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Personal income tax reform
The law is 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 law 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 law include:
Changes to the tax residence definition
The new rules may 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
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. An innovative compromise was achieved to condition the refund of the extraordinary surtax in 2016 to the good performance of PIT and VAT government revenues.
Deadlines for the submission of tax returns
This simplification measures are welcomed together with other related measures covering reduction/reshuffling of certain tax declarations on employers.
Tiago Cassiano Neves
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