The State Budget for 2023 was approved by Law 24-D/2022, of 30 December (OE 2023) with some changes compared to the proposal presented by the Government. In this newsletter, we review the main changes approved by the Portuguese Parliament. PIT Regarding Personal Income Tax (PIT), we highlight the following novelties compared to the Government's proposal:
Capital gains resulting from the sale of crypto assets. The change of residence will be assimilated to disposal for consideration. Capital gains will be calculated according to FIFO (First In, First Out) rules. The exclusion of taxation of capital gains and capital losses will apply not only in respect of disposals that relate to crypto-assets held for a period of 365 days or more but also those that are made against the delivery of new crypto-assets – in this case, the crypto-assets received will be attributed an acquisition value equal to the acquisition value of the crypto-assets delivered. The exclusions from taxation will not apply when the taxpayers or the debtors of the income are not resident in another Member State of the European Union or the European Economic Area or in another State or jurisdiction with which an international double taxation treaty, bilateral or multilateral agreement providing for the exchange of information for tax purposes is in force.
CIT With regard to Corporate Income Tax (CIT), we highlight the following changes:
VALUE ADDED TAX As to Value Added Tax (VAT), the following changes are highlighted:
REAL ESTATE TRANSFER TAX Regarding Real Estate Transfer Tax (RETT), the following measures stand out:
MUNICIPAL PROPERTY TAX With regards to Municipal Property Tax (MPT), the following changes were included:
- up to 100% in cases where the buildings are used for local accommodation. - up to 25% in cases of houses that are not rented or in use as the taxpayer's own permanent residence. A further 50% increase may apply whenever a taxpayer is a legal person or other equivalent entity.
- 25% whenever the urban building or autonomous fraction is destined to habitation and, in the year to which the tax relates, is not rented or allocated to the taxpayer's own and permanent residence. - 50% whenever a taxpayer is a legal person or other equivalent entity. STAMP DUTY In terms of stamp duty, we highlight these new rules:
TAX BENEFITS The State Budget includes the following changes:
For more information on the other tax changes introduced by the State Budget 2023, please click here. |
The Parliament approved the State Budget for 2023 (2023 State Budget). In this newsletter, we summarise the main tax changes set out in the 2023 State Budget. Personal income tax Regarding Personal Income Tax (PIT), the main changes are as follows:
- 50% with a limit of 12.5 times the value of the Social Support Index in the first year. - 40% with a limit of 10 times the value of the Social Support Index in the second year; - 30% with a limit of 7.5 times the value of the Social Support Index in the third and fourth years; and - 20% with a limit of 5 times the value of the Social Support Index in the fifth year.
- Relate to crypto assets held for a period of 365 days or more; or - Are made against the delivery of new crypto-assets – in this case, the crypto-assets received will be attributed an acquisition value equal to the acquisition value of the crypto-assets delivered. These exclusions from taxation will not apply when the taxpayers or the debtors of the income are not resident in another Member State of the European Union or the European Economic Area or in another State or jurisdiction with which an international double taxation treaty, bilateral or multilateral agreement providing for the exchange of information for tax purposes is in force.
Corporate income tax In terms of Corporate Income Tax (CIT), the following changes should be highlighted:
- Production, transport, distribution, and trade of electricity or gas; or - Manufacture of petroleum products refined or from waste, and of agglomerated fuels.
- Fertilisers, organic and mineral fertilizers, and correctives. - Flours, cereals, and seeds, including mixtures, residues, and waste from food industries, and any other products suitable for the feeding of livestock, poultry, and other animals, referred to in the Codex Alimentarius, irrespective of breed and living functionality, intended for human consumption. - Irrigation water; and - Glass bottles.
Value added tax With regard to Value Added Tax (VAT), the following changes should be highlighted:
Special taxes on consumption In terms of special taxes on consumption, the following amendments should be noted: Duty on petroleum and energy products (ISP)
- Products covered by CN codes 2710 19 62 to 2710 19 67 and CN codes 2710 20 32 and 2710 20 38, used in the production of electricity and cogeneration, or town gas on the mainland, are taxed at a rate corresponding to 100 % of the ISP rate and at a rate corresponding to 100 % of the addition on CO2 emissions. - Covered by CN codes 2710 19 43 to 2710 19 48, CN 2710 20 11 to 2710 20 19, CN 2710 19 62 to 2710 19 67, CN 2710 20 32 and 2710 20 38, consumed in the Autonomous Regions of Azores and Madeira and used for the production of electricity, electricity, and heat (cogeneration) or town gas, by entities which carry out such activities as their main activity, are taxed at a rate corresponding to 50% of the ISP rate and 50% of the rate of the CO2 emission surcharge. It is set to rise to 75 % and 100 % on 1 January 2024 and 2025 respectively. - Falling within CN code 2711, used in the production of electricity, of electricity and heat (cogeneration), or of town gas, by entities carrying out such activities as their main activity, apart from those used in the autonomous regions, are taxed at a rate corresponding to 40% of the ISP rate and at a rate corresponding to 40% of the rate of addition on CO2 emissions. It is set to rise to 50% as of 1 January 2024; - Falling within CN codes 2701, 2702, 2704, 2713, and 2711 12 11 which are used in installations subject to an agreement on the rationalization of energy consumption (ARCE), and fuel oil with a sulfur content not exceeding 0,5% falling within CN codes 2710 19 62 and 2710 19 66 will be taxed at a rate corresponding to 30% of the additional rate on CO2 emissions. It is set to increase to 65 % and 100 % on 1 January 2024 and 2025 respectively. Duty on Beverages
Duty on Tobacco
Carbon tax The carbon tax for consumers traveling by air, sea, and river remains in force in 2023. Vehicles tax Increase in the vehicles tax rates applicable to cars, motorbikes, tricycles, and quadricycles, regarding their cylinder capacity and environmental component. Single circulation tax A generalized increase in the single circulation tax rates is applicable to all vehicles. Real state transfer tax Regarding Real Estate Transfer Tax (RETT), the following measures stand out:
Municipal Property Tax With regard to Municipal Property Tax (MPT), the following measures are of particular importance:
- up to 100% in cases where the buildings are used for local accommodation. - up to 25% in cases of houses that are not rented or in use as the taxpayer's own permanent residence. A further 50% increase may apply whenever a taxpayer is a legal person or other equivalent entity.
