Personal Income Tax (PIT)

General rates

The limits of each bracket of the PIT table of general rates shall be updated by 5.1%. The marginal rate applicable to the second bracket shall be reduced to 21% (currently 23%).

These shall be the new general PIT rates applicable:

Taxable income (EUR)
Rate
Deduction (EUR)
Up to 7,479
14.5%
0,00
Exceeding 7,479 up to 11,284
21.0%
484.14
Exceeding 11,284 up to 15,992
26.5%
1,106.73
Exceeding 15,992 up to 20,700
28.5%
1,426.65
Exceeding 20,700 up to 26,355
35.0%
2,772.14
Exceeding 26,335 up to 38,632
37.0%
3,299.12
Exceeding 38,632 up to 50,483
43.5%
5,810.25
Exceeding 50,483 up to 78,834
45.0%
6,567.33
Exceeding 78,834
48.0%
8,932.68

“The limits of each bracket of the PIT shall be updated by 5.1%.”

Subsistence level

There is an amendment to the computation of the subsistence level applicable to holders of income mainly originated from employment work, business and professional activities and pensions. 

There will be a deduction 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.

 

Youth PIT (“IRS Jovem”)

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 5 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.”

Deductions for dependants

In the case of more than one dependant, there will be 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. Currently, for dependants aged more than 3 and less than 6 years old, the increase is of EUR 150 (or EUR 75 in the case of joint custody).

 

Withholding taxes

Overtime working

The flat withholding tax rate applicable to the remuneration of overtime working is reduced by 50% from the 101st hour (inclusive) onwards.

The proposal foresees waiving the flat withholding tax rate applicable to the first 50 hours of overtime working in case of income from employment work as well as business and professional income obtained in the Portuguese territory by non tax residents. Currently, the exemption applies up to the amount of the national minimum wage.

 

Effective monthly rate

Up to the moment where employment income in general and pensions are paid or made available, the paying entities must disclose the monthly effective withholding tax rate in the document supporting the amounts of income and the respective withholding taxes. This rate is determined by the ratio between the amounts of tax withheld and the income paid or made available.

 

Reduction for home loans holders

In 2023, a taxpayer who i) holds a home loan concerning his permanent home and ii) earns a monthly remuneration of not more than EUR 2,000, will be allowed a reduction of the withholding tax rate on employment income (Category A). In this case, the rate applicable to the previous tax bracket and corresponding to the monthly remuneration and family situation shall apply. 

The taxpayer shall be required to communicate his option to the paying entity, prior to the moment when the income is paid or made available.

 

Adapting withholding tax systems

In 2023, salary and pension payment systems shall be adapted to the new system of PIT withholding yet to be approved. This aims at applying adequate withholding rates in view of the taxpayers tax situation.

 

“Gains realised on the sale of crypto assets shall be subject to taxation. A relief from taxation shall apply in case of crypto assets held for 365 days or more.”

Crypto assets

A new 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.

A wide tax framework shall be created for crypto assets.

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.

Category G (Capital Gains)

The transfer for consideration of crypto assets that do not qualify as securities falls under Category G (capital gains). The gain corresponds to the difference between the sales proceeds (which is presumed to be the market value with reference to the date of the transfer) and the acquisition value. A deduction is allowed in respect of the necessary and effectively incurred expenses connected both with the acquisition and the transfer.

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.

Said balance 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 of crypto assets held for 365 days or more are exempt from taxation. 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.

Losses assessed in these transactions, in a given year can be deducted in the five following years, should the taxpayer opt to aggregate them to the remaining income.

The financial equivalence of crypto assets is subject to the same rules as applicable to income in kind.

 

Exclusion from taxation - Production of renewable energy

It is proposed to create a new incentive to the production of renewable energy. 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. 

 

Contact us

Rosa Areias

Rosa Areias

Tax Lead Partner, Membro da Comissão Executiva, PwC Portugal

Tel: +351 225 433 101

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