A young person with a net monthly income of 850 euros can expect a profit of approximately 389.40 euros at the end of the five years of application of the new IRS Young rules that the Prime Minister, António Costa, indicated last week, as part of the announcement of several measures to be taken to retain talent in Portugal.
In terms of simulations compared to the current model, if a young person between 18 and 26 years old has an income of 950 euros, the profit could be 816.40 euros. In a scenario with a higher salary of 1,200 euros, the beneficiary will be able to build up a savings amount of 2,466.63 euros after the five years provided for by the tax regime.
Calculation conditioning
The simulations are based on calculations by Deco Proteste, but “they are only estimates, which may not correspond exactly to the actual values, as the 2024 state budget may bring more changes,” says Magda Canas, specialist in fiscal affairs at the Association for Consumer Protection.
The calculations were made in comparison with the current regime, which already provides for bonuses. But ‘nothing guarantees, for example, that the calculation formula for this second semester [do IRS] it will remain the same,” says Magda Canas, referring to a possible new revision of the IRS levels. “We do not know under what conditions this will be carried out and whether it will actually take place,” the inspector adds.
For the time being, he acknowledges that “the Prime Minister has not made it clear whether the other requirements of the IRS Jovem will remain unchanged, such as the limit in terms of value, or whether we can count on other changes.”
What is known is that “it was mentioned that this change is so that ‘anyone can start at the beginning of their life'”, emphasizes Magda Canas. Therefore, the new rules include a total exemption from IRS in the first year of activity. as well as new adjustments to the benefit rates applied during the five years of the program: in the second year the young people concerned pay 25% of the IRS payable, in the third and fourth years they pay only half and in the third and fourth year they only pay half. the fifth year they pay 75% of the tax they would have to pay.
Optional subscription
It is also known that the IRS Jovem was not intended for all persons falling under the eligible age group, Magda Canas recalls, first of all, because the measure is optional, that is, it is not automatically applied just because of the age factor. “It is advisable that before signing up for this regime when completing their annual IRS returns, young people run the tax authorities’ simulations to see if the option suits them.”
For income earned in 2023, and in accordance with what was established in the state budget, the IRS Jovem, which must be declared in 2024, provides a tax exemption of 50% in the first year of activity, 40% in the second year and 30 % in the third and fourth years, and 20% in the fifth year.
According to the Ministry of Finance, the IRS Jovem counted a total of 73,684 beneficiaries last year, a number more than double that of 2021, with a total income from dependent work of 1,060 million euros.
Source: DN