- 25% whenever the urban building or unit is intended for habitation and, in the year to which the tax relates, is not rented or allocated to the taxpayer's own and permanent residence. - 50% whenever a taxpayer is a legal person or other equivalent entity. Stamp Duty In terms of stamp duty, we highlight these new rules:
Special Contributions The 2023 State Budget extends the following special contributions to 2023: - Special contribution to the conservation of forest resources. - Contribution to the banking sector. - Additional solidarity contribution to the banking sector. - Contribution to the Pharmaceutical Industry. - Extraordinary contribution to the energy sector. - Extraordinary contribution to the suppliers of medical devices industry of the National Health Service; and - Contribution to single-use plastic or aluminum packaging in prepared meals. Tax Benefits The State Budget includes the following changes:
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* New amendments or adjusted amendments during the discussions held in Parliament.
The European Regulation published yesterday, lays down temporary emergency rules to speed up the licensing procedure for renewable energy plants. Under this Regulation, the planning, construction, operation and grid connection of renewable energy plants and installations deemed to be of overriding public interest and Member States must ensure that they have priority in the licensing procedures. To speed up licensing procedures it establishes:
This temporary framework enters into force today, on 30 December 2022 and applies to licensing procedures starting until 30 June 2024. The European Commission will review this Regulation by the end of 2023, with a view to a possible extension of its period of validity. |
The Portuguese windfall profits’ tax law has finally been approved last week by the Portuguese Parliament, confirming that:
According to the Portuguese Government, this new tax will generate revenue between 50 and 100 hundred million euros. But GALP alone has already announced that its tax burden for 2022 and 2023 will exceed 100 hundred million euros. In any case, the impact on prices to consumer will be high and this new tax will contribute to extending the inflation pressure on oil and gas products in 2023. |
Portugal completes the implementation of Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources by establishing the new national goals for renewable energy consumption. Within those, stands out the establishment of a minimum quota of use of energy from renewable sources in 2030 of at least 49 % of renewable energy use in gross final consumption of energy. This represents a more ambitious goal compared to the previously 47 % forecast. In the transport sector, the target is lower: in 2030, the minimum share of renewable energies in the final consumption of energy should be of 29%. To guarantee the fulfilment of these goals, the Portuguese Government established that:
With a view to promoting the use of renewable energies, new incentives are created, of which we highlight the following:
Decree-Law No. 84/2022, of 9 December, where the above goals and measures are set, came into force on December 10, 2022. |
Yesterday, the Portuguese Cabinet approved in its weekly meeting a new bill proposal to create a temporary and extraordinary solidarity contribution on the energy sector. The goal of this new bill is, the Portuguese Government says, to provide an adequate tax treatment for windfall profits arising from unanticipated circumstances, such as rising inflation, which result in current profits not matching those usually made by energy companies. The Portuguese Government also claims that this new tax will mitigate the economic effects of inflation and the consequent increase in energy prices. Of course, it is yet to see how energy companies will reflect this tax on energy prices and whether it will in fact help the decrease in inflation or, on the contrary, add additional inflationary pressure to an already overheated energy market. This law proposal will now be submitted to Parliament for discussions and most likely approval, giving the majority the Government party has in the Parliament. The market is anticipating a no less than 33% tax rate applicable to profits falling under this new contribution, that will be added to the energy companies’ CIT on overall profits. Until the text of the proposed bill is known, it will remain unclear if and how this tax will apply to the Portuguese energy companies’ 2022 profits or only to those from 2023 onwards. |
In 2023, rents under urban and rural leases will be reviewed in accordance with an index of 1.02, i.e., increasing rents will be limited to 2%, unless the parties agree otherwise. Pursuant to Law no. 19/2022, of 21 October 2022, the above index of 1.02 shall apply to urban and rural lease agreements that establish annual rent review to take place in accordance with the index established in the applicable law or the annual publication made by the National Statistics Institute in the Official Gazette (Diário da República). To compensate landlords for the above-mentioned limitation to rent review – which will be below inflation and consumer price index in 2022 – only a portion of their real estate income will be considered for purposes of income taxation. For individuals, real estate income subject to the tax rates established in article 68, section 1, or article 72, section 2, of the Individual Income Tax Code (IITC), shall be determined by applying a factor of 0.91. As to real estate income subject to the special tax rates established in sections 2 to 5 of article 72 of IITC. For companies, taxable income originating in rent subject to the tax rates established in article 87 of the Corporate Income Tax Code (ITC) shall be determined by applying a factor of 0.87. This form of support granted to landlords shall apply to rents (i) that become due and are paid in 2023, (ii) originated in lease agreements in force before 1 January 2022 and reported to the tax authorities as required by Portuguese law and (iii) that do not originate from lease agreements which rents are reviewed in accordance with an index exceeding the above-mentioned index of 1.02 established for 2023. |
