COVID-19 – Extraordinary and temporary regime applicable to tax and social security obligations

In brief

Decree Law 10-F/2020, of 26 March, establishes an extraordinary and temporary regime applicable to tax and social security obligations as a result of COVD-19 pandemic, as well as other measures, following the announcement of the Minister of Finance on 18 March 2020.

In detail

Decree Law 10-F/2020, of 26 March, establishes an extraordinary and temporary regime applicable to tax and social security obligations, as well as other measures, as a result of COVD-19 pandemic, following the announcement of the Minister of Finance on 18 March 2020.

The following measures are foreseen:

I – Deferral of PIT and CIT withholding taxes and VAT due in April, May and June 2020

• Payment in 3 or 6 monthly instalments, upon electronic request, no interest due or need to present a guarantee;
• The first instalment should be paid within the legal deadline foreseen;
• The following instalments should be paid in the next months, within the legal deadline foreseen;
• This measure applies to:
  • Self-employed workers;
  • Taxpayers:
    • With a turnover up to Euro 10 million in 2018;
    • That have started their activity from 1 January 2019 onward;
    • That have reinitiated their activity from 1 January 2019 onward, not having registered any turnover in 2018;
    • Which activity is included in a sector that was closed following the declaration of a state of emergency, as foreseen in Article 7 and Annex I of Decree-Law 2-A/2020, of 20 March;
    • Which invoicing in 2020 (as communicated through the e-invoice system or with reference to the turnover) decreases in at least 20%, in the average three months prior to the month in which the taxes should paid (with reference to the same period in 2019); certification by statutory auditor or certified accountant is required.

II - Deferral of social security contributions due in March, April, May and June 2020

Social contributions due in March 2020 with reference to February 2020

Entities that did not pay the social contributions due on 20 March 2020 with reference to February 2020 can make the respective payment until 31 March 2020.

Social contributions due in April, May and June 2020

• Payment of 1/3 of the amount of the social contributions due by the employer, to be made in the month in which they are due;
• The remainder 2/3 of the social contributions can be made in 3 or 6 monthly equal instalments, starting
• in July 2020, interest-free;
• It is not necessary to file a request to have access to this measure; however, in July 2020, the employer should inform the Social Security authorities which instalment period (3 or 6 months) will be implemented:
• Entities that paid the total amount of the social contributions due in March 2020 and related with February 2020, can initiate the deferred payment in April 2020 ending in June 2020;
•  This measure applies to:
  •  Self-employed workers;
  • Private and social employers with:
    • Less than 50 employees;
    • With 50 and up to 249 employees, that:
      • Face a decrease of at least 20% of invoicing (as communicated through the e-invoice system or with reference to the turnover) in March, April and May 2020, with reference to the same period in 2019;
      • Having started their activity in less than 12 months, face a decrease of at least 20% of invoicing (as communicated through the e-invoice system or with reference to the turnover), with reference to the average of the period of activity;
    • 250 or more employees:
      • Entities that face a decrease, duly certified by joint statement of the entity and the respective certified accountant, of at least 20 % of the invoicing (as communicated through the e-invoice system or with reference to the turnover) in the months of March, April and May 2020, with reference to the same period in 2019 (average of the period of activity in case of entities that have started their activity in less than 12 months); 
        • Applicable to the following entities:
          • Social solidarity private institution or equivalent;
          • Entities which activity is included in a sector that was closed following the declaration of a state of emergency, as foreseen in Article 7 and Annex I of Decree-Law 2-A/2020, of 20 March, as well as entities in the aviation and tourist sectors;
          • Entities which ativity was suspended, following legislation enacted or administrative decision.
• The number of employees considers the statement of remunerations of February 2020;
• Lack of payment of the first instalment of 1/3 implies the cease of the benefits; all instalments shall become due immediately, and interest will be charged.

III – Lawyers and Solicitors contributions

The Lawyers and Solicitors Bar can defer or temporarily suspend the payment of contributions or reduce temporarily the contribution brackets due by lawyers and solicitors that prove a decrease of income that prevents the normal payment of the contributions.

IV – Suspension of payments in instalments of debts to the tax authorities and Social Security

In view of Law No. 1-A / 2020, tax enforcement proceedings (tax and social security debts) are automatically suspended. This means that the tax authorities will not proceed with any pledges until the exceptional situation of prevention, containment, mitigation and treatment of the epidemiological infection by SARS -CoV -2 and COVID -19 cease.

The Decree-Law now published extends the application of the judicial vacation regime to the current installment plans and ensures that such suspension will remain, at least, until 30 June 2020. Therefore, during the months of April, May and June of 2020, taxpayers are not obligated to pay the instalments.

This suspension does not forbid the taxpayers from continuing to normally comply with instalment plans.

Finally, after June 30, 2020, it will be up to the Social Security authorities to decide on the extension of the term of suspension of the benefit plans that have been signed with private social security institutions under cooperation agreements.

This Decree-Law is effective as from 12 March 2020.