Salaries between €760, the government’s proposed minimum allowance for 2023 and the thousand euros will deduct less IRS next year and benefit from higher disposable income at the end of the month, according to the new version of the Competitiveness Accord and Income proposal presented yesterday to trade unions and employers, at an extraordinary meeting of the Permanent Commission on Social Dialogue, attended by the Minister of Labor, Ana Mendes Godinho, the Minister of Finance, Fernando Medina, and the Secretary of State for Fiscal Affairs, António Mendonça Mendes .
To increase the disposable income of this income bracket, between 760 and 1,000 euros, the executive is proposing “to reformulate the operating rules of the minimum subsistence in order to give the IRS more progressiveness, moving from a logic of final settlement to an upstream discount logic, taking advantage of incomes up to a thousand per month and eliminating the current distortion of taxation on 100% of income directly above the current minimum guaranteed pay,” reads the document accessed by DN/Dinheiro Vivo. In practice, this means that any IRS refunds that employees might receive in the following year, at the time of tax settlement, are already included in monthly salaries, through a reduction in the IRS. In addition, the cabinet proposes not to tax incomes just above the minimum wage, for example 765 or 770 euros, for 100%, so that they do not ultimately fall below the minimum wage.
At this point, the minimum existence, i.e. the level to which income is exempt from IRS, is verified in the following year, at the time of settlement. The executive now wants to bring this calculation forward to reflect on workers’ salaries. For example, with the increase in the minimum wage from 705 to 760 euros, the minimum wage to be determined in 2024 will be set at 10,640 euros gross on an annual basis. That is, income up to this value is exempt. But tax can be paid on these salaries via the withholding tax, which will be refunded by the tax authorities in 2024. With the change in the scheme, you will receive more income per month in the following year instead of a reimbursement, or with a reduction in the retention or an increase in the specific deduction, which today amounts to EUR 4104 per year per holder.
The increase in the minimum wage from the current EUR 705 to EUR 760 by 2023 represents an improvement over the original proposal as, as reported by DN/Dinheiro Vivo, the government’s intention was to guarantee an additional 1.3 percentage points to the impact of inflation. After all, it would mean that this value is added to the expected increase of 6.4%, which amounts to an increase of 7.7% to 759 euros. The government jumps to 760 euros, an increase of 7.8%, and brings the national minimum wage even closer to the proposal for the civil service: 761.58 euros.
The reduced IRC rate of 17% was gradually extended over the next four years for income up to 50 thousand euros and a 10% reduction in the autonomous tax.
The government maintains the target of reaching a guaranteed minimum wage of 900 euros by 2026, at the end of the legislature, and is already working on a plan for wage increases for the next four years: in 2024 that will increase by another 50 euros to 810 euros. euros; in 2025 it will grow by 45 euros to 855 euros; and in 2026 the increase will also be from 45 euros to 900 euros. Wage increases should translate into effective gains in workers’ disposable income, according to the proposed income agreement. In this way, the government commits to update the IRS scales by 5.1% “based on the criterion of the nominal valuation of compensation per employee, ensuring the principle of tax neutrality of the salary updates, with the regular updating of the IRS scales.”. It also proposes, where possible, “eliminating the difference between the IRS’s withholding tax and the tax due and moving towards a withholding tax system that ensures that pay increases translate into monthly net gains for employees,” the same document states. handed over to the employees. the social partners.
Another novelty included in the document is the increase in the compensation upon termination of employment from 12 to 14 days per year of seniority. This subject has been taboo since the fee was reduced from 30 days to 12 days during the Troika period. Overtime has also evolved as it starts to be paid from 100 hours and not from 120 hours as scheduled.
In this effort to raise incomes, the executive foresees a series of counterparts, not least because, according to the president of the Business Confederation of Portugal (CIP), António Saraiva, the increase in the minimum billion will represent euros per year”. for companies”. For example, the Institute proposes that companies can deduct 50% of the costs in the case of wage increases of at least 5.1% in corporate tax. In addition, the taxable income that is subject to a tax lower than 21% doubles from € 25,000 to € 50,000 in the case of small and medium-sized enterprises (SMEs) and domestic companies. Above this income ceiling, the standard rate of 21% applies. The proposed agreement also provides for “a two-year extension of the application of the reduced rate for enterprises arising from from mergers between SMEs”.
In line with the demands of employer confederations, the Executive is opening the door to selective cuts in autonomous taxes on business expenses. For example, the proposal provides for “the immediate reduction of 2.5 percentage points in autonomous tax rates applicable to costs related to plug-in hybrid vehicles and the reduction of autonomous tax rates applicable to light vehicles powered by natural gas (CNG) vehicles,” according to the document.
In addition, “in the autonomous taxation chapter, a gradual tax reduction of approximately 10% should be implemented over the agreement period, until 2026”.
Source: DN