The Portuguese government has enacted a recent regulation (Decree-Law 72/2022) adding new easing rules to those recently published (Decree-Law 30-A/2022), setting forth new measures aimed at fostering and streamlining the licensing of renewable energy generation and storage plants. 1.Construction
2. Compensation to Municipalities
3. Agreements with the DSO/TSO
4. 2019, 2020 and 2021 Auctions new benefits
These rules new rules enter into force today, October 20th, 2022, and will apply until April 19th, 2024. |
A “Medium-Term Agreement on Improving Incomes, Wages and Competitiveness” (“The 2023-2026 Social Pact”) has recently been signed by the so-called Portuguese Social Partners (representatives of employers, unions, and the Government). It sets guidelines for employment collective bargaining on the increase of salaries for the years 2023 to 2026. The most relevant provisions of the Portuguese 2023-2026 Social Pact in this regard are: (i) The annual nominal appreciation of salaries per employee of 4.8% on average (appreciation of 5.1% in 2023; 4.8% in 2024; 4.7% in 2025 and 4.6% in 2026); (ii) An increase of the minimum monthly guaranteed remuneration up to at least €900.00 in 2026 (increase to €760.00 in 2023; €810.00 in 2024; €855.00 in 2025 and €900.00 in 2026). (iii) The increased remuneration for overtime work above 100 hours: (i) 50% for the first hour; (ii) 75% for each subsequent hour; (iii) 100% for each hour on weekly rest days or public holidays. (i) A tax exemption on the meal allowance of up to €5.20 per day. (ii) The increase to the severance compensation to 14 days’ salary per year of seniority in case of collective dismissal or job extinction. (iii) An increase of 50% to the employer’s tax deductions regarding an increase in salaries (wages and social contributions), for all companies that have at least complied with one of the following conditions: (i) they have signed or renewed their collective bargaining agreements less than three years ago; (ii) they have annually increased salaries above the values of the 2023-2026 Social Pact and of their application framework collective bargaining instruments; (iii) they have reduced the difference between the remuneration of the 10% of better remunerated and the 10% of less well remunerated. |
Employers must pay attention to the 2023-2026 Social Pact for the impact it will have on their labor costs, as the above guidelines can be construed as an instrument that, to some extent, allows anticipating the Portuguese companies’ labor costs in the forthcoming years.
The legal background of entry, stay, exit and expulsion of foreigners from the national territory have recently been changed. The same law that amended the legal regime for the entry, stay, exit and removal of foreigners from national territory also created the conditions for the implementation of the Agreement on Mobility between the Member States of the Comunidade dos Países de Língua Portuguesa (Community of Portuguese Language Countries - CPLP), concluded in 2021. The amendments aim to attract a new wave of immigration to the country, in a regulated and integrated way, which may contribute to its development and mitigate the labour shortage felt in Portugal. The law also created the digital nomad visa. The main measures include the following:
The new visa for work search allows foreigners to enter Portugal to look for work. The visa has a maximum duration of 120 days, extendable for 60 days. With a view to simplifying procedures, the visa integrates the scheduling with the services competent for granting residence permits within 120 days of the visa's duration, conferring the right to request a residence permit, after establishing and formalising the operating agreement within that period.
In situations where the visa applicant is a national of a State where the Agreement on Mobility between the CPLP Member States is in force, the procedure for issuing visas is facilitated. The following changes have contributed to speeding up the process: (i) waiver of the prior opinion of the Serviço de Estrageiros e Fronteiras (Foreigners and Borders Service - SEF); (ii) direct and an immediate consultation of the Schengen Information System databases by the competent services; (iii) refusal to issue visas limited to situations where there is an indication of a ban on entry and stay in the Schengen Information System for security reasons.
The new visa applies to remote work carried out by people who work in Portugal (e.g. digital nomads), by employees or independent contractors, and for entities with residence or head offices outside our country.
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