, parental licence, maternity, etc., will be taxed.
• Convergence in the specific deduction between dependent work and pensions.
For Social Security:
• Unemployment benefits will last for a maximum of 18 months (and not 36 months as before).
• Unemployment benefits will not exceed €1,048 monthly.
• After six months, there will be a progressive reduction of at least 10% on the unemployment benefit.
• The minimum period of rebate for social security, to have access to unemployment benefits, is now 12 months.
• Self-employed workers with one company on a regular basis will have unemployment benefits.
• Reduction of retirement pensions that are over €1,500.
• Dismissals can be driven by failure to comply with the objectives determined by the employer.
• Reduction of compensation settlements for dismissal: 20 days for every working year (10 days paid by the employer and 10 days paid by a fund created by the workers), with a maximum of 12 months.
For IRC:
• Elimination of all reduced rates.
• Abolition of the IRC rate of 12.5% on earnings up to €12,500. The only income IRC rate applicable is 25%.
• The deduction of tax losses is limited to three years.
• Reduction of tax benefits for businesses located in the autonomous regions.
Tax benefits no longer applicable:
• Net job creation.
• Income from trust fund in equities.
• Exemption from capital gains realised by non-resident societies on disposal of Portuguese holdings and other values.
• Increase on mandatory social charges with the creation of net employment for purposes of determining the taxable income.
• Approximation of pensioners’ retained IRS value to that
of employees
• Increase of IMI (property council tax)
• Reduction of the exemption period.
• Decrease of IMT (property transaction tax).
• Reduction of VAT exemptions.
• Transfer of goods and services to higher VAT rates.
Simplification of VAT refund on export companies and simpler procedures
• Increase of taxes on the sale of automobiles, tobacco and EDP.
• Annual update of property tax values for commercial real estate.
• Increase of IMI on unoccupied or unrented real properties.
Conclusions
The government submitted a proposal for the State Budget that tries to follow these measures, but not all of them.
However, changes were made in particular by imposing the extraordinary surcharge and the cancellation of the 13th and 14th months’ salaries for government employees in 2012 and 2013.
On January 29, I will be talking at a full day seminar in the Algarve. The issues that will be presented are:
• Government budget for 2012 and its implications on businesses and investments.
• Labour law and the big changes for 2012.
• Learning to ‘fight back’ and increase a firm’s profitability.
Please contact Filomena Ramilo at filomena.ramilo@moneris.pt.
