Personal Income Tax (PIT)

Youth PIT (“IRS Jovem”)

There is an update of the tax regime applicable to income earned by young workers aged between 18 and 26 years who are not dependents. The following amendments are introduced:

•  The regime shall cover also income from Category B (self employment/business income) and not only income from Category A (employment income) as before;
• Increase of the limit age to 30 years, in case of conclusion of a PhD;

• The exemption applies during the first five years following the conclusion of the eligible degree;

• The exemption is of 30% of the income earned in the two first years; 20% in the two following years; 10% in the last year, capped respectively at 7.5 * Social Support Index (“Indexante dos Apoios Sociais” or “IAS”), 5 * IAS and 2.5 * IAS;
• The exemption can apply in non-consecutive years, provided that the taxpayer is not aged more than 35 years;
• Information on the taxpayers eligibility for the exemption is made available by the tax authority in the automatic PIT return, or in the prefilled PIT return.

The new exemption rules apply to taxpayers which first year of income earning (following the conclusion of a cycle of studies) is 2021 or a following year. Taxpayers that have opted for the regime in 2020 can benefit from the new rules for the remaining period, with the necessary adjustments.

Capital gains on securities

Mandatory aggregation

The positive balance between capital gains and capital losses arising from the transfer for consideration of shares and other securities is mandatorily aggregated  and taxed at progressive rates if all of the following conditions are met:

• The assets have been held for less than 365 days;
• The taxable income of the taxpayer including the balance of the capital gains and capital losses amounts to or exceeds EUR 75,009.
• These rules apply also to the balance between capital gains and capital losses subject to the aggravated 35% tax rate (country, territory or region subject to a clearly more favorable tax regime).

These rules apply only to income earned from 1 January 2023 onwards.

Assessment method

First in first out (FIFO) rule shall apply in case of a disposal of securities deposited in more than one credit institution or financial company, with this rule applying with reference to each of these entities. Credit institutions and financial companies involved in security-related transactions are required to provide a document to the taxpayers, by 20 January of the following year, identifying the amount, date, historical acquisition value and sales value of the securities disposed of.

In case the date and historical acquisition value are unknown, the acquisition value corresponds to the lower quotation amount in the two years prior to the sale, unless a lower amount is declared.

Acquisition by means of an exempt donation

The acquisition cost of securities acquired by means of a donation that is exempt from Stamp Tax will correspond to the amount considered for the purpose of the assessment of said tax, in the two years prior to the donation.

Capital gains derived from trusts 

The transfer for consideration of rights on trusts, including the transfer for consideration of the beneficiary position, qualifies as a capital gain subject to taxation.

The rate is 35% in case of trusts domiciled in countries, territories or regions subject to more favorable tax regimes.

A trust is considered as having its domicile in a country, territory or region subject to a more favorable tax regime if the head office or place of effective management of the trustee is domiciled therein. If the trustee is a natural person, the same applies if he is resident for tax purposes therein.

Capital gains derived from the transfer for consideration of rights on trusts are considered as having Portuguese source if the assets of the trust are comprised directly or indirectly in more than 50% of real estate or rights in rem of real estate located in the Portuguese territory. Reference is made to any moment of a period of 365 days prior to the transfer.

Standard rates

There is a split of the third and sixth income brackets. There will be a reduction of rate in the lower amount of those brackets. The table with the general PIT rates shall include nine income brackets as follows:

Subsistence level

There will be an increase by EUR 200 of the amount of the subsistence level in the PIT to be assessed in 2022 concerning income earned in 2021.

On the computation of the PIT concerning income earned in 2022 the previous rules will apply. This will correspond to the computation rules foreseen in the legislation (1.5 * 14 * IAS) or any other rules enacted in the future. 

It is established that the Government will assess the introduction of changes to the “subsistence level”, with a view to continue to increase its value and correct elements of regressive taxation.

Assessment of the adequacy of withholding tax rates

It is foreseen an assessment of the introduction of a mechanism that allows applying a withholding tax rate that is more adequate to the taxpayer’s situation, in those cases where an increase of salary results in a lower amount of net monthly income than the one earned previously.

Deduction for requesting invoices

There is an increase to 35% (currently, 22.5%) of the deduction concerning the VAT amount incurred with the acquisition of veterinary medicines.

Civil custody

People who are covered by civil custody are currently regarded as dependents for tax purposes. This rule will not apply in case a person (i) was until adulthood under custody of any of the members in charge of the household, (ii) is not aged more than 25 years and (iii) does not earn annual income exceeding the monthly minimum wage.