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Draft Bill on personal income tax

27 Oct 2014

The Draft Bill is largely based on the recommendations incorporated on prior Reports by the Commission for the Personal Income Tax Reform appointed earlier this year. Taxand Portugal provides an overview of the proposed amendments for 2015.

The Commission mandate was focused on 3 main areas for improvement: tax simplification; enhancing social mobility and; protection of the family. The reduction of the tax burden was not included on the mandate, although some of the measures now included in the Draft Bill pave the way to a reduction albeit shy of the overall tax burden on individual Portuguese tax residents.

The most relevant areas of interest of this Draft Bill include:

Changes to the tax residence definition
The new rules are likely to affect companies with inward and outward expatriates during a taxable year. The proposed changes simplify some issues namely on the entry date for inward expatriates but some concerns on exit situations remaining, as tax controversy issues on the current tax residence rule and interaction with tax treaties tie-breaker rule may continue to be a problematic topic.

Progressive tax rates for 2015
Progressive rates schedule up to 48% is maintained to all income not subject to final withholding tax or flat rates. The maintenance of the progressive tax schedule for 2015 is an indication that the past tax hikes resulting from the budgetary adjustment programme remain in place.

Deadlines for the submission of tax returns
The Draft Bill proposes the standardisation of the deadlines for the submission of the tax declarations - 15 March to 15 April for employment and pension income and 16 April to 16 May in all other cases.

Discover more: Draft bill on personal income tax for 2015 >

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Fernando Castro Silva
T. + 351 21 891 32 32

Tiago Cassiano Neves
T. +351 218 913 232

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Taxand's Take

The simplification measures are welcomed together with other related measures covering reduction/reshuffling of certain tax declarations on companies operating in Portugal.

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