Category A – Employment Income
The amounts borne by the employing entities concerning health insurance premiums for the benefit of their employees or their employees’ relatives are expressly excluded from taxation as employment income, provided such benefit is granted with general character.
Category B – Business and professional activities income
The threshold of annual income up to which the simplified regime of computation of taxable income may apply has been increased from EUR 150,000.00 to EUR 200,000.00.
Also, the coefficients applicable to determine the taxable income are amended, as follows:
- 0.15 applicable to the sales of goods and products, as well as to services rendered in connection with the hotel, food and drink sectors;
- 0.75 applicable to the income from the professional activities set out in the table referred to in article 151 of the IRS Code (self-employed professionals);
- 0.95 applicable to income from royalties and know-how, and to other income (investment income, capital gains and other net worth increases and rental income) obtained in connection with the business / professional activities (Category B).
- 0.30 applicable to subsidies or grants other then operating subsidies or grants;
- 0.10 applicable to operating subsidies or grants and to the remainder B category income.
Organised Accounts regime
The autonomous taxation applicable to the deductible costs related to passenger vehicles (such as rents, depreciations, fuel, etc) with a purchase price of EUR 20,000.00 or more is increased from 10% to 20%.
Carryforward of losses
The business / professional activity’ tax losses carry-forward period is extended from 5 to 12 years. This new 12-year period will only be applicable to the losses incurred in the taxation periods of 2014 and subsequent.
Category E – Investment income
The proceeds of liquidation of companies will no longer qualify as investment income, but rather exclusively as capital gain (Category G).
Category G – Capital Gains
In addition to the new qualification of the proceeds of liquidation referred to in the previous point, the definition of capital gain now expressly includes income arising from the cancellation or delivery of shares of companies merged, demerged or acquired following merger or demerger operations or the exchange of shares.
Household – dependants in case of divorce or legal separation
In situations of divorce, legal separation of persons and property, declaration of invalidity or annulment of marriage in which parental responsibilities are jointly exercised by the parents, the children (including the adopted children and the step children) provided that still minors and the minors under guardianship, are deemed to be included in one of the following households for taxation purposes:
- The household of the parent with whom the child resides, as determined by the court in the in regulation of the parenting responsibilities;
- The household of the parent with whom the child lives on the last day of the year, whenever no residence was determined in the regulation of the parenting responsibilities and it is not possible to establish the usual residency of the minor.
The surcharge of 3.5%, introduced by the 2013 State Budget Law (as a temporary additional tax) has been kept in 2014. The surcharge is applicable to all IRS brackets, in the same terms foreseen in 2013 State Budget Law.
Taxable persons with disabilities
The exclusion from taxation of 10% of the gross income of Categories A (employment income), B (business and professional activities income,) and H (pension income) remains applicable in 2014. The maximum benefit, per category, is of EUR 2,500.00.
Optional regime for residents of another Member-State of the European Union or of the European Economic Area
The option for taxation in accordance with the rules applicable to resident taxable persons when, at least 90% of all the income received is obtained in the Portuguese territory, will no longer be limited to the income of Categories A (employment), B (business and professional activities income) and H (pensions) and will now apply to all income categories.
Non-residents withholding tax: formalities
The Law foresees a simplification of the formal requirements to be complied with for the exemption from withholding tax or for the refund of tax withheld on income received by non resident taxable persons under double taxation conventions, other international law agreements or the applicable Portuguese law,.
In fact, it will no longer be mandatory to obtain Form 21-RFI to 24-RFI duly certified by the competent authorities of the State of residence of the beneficiary of the income (which, was sometimes quite difficult). According to the new rules, the taxpayer may present such RFI forms filled in but not certified provided it is accompanied by a tax residency certificate issued by the competent authorities of the State of residency attesting to the tax residence during the period in question and to the fact that the person is subject to taxation in that State.