IRS 2012 in Portugal
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In 2012, Portugal will make significant changes to its individual income tax laws. During the 2011 year, most citizens enjoyed a number of tax deductions and had access to many tax credits. This, however, was before significant budget cuts came into play in the country. The government is trying to save money in any manner possible, which will lead to its citizens paying more tax than ever before.
Many areas will receive funding cuts, in addition to the lack of tax credits available, meaning that Portugal is in a transitional period. Basically, most taxpayers will either receive a smaller tax refund or will pay more in taxes, depending on their income. Fewer things are deductible and tax rates have increased for more people, putting a strain on many people‘s finances. This has been implemented to reduce the deficit and all taxpayers in the country should understand these provisions before tax season arrives.
One change that will affect many people is the extraordinary levy that has been implemented. All private sector employees and pensioners will have a mandatory 3.5 percent levy applied to their income. Those in the public sector have the same levy applied, meaning that everyone is relatively equal. This levy is in addition to other income tax paid by these employees.
This additional tax will hurt some people more than others, however, as pensioners will have their tax allowance reduced from €6,000 to €4,104. This means that an increasing number of low incomes pensioners will be forced to pay income tax. Workers who make more than €153,300 in a year have to pay an additional 2.5 percent levy surcharge, so their taxes will increase by 6 percent this year.
If you make any capital gains during the year by selling things like stocks and bonds, the tax that you pay on these sales increases by 1.5 percent to a rate of 21.5 percent. In 2011, the government eliminated exemptions on long-term gains through these means, but this has now been applied to all capital gains. If you have put any long-term stocks and bonds away for future sales, you might want to hold onto them for a little bit longer.
Although the tax brackets will not change, the amount in tax paid by each bracket does change. The government states that this is due to inflation, although it does not have an accurate estimate on the effect of inflation on the country. This is essentially a hidden tax for all taxpayers. In addition, the more money your household brings in, the less you can deduct from your taxes.
If you end up in the upper two tax bracket levels, you cannot deduct anything from your taxes unless you have dependents. Under these circumstances, you can deduct 10 percent per dependent. Every type of deduction made has a ceiling. If you end up making more money than the predetermined ceiling, you will find certain things that you can no longer deduct.
In the past, salaried employees could claim a meal allowance of between €6.41 and €7.26, depending on how the employee paid for the meal. Those numbers, however, have dropped to €5.55 and to €6.83 for those workers. This adds up over the course of the year, since many people use these meal allowances on a daily basis.
People in professional fields like mining and fishing could previously deduct all of their insurance premiums. The 2012 laws have set a limit of €2,096.10 for these individuals under these new provisions. This could lead to many professionals being underinsured, especially if they cannot afford to pay for insurance after it reaches the ceiling.
Overall, these new income tax provisions will make it difficult for the citizens of Portugal to get ahead because of how much money they will take. The average worker in the country could struggle to live the same lifestyle as in previous years because of the money that the government is taking. Although this is being done to lower the deficit in the country, it is easy to see why it has infuriated so many people in Portugal.
For information on taxes in Portugal contact the Portugal real estate team via email at: info@portugalproperty.com or call free on: +44(0)800 0148201 or check out our Taxes related to purchasing property in Portugal on our Property Taxes pages
Published in: Taxation