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Posted by portugalpress on February 22, 2018

The 2018 State Budget, approved by Law 114/2017 of December 29, brought some positive changes from the fiscal point of view and some people consider that 2018 is a year of fiscal relief for the following reasons:

(a) Subsistence level (mínimo de existência)

The subsistence level (net income available after the application of personal income tax), previewed exclusively for salaried employees and pensioners, is extended to the self-employed, with the exception of “other activities exclusively of provision of services” mentioned in the list of activities in article 151 of the IRS Code.

Cumulatively, the subsistence level increases from €8,500 to €8,847.72, which cannot, under any circumstances, be lower than the annual national minimum wage.

(b) Guaranteed minimum monthly income

The national minimum wage in Continental Portugal increased from €557 to €580 in 2018. In this way, the national minimum wage increases by 4.1% in 2018 – or €23 more than in 2017.

(c) Meal allowance

The minimum meal allowance is unchanged this year. However, there is an increase in the value of the meal allowance excluded from IRS to €4.77, when paid in cash – which corresponds to the amount of meal allowance in force for the state’s officers since August 2017 – and to € 7.63, when paid in vouchers or meal card.

(d) IRS

The big, and most anticipated, change proposed for the IRS in 2018 is the return to the seven IRS grades, entailing a tax relief in the middle classes of the IRS. Taking into account the above, the IRS ranks increased from five to seven, by means of the division of the second and third levels, resulting in the table below.

(e) Holiday and Christmas allowances

The parliament has not approved the extension to 2018 of the pro rata payment scheme of half of holiday and Christmas allowances created in 2013, contrary to what it has done in the last four years. In this way, the general provisions of the Labour Code are again applied.

As stated in the Labour Code, the payment of the Christmas allowance and vacation allowance must be made in full at the time provided for its enjoyment.

In practice, with the elimination of the pro rata payments, the holiday and Christmas allowances will be paid in full before the start of the holiday period and until 15 December, respectively.

By Dr Eduardo Serra Jorge

Dr Eduardo Serra Jorge is founding member, senior partner and CEO of lawyers firm Eduardo Serra Jorge & Maria José Garcia – Sociedade de Advogados, R.L., created in 1987.

In his column, he addresses legal issues affecting foreign residents in Portugal.

Faro office at Gaveto das Ruas Pedro Nunes e José de Matos, 5 R/C
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