Single or married parents (two holders) with dependent children, with a disability equal to or greater than 60%, will be able to choose whether to withhold more or less, in terms of IRS, and thus not be penalized by the increase in deductions provided for in the current tables that came into effect in July. The Ministry of Finance decided to correct this mechanism after Dinheiro Vivo reported that fiscal injustice. An order will be published this Monday, signed by the Secretary of State for Tax Affairs, Nuno Félix, allowing a net wage increase for these workers from August, provided they ask the employer to change the regime, the DV found. That is, the change is not automatic.
For example, gross monthly wages equal to or higher than EUR 1118 will no longer be discounted from next month if employees opt for the new solution, even if they already received that fine in July, which ranged from one to EUR 161 per month, as proposed by the DV in early June. Recognizing this failure, also because the purpose of the new tables is to reduce rebates, i.e. tax advances to the state, to allow for a higher net salary and a comparison between the amounts to be withheld and the effective tax burden, the receivership will change the withholding system for the fourth time this year. Incidentally, Finance Minister Fernando Medina had already admitted in parliament at the end of July that he would make adjustments to halt the increase in the weight of reductions in salaries: “I will analyze the matter and if a correction needs to be made, we will do it”.
The devaluation of dependents with a degree of permanent disability equal to or greater than 60%, in the new July tables, led to the increase of the withholding tax resulting in a loss of net income. In other words, under the previous regime, one disabled child was worth five healthy children, resulting in a higher deduction and therefore lower discounts. But the new model’s tables reduced the weight of dependents with disabilities, which now has just 3.5 children without disabilities, increasing retention levels. It was this point that the Ministry of Finance surgically corrected, but left the decision to change to the workers.
For example, the period of EUR 84.82 per dependent person to be deducted, as stipulated in Decree No º 14043-B/2022 of 5 December, can be multiplied by three, in the case of a single or married single holder, or six for a couple with two holders. This means that, according to the DV’s accounts, the maximum deduction increases from EUR 84.82 to EUR 254.46 in the first situation, or to EUR 508.92 in the second situation. As a result, a gross monthly salary of 1118 euros for a single person who retained one euro in July, from a net salary of 995.02 euros to 994.02 euros, already deducting social security, of 11% or 122.98 euros, will now remain at 995.02 euros, that is, again free of discounts, if you keep the closing of the closing per dependent, of 84.
If we analyze the examples in the infographic and take into account the higher value of the portion to be deducted (multiplication by three, in the case of singles, or by six, in the case of a couple), a gross monthly salary of 1,200 euros for an unmarried person who deducted 13.20 euros with the IRS in the first semester, an amount that increased to 24.52 euros in July, will now not be subject to withholding. This means a net profit of 13.20 euros compared to the first half of the year, or 24.52 euros compared to July, which means a higher net salary, already after social contributions, of 1068 euros.
But in order to benefit from this exemption, the employee will have to inform the employer whether he wants to withhold more or less, indicating whether the multiplier of the portion to be withheld by the child is one, two, three, four, five or six, as the case may be, before payroll processing. These IRS tables are not retroactive. However, a correction is provided for the excess withholdings, which can be refunded through the next withholding, but without exceeding the last annual withholding period, according to the IRS code.
Since the rebates are advances to the IRS with respect to tax due in the following year, employees can always choose to stay in the current regime, deduct more now, but receive a larger refund later. If they withhold less, they may receive a lower amount back in the following year or even have to pay.
The relaxation, now introduced by the Ministry of Finance, is justified in view of the increased costs that these families bear, namely probation and special education expenses, the DV knows. It should be noted, however, that these taxpayers are allowed to deduct a higher amount from the collection at the time of issue of the IRS return in proportion to the costs incurred. “30% of all expenses for education and rehabilitation of dependent persons with disabilities are deductible” without any limitation, according to Number 2 of Section 87 of the IRS Code. This means that expenditure on healthcare and education does not contribute to the maximum limits of deductible costs, which vary between EUR 2,000 for lower incomes and EUR 1,500 for higher salaries.
Bearing in mind that the weight of expenses will vary from family to family, everyone can choose to withhold more or less, by multiplying to three or six to add to the portion to be deducted, for each dependent with a degree of disability equal to or greater than 60%. If a household has a lot of expenses, it can be beneficial to deduct less because they then have enough expenses to deduct from the collection and therefore deduct from the tax payable. If costs are reduced, it pays to withhold more because you won’t have enough expenses to cover the tax burden on the same day of settlement.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
