The new IRS withholding tax tables, published yesterday in Diário da República, give a tax reduction of up to about 45 euros per month to employees without children, both single and married, with a gross monthly salary of up to 964 euros. The adjustments are retroactive to January 1, 2023. The period only lasts until June 30 of this year, as a new model of retention tables will come into effect from July 1, following a marginal rate logic.
“As part of the adjustment effort made to bring the withholding tax closer to the final tax due, there was a need for additional adjustments to the withholding tables approved at the time, increasing the withholding percentages in the source of each step and adjusting the thresholds of these apply to income from work up to 964 euros per month, without dependents,” reads the order signed by State Secretary for Tax Affairs Nuno Félix.
Let’s take a look at the changes in the retention table for single and married dependent employees, with two titulars and without children: the ceiling for the second tranche will be increased from 766 euros to 790 euros and will start withholding 2% instead of the current 2.5%; the limit of the third tranche is also increased from 787 euros to 812 euros and the retention is reduced from 4.9% to 4%; the fourth tier now goes up to 863 euros instead of 851 euros and starts with a 7% discount instead of 7.8%; and finally, the fifth tier maintains the threshold at 964 euros, but lowers the retention from 10% to 9.3%.
Dinheiro Vivo compared the current and the new IRS tables and ran simulations to understand how much more money these employees can count on at the end of the month. For example, for a single or married person, with two holders, without children, the increase in income can vary between approximately 4 and 45 euros. For example, with a gross salary of 790 euros, 45.82 euros less is deducted. That is to say, the retention decreases from 61.62 euros (7.8%) to 15.8 (2%). With a gross salary of 763 euros, the relief is 3.82 euros, as 15.26 euros (2%) now remain instead of the current 19.08 euros (2.5%). An employee with a gross monthly income of EUR 964 receives an extra EUR 6.75 at the end of the month, with a discount of EUR 89.65 (9.3%) instead of EUR 96.4 (10%).
A real increase of EUR 25.86 is guaranteed for civil servants who saw their salary increase from EUR 757 to EUR 862.23, as requested by FESAP.
The new tables also solve the problem denounced by the Federation of Associations of Public Administration (FESAP) that led the Ministry of Finance to make these corrections. For example, a real increase of EUR 25.86 is guaranteed for civil servants who saw their salary increase by EUR 104.22, from EUR 757 to EUR 862.23. If these adjustments were not made and the social contributions and contributions were already added to the ADSE, these employees would end up with a net salary of 650.23 euros, one euro below the net minimum wage, which is 651.15 euros. For example, these employees have 677.09 euros at the end of the month.
There were also corrections in the tables for married employees, without children, who are single earners. The changes will affect between the second and fourth tiers and could raise between EUR 11 and EUR 26 more at the end of the month for gross salaries up to EUR 842. The second tax level will be increased from EUR 766 per month to EUR 790 and the withholding tax will be reduced from 3.2% to 1.2%; the ceiling of the third tier goes from the current 788 euros to 813 euros and the discount decreases from 3.2% to 2.4%; and the fourth income level now goes to 842 euros, previously it was 830 euros, and the withholding tax is relaxed from 4.6% to 3.3%. For example, an employee with a salary of EUR 790 has an extra EUR 26.86 at the end of the month, because retention falls from EUR 36.34 (4.6%) to EUR 9.48 (1.2%). A salary of 930 euros brings home more than 11.35 euros, because discounts fall from 38.18 euros (4.6%) to 26.83 euros (3.3%).
The new “tables maintain the update of the withholding tax exemption limit to 762 euros per month, by applying the minimum amount, as well as other updates to the limits and withholding taxes,” the order said. Similarly, the tables related to “income from dependent work earned by disabled persons, as well as the tables related to pension income (excluding alimony payments)” remain unchanged, the same document clarifies.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
