The limits of each bracket of the PIT table of general rates are updated by 5.1%. The marginal rate applicable to the second bracket is reduced to 21% (formerly 23%).
The new general PIT rates applicable are the following:
|Taxable income (EUR)
|Up to 7,479
|Exceeding 7,479 up to 11,284
|Exceeding 11,284 up to 15,992
|Exceeding 15,992 up to 20,700
|Exceeding 20,700 up to 26,355
|Exceeding 26,355 up to 38,632
|Exceeding 38,632 up to 50,483
|Exceeding 50,483 up to 78,834
“The limits of each bracket of the PIT are updated by 5.1%.”
There is an amendment to the computation of the subsistence level applicable to holders of income mainly deriving from employment work, business and professional activities and pensions. A deduction is now foreseen on the assessment of the taxable income. The former regime considered a minimum amount of guaranteed net income..
Two transitional regimes are foreseen for 2022 and 2023.
The new regime of computation of the subsistence level sets the respective indicators and the formulas to assess the amount of the applicable deduction, as well as the excluded situations.
There is a reinforcement of the tax regime applicable to income earned by young workers aged 18 to 26 (non dependants). The following exemptions shall apply:
50% in the first year capped at 12.5 times the amount of the Social Support Index (“Indexante dos Apoios Sociais” or “IAS”);
40% in the second year capped at 10 times the amount of the IAS;
30% in the third and fourths years capped at 7.5 times the amount of the IAS;
20% in the fifth year capped at five times the amount of the IAS.
“There is a reinforcement of the regime of Youth PIT (“IRS Jovem”): increase of the percentages of income excluded from taxation and increase on the applicable caps.”
In the case of more than one dependant, there is an increase of EUR 300 of the personal deduction per dependant (or EUR 150 in the case of joint custody) for the second and subsequent dependants aged not more than 6 years old, with reference to 31 December of the year concerned. This applies regardless of the age of the first dependant.
It is allowed as a tax deduction an amount corresponding to 100% of the VAT incurred by any member of the household with the acquisition of public transport tickets, provided that the expense is supported by an invoice. This is already foreseen in the case of for monthly passes.
The same tax deduction applies in respect to periodical magazines and journals, including in digital format, that are subject to the reduced VAT rate.
The flat withholding tax rate applicable to the remuneration of overtime working is reduced by 50% from the 101st hour (inclusive) onwards.
A waive of the flat withholding tax rate applies to the first 50 hours of overtime work in the case of income from employment work obtained in the Portuguese territory by non tax residents, capped at the monthly minimum national wage. A flat rate of 25% applies on the excess.
Reduction for holders of housing credit
In 2023, taxpayers (i) who owe housing credit related with a permanent home and (ii) whose monthly remuneration does not exceeds EUR 2,700, are allowed to benefit from a reduction from withholding tax on employment income as follows:
From January to June 2023 - the reduction of withholding PIT rate considers the rate of the immediate lower bracket applicable considering the respective monthly remuneration and family situation;
From July to December 2023 - the reduction of the maximum marginal withholding PIT rate should correspond to 2 percentage points; the amounts to deduct remain unchanged (general and dependant, when applicable).
Adapting withholding tax systems
In 2023, payments of salaries and pensions shall be adapted to the new withholding tax system, aiming at applying adequate withholding tax rates in view of the taxpayers situation.
Accordingly, from 1 January to 30 June 2023, the withholding tax rates published by Order 14043-A/2022, of 5 December, shall apply. These are in line with the system followed in previous years, that reflect the update of the PIT brackets, the reduction of the marginal rate on the second bracket and the restructuring of the minimum subsistence level. Also the lower withholding tax exemption cap is updated to EUR 762 per month.
From 1 July 2023 until the end of the year, the withholding tax rates published by Order 14043-B/2022, of 5 December, that foresee a new system following a logic of marginal rates in line with the PIT brackets relevant for the annual assessment of the tax. The applicable withholding tax shall result from a combination of both applying a rate on the monthly income with a deduction of a certain amount. Taxpayers whose household includes dependents are allowed a deduction per dependant.
Effective monthly rate
Up to the moment where employment income in general and pensions are paid or made available, the Paying entities are required to disclose the monthly effective withholding tax rate in the document supporting employment income and pensions and the respective withholding taxes. Disclosure is required up to the moment of payment of placement at disposal. Said rate is determined by the ratio between the amounts of tax withheld and the income paid or made available.
