A married couple without children and with a gross monthly income of 2,000 euros will save 516.94 euros during the tax reform next year, a benefit that rises to 874 euros for a married couple with one child and a gross monthly income of 1,500 euros. The simulations, carried out by EY for Dinheiro Vivo, are based on updating the limits of the tax brackets by 3% and reducing the rates applicable to the first five brackets.
A transversal revision included in the 2024 state budget proposal and which will benefit about six million households, says the Minister of Finance, with a budgetary impact, already in 2024, of a decrease of 1,327 million euros compared to 2023 The total impact of the measure, to be measured in 2025, with the liquidation of the IRS, is estimated at 1,769 million.
Fernando Medina guarantees that the reduction in tax rates will be felt in the pockets of families from January. “The benefits are not benefits that will be felt in 2025, they are benefits that will be transferred to families from 2024,” he said in response to journalists, emphasizing that what is at stake is not “a theoretical-conceptual tax cut for the is the future. “, but “an effective tax cut” that the Portuguese “will benefit from in January 2024” through withholding taxes.
The difference between 1.3 and 1.7 billion is precisely for this reason, as only income from categories A and H is subject to withholding tax at progressive rates, “so only that part of the impact will be reflected in 2024”. The remaining amount will be settled in the following year.
Therefore, and in order to “adapt the tax system to the macroeconomic framework forecast for the year 2024”, the government is proposing a new update of the 3% IRS brackets, to bring them in line with the forecast inflation for the year 2024: 2.9%. An update below the 5% reference value for wage increases provided for in the income agreement signed on Saturday with the social partners – with the exception of CIP and CGTP – and which the government sought to compensate with a transversal reduction in the marginal rates of the tax up to the 5th bracket
A discount ranging from 1.25 percentage points in the lowest bracket, which covers gross annual income up to 7,703 euros and is taxed at 13.25%. The 2nd bracket now pays 18% tax, instead of the 21% that applied this year. In the 3rd bracket, the marginal rate becomes 23%, instead of 26.5%. Here the largest tax reduction takes place, corresponding to a gross annual income of 16,472 euros, i.e. monthly salaries, before taxes, between 1,123 euros and 1,500 euros.
In the 4th and 5th brackets, the rate reduction is 2.5 and 2.25 percentage points respectively. Therefore, rates of 26% will be applied to those earning up to 21,321 euros per year and 32.75% for incomes up to 27,146 euros.
“The proposed change will allow for a reduction in the average IRS rate to 2.4%, with greater emphasis on households with a gross income of up to 2,000 euros per month,” the report said. The government also recalls that, as it is a progressive tax, all taxpayers will benefit from this reduction in the first five brackets.
“The 2024 IRS reform will complement what was done last year [com uma redução de 5,1%]and has a strong concentration on a strategy to reduce the IRS, aimed at the middle class,” the Minister of Finance emphasized, pointing to reductions in the effective rate of 2.4 percentage points for salaries of 800 euros and 3.2% for salaries of 900 euros per month. An operational assistant, with a monthly salary of 822 euros and no children, will have an annual income, he guarantees, of 786 euros. A senior technician, who earns 2000 euros, will have an income, compared to this year, from 1190 euros.
Also notable is the strengthening of the minimum wage, which rises to the new value of the minimum wage, to prevent part of it from being charged to the IRS. The national minimum wage will increase from 760 euros to 820 euros in 2024 (+8%), which corresponds to a gross annual salary of 11,480 euros. The government proposes, by the year 2024 and through the minimum subsistence mechanism, the full protection of households earning the national minimum wage, thus guaranteeing that they do not pay IRS.” , can be read in the report.
The proposal presented to Parliament yesterday also provides for the exclusion from tax of 50% of the income of those returning to Portugal by 2026. “50% of the dependent labor income and business and professional income of taxpayers are excluded from taxation” who become tax residents in Portugal by 2026, the document said.
However, the proposal stipulates that this exclusion applies up to the upper limit of the 1st income bracket to which the additional IRS solidarity tax applies, which is currently set at 250,000 euros per year.
To benefit from this measure, employees must not have been considered residents of Portuguese territory for the past five years – and for tax purposes, the Tax Authorities (AT) generally consider the address linked to the Citizen Card.
Ilídia Pinto is a journalist for Dinheiro Vivo
Source: DN
