There are already new IRS tables for 2023, but it won’t be until the second half of the year that taxpayers will take full advantage of the promised tax relief. It concerns the entry into force, in the second half of next year, of the new system for calculating withholding tax on earned income, “much fairer”, the Finance Minister promises, provided that any income is taxed at the highest withholding rate in the event of a wage increase . That is, an increase in gross wages “always corresponds to an increase in net monthly income”.
To give payers time to “adapt their payment system to the new retention model”, the government approved a series of temporary tables, which will be applied temporarily in the first half of 2023. These tables “follow the current model and include the update of the withholding tax exemption limit to 762 euros per month”, which means an increase of 52 euros compared to the current value of the wages exemption and of 42 euros for pensions.
The new tables, published yesterday in Diário da República, have also been designed taking into account the changes to the IRS approved in the state budget for 2023, namely the new minimum subsistence rules, the update of the levels by 5.1% and the reduction of two percentage points (from 23% to 21%) in the marginal rate of the second tier.
With the transitional retention model, “it is guaranteed that employees and retirees who are increased between the end of 2022 and January 2023 will actually have an increase in net income,” the Treasury Department underlined in a statement. From July 1, a new model will come into effect, “which follows a marginal rate logic, in harmony with the IRS levels, avoiding regressive situations”.
That is, when an employee sees his gross monthly pay rise because he worked on a holiday or worked overtime, he will no longer lose income by “climbing” a rung in the IRS table. A measure that was claimed by workers and entrepreneurs, as many struggled to convince workers to accept overtime because they lost money in practice.
What will happen. The Treasury Department explains that the IRS’s new withholding tax model “follows a marginal rate logic, which is performed by combining the application of a rate to monthly income with the withholding of a portion to be withheld, similar to what happens in the annual tax assessment”.
And that’s why most of the benefits won’t be felt by taxpayers until July 1. According to EY’s simulations for DN/Dinheiro Vivo, this is the case of a single taxpayer, without children, who, with a gross monthly salary of EUR 780 in the first semester, will have a monthly benefit of EUR 23 compared to 2022, but this will increase in the second half to 53 euros per month. This means that your net income, already deducted from taxes, will increase from the current EUR 633.20 to EUR 656.20 in January and to EUR 686.20 from July 1.
Even with a gross income of 1500 euros you have no profit in the first semester; in the second semester you earn 22 euros more per month, with a net monthly income of 1099 euros.
For a couple with two children and a gross income of EUR 780, the profit in the first half of the year is EUR 19 per month and EUR 26 in the second half, with the net income rising to EUR 687.20 and to EUR 694, respectively. 20.
With a gross salary of 1500 euros, there is no profit in the first semester, only 26 euros per month in the second, after deduction of taxes 1142 euros. And if the gross income is two thousand euros per month, then the profit will be, respectively, 22 and 30 euros per month in the first and second half of the year. You then take home 1418 euros per month “clean”.
Finally, as far as pensioners are concerned, the potential income ranges from 31 euros per month for a gross income of 780 euros (without any benefits in the first six months of the year), to 25 euros for those who have a gross pension of 1500 euros. In this case, the monthly profit in the first half is 15 euros compared to the current value.
If a pensioner earns 2,000 euros gross, he will earn 18 euros per month from January and 51 euros extra per month from July. For those with a gross pension of EUR 5,000, the monthly income increase is EUR 50 and EUR 176 respectively. Your monthly net income will increase from the current EUR 3,135 to EUR 3,185 on 1 January and EUR 3,311 from 1 July.
Published yesterday in Diário da República, the tables of the new IRS withholding model, which will take effect from July 1, 2023, have a column with the effective monthly withholding rate including a portion to be deducted from the fixed amount per dependent.
*with Lusa
Ilídia Pinto is a journalist for Dinheiro Vivo
Source: DN