Self employed workers
The Government assumes the compromise to review during 2023 the withholding tax rates applicable to self employed workers.
“Gains realised on the sale of crypto assets are subject to taxation. A relief from taxation applies in the case of crypto assets held for 365 days or more.”
A regime of taxation of gains and income from crypto assets is created.
A definition of crypto assets is introduced. It includes all digital representations of values or rights that can be transferred or stored electronically using distributed ledger technology or similar. Unique and non fungible crypto assets are excluded.
The equivalent cash value of crypto assets considers the same rules as those applicable to income in kind.
Category B (Business and Professional Income)
Transactions involving the issuance of crypto assets, including mining, or the validation of crypto assets transactions through consensus mechanisms, shall be considered commercial and industrial activities, taxed accordingly.
For the purposes of the simplified taxation regime, the taxable income is computed by applying the coefficient of 0.15 to the sales of crypto assets. The coefficient is 0.95 in the case of mining of crypto assets.
Income derived from the above transactions is deemed realised on the moment of the transfer of the crypto assets for a consideration. Both the termination of the activity and the loss of Portuguese residency are equivalent to transfers for a consideration.
Category E (Investment income)
Any type of remuneration derived from transactions involving crypto assets qualifies as investment income (Category E) for PIT purposes.
No withholding tax needs to be levied on this remuneration.
In case the income is regarded as crypto assets, taxation occurs considering it as a capital gain (Category G) on the moment of the transfer of the crypto assets received.
Category G (Capital Gains)
The loss of residency in the Portuguese territory is in this case equivalent to a transfer for a consideration.
The taxable gain corresponds to the difference between the sales proceeds (presumably the market value at the time of the transfer) and the acquisition value, net of the amounts qualifying as investment income. Necessary and effective expenses incurred with the acquisition and transfer are deductible.
For the purpose of assessing a capital gain or a capital loss, the crypto assets transferred are those acquired longer (FIFO - First In, First Out).
The positive balance between capital gains and capital losses is subject to a flat rate of 28%. The taxpayer can opt to aggregate the amount to the remainder income and have it taxed at progressive rates.
If a negative balance is assessed following a transfer of crypto assets, this capital loss can be carried forward for 5 years, when the taxpayer opts to aggregate its income.
The balance assessed is disregarded for the purpose of the mandatory aggregation applicable to capital gains derived from securities held for less than 365 days, earned by taxpayers with taxable income of an amount equal or higher than the last bracket of the progressive rates, which shall enter into force in 2023.
Gains arising from the transfer for a consideration of crypto assets held for 365 days or more are excluded from taxation. Losses are also disregarded. In the case of crypto assets acquired prior to 1 January 2023, on the computation of this period of time it is relevant the holding period that has already elapsed.
No taxation arises on crypto assets held for less than 365 days whose consideration on a transfer is also crypto assets. The acquisition value of the crypto assets received is the same as that of the crypto assets delivered.
Both the above exclusions from taxation are not applicable if the taxpayers or the paying entity are not tax resident in another Member State, or in a State member of the European Economic Area or in another State with which a convention for the avoidance of double taxation, or a bilateral agreement or a multilateral agreement is in force and foreseen the exchange of information for tax purposes.
There is a new reporting obligation for natural or legal persons, organisations and other entities without legal personality, all providing services of custody and management of crypto assets on behalf of third parties, or managing one or more platforms for the negotiation of crypto assets. They are required to comply with this obligation up to the end of January each year.
A new incentive to the production of renewable energy is introduced. There will be an exclusion from taxation, capped at EUR 1,000, of the annual income earned with the sale of excess energy produced for self consumption or by small production units.
The positive balance deriving from the transfer for a consideration of rights in rem on real estate and realised by non resident is mandatorily aggregated and subject to the general PIT rates. It is taxed for 50% of the respective amount; the general PIT rates apply.
All income earned, including foreign source income, shall be considered for the purpose of determining the applicable rate on the above mentioned positive balance.
Tax Lead Partner | Entrepreneurial & Private Business Leader | Membro da Comissão Executiva, PwC Portugal
Tel: +351 225 433 101