Contrary to what the government has been advocating, not all employees will receive payroll tax exemptions, with the new IRS tables due to take effect July 1. Single people with a child, with a disability rate of 60% or more, who earn more than 1118 euros gross per month, will deduct more, which translates into a lower net salary.
The warning was given by Deco Proteste and later confirmed by Dinheiro Vivo’s accounts for different income groups. The Ministry of Finance was questioned by this newspaper last Friday, May 26, to understand whether it is a mistake and whether it will correct it, but did not receive an answer until the end of the edition.
If these tables are maintained, the wage loss can vary between EUR 1 per month for gross monthly wages of EUR 1118 and EUR 161 for gross wages of EUR 8000, compared to the applicable retention regime. If we calculate the deductions for, say, a salary of 1700 euros, then the fine is 63 euros per month.
The Ministry of Finance was asked if it was an error and if it will correct it, but until the end of this edition has not responded.
In the first case, with a profit of EUR 1118, the net salary rises to EUR 994.02 minus one EUR, compared to the EUR 995.02 currently earned. The calculation of the values of the Deco Proteste simulator, confirmed by Dinheiro Vivo, already includes the 11% social security contributions and does not take into account the meal subsidy.
An employee with a salary of 1700 euros, deducting 110 euros plus social security costs and having a net worth of 1403 euros, will advance 173 euros to the tax authorities, plus 63 euros, resulting in a lower salary of 1340 euros.
Taking into account a higher profit of EUR 8,000 gross per month, the discounts for the Tax and Customs Administration increase from EUR 2,592 per month to EUR 2,753. After all, this worker, who earns 4528 euros cleanly, now receives 4367 euros minus 161 euros per month.
A handicapped child is worth less
The weight that Finance assigns to the disabled child is one of the main justifications for the deteriorating retention rate. Until June, a dependent with a disability rate equal to or greater than 60% was equivalent to five children for tax purposes, significantly easing the reductions. As of the second semester, the same descendant will be worth only 3.5 children, according to Dinheiro Vivo accounts. This information is not available on the Finance Portal, but in messages from the Ministry of Finance, so it is not easy for the general public to decipher.
For example, Order No. 14043-A/2022 of December 5, 2022 until June stipulates that “every dependent with a degree of permanent disability equal to or greater than 60%, for the purposes of withholding tax, is equal to five dependents non-disabled”. This standard, which, according to the same diploma, “enters into force until 30 June 2023”, has as a direct consequence the exemption from withholding tax on earned income, because the more children an employee has, the wider the scope of the exemption and the reductions to minors.
The rules change in the second half. Not only do the tables no longer work according to percentage rates and a formula based on nominal values is now applied, but disabled children are also becoming less important in the phasing out of reductions in wages. 14043-B/2022 of December 5, 2022, “for each dependent with a degree of permanent disability equal to or greater than 60%, the amount of 84.82 euros is added to the portion to be deducted” . The same legal text contains an amendment that “will come into force from 1 July 2023”. This amount, added to the EUR 34.29 deductible per child, amounts to EUR 119.11, which is EUR 52.35 less than the EUR 171.45 to be deducted from the employee’s income if the child in question is worth five persons without disabilities. That is, the disabled dependent is now worth 30.5% less or 1,525 fewer children, which corresponds to 3.5 healthy offspring.
This devaluation will increase the withholding tax. With the current tables, employees who earn, for example, 1700 euros gross, deduct 110 euros per month. From the second semester, they deduct 173 euros, plus 63 euros per month.
Faced with “this injustice”, Deco Proteste will “warn the government to correct the tables, so as not to harm single workers with disabled people in charge”, revealed to DN/Dinheiro Vivo, the spokeswoman for that institution , Soraia Leite. The lawyer considers “this situation to be particularly serious, taking into account that these families are more vulnerable and have to bear more costs because of the child’s disability,” she stressed.
Losses were verified in all simulations for income equal to or higher than EUR 1118. However, there is an exception. Anyone who receives 1800 euros gross per month has a net profit of 2 euros. On the other hand, for salaries equal to or below EUR 1117, there was no exemption from withholding compared to the current tables, as these income brackets are exempt.
Remember that IRS rebates are advances that employees pay to the state in respect of tax due in the following year. Greater retention does not mean an increase in the tax burden. That is, those who give a higher discount now can get a larger amount back later. Employees who withhold less may receive or even have to pay less tax.
Salomé Pinto is a journalist for Dinheiro Vivo
Source: DN
