Chapter 1 (Part 2) Flashcards
(23 cards)
Tax base (material scope)
the amount of revenue/wealth on which tax authorities can levy a tax (enforcing the requirement for businesses to pay it)
Tax base for ex residents
50% of the employment income and the professional income of taxpayers are excluded from taxation for a period of 5 years, provided that they:
- become fiscally resident by 2026
- not resident in portuguese territory of the previous 5 years
- have been resident in portuguese territory
Youth personal income tax
category A and B income earned by taxable persons up to age 35 who are not considered dependents shall be partially exempt from personal income tax for the first 10 years of earning the income
Personal scope of the tax
Passive subjects/taxable persons: natural persons residing in portuguese territory AND those who obtain income in portuguese territory
Personal scope tax in case of a household
- each of the spouses living together are allowed to submit a separate tax return, listing the income earned by each spouse PLUS 50% of the income of the dependents that are part of their household (SEPARATE TAXATION)
- they can also choose to submit a joint tax listing the income obtained by all members of the household (JOINT TAXATION)
Principle of territoriality (subjective sense) - State of Residence
residents in portuguese territory are liable to IRS for all their income, including that arising outside the territory (worldwide taxation principle)
Principle of Territoriality (objective sense) - Source State
non-residents are liable to IRS on income and gains obtained in Portuguese territory
Who is considered a resident in Portuguese territory…
- having remained there for more than 183 days, consecutive or interpolated (in any period of 12 months)
- housing with the intention to reside
- working on a ship or aircraft, and is employed by a portuguese-based company
- portuguese citizens working abroad for the portuguese government
Non-habitual residents
individuals that have just become tax residents in Portugal, and weren’t considered residents in Portugal in the previous 5 years
How are non-habitual residents taxed…
- flat tax rate of 20%
- 10% tax rate on foreign pensions
- this NHR regime is only available for 10 consecutive years (CANNOT BE RENEWED)
Incidental enumeration or Fringe benefits
all rights, benefits or privileges not included in the main renumeration
Examples of incidental renumeration
- Life insurance and contributions to pension funds
- Residence allowances, the use of a house provided by the employer
- Interest-free loans or loans with lower interest rate
- Trips that have been paid for by the company
- Gifted a car for your own personal use (Personal use of a motor vehicle)
How to calculate the amount of income related to the personal use of the vehicle?
Annual income = 0.75% of the market value(*) of the vehicle * months of use in a year
Market value = price of acquisition - (price of acquisition * depreciation coefficient)
Difference between personal use of a motor vehicle and ACQUISITION of a motor vehicle
Personal use: company offers you a car for PERSONAL USE, you can do anything with it, its for your own use
Acquisition of motor vehicle: company sells you the car for lower than the market price
(both situations are considered renumerations)
4462.15
Withholding renumerations
- to withhold *
- for purposes of withholding you are going to add to the salary all incidental renumerations that is paid in cash, there is no withholding for incidental renumerations paid in kinds
- must round down to nearest Euro unit
Economic double taxation
occurs when the same income is subject to the same tax in the same fiscal year
Difference between economic taxation and legal taxation
- Economic double taxation happens when the same income is taxed twice at different levels (usually between a company and its shareholders)
- Legal double taxation happens when the same person/entity is taxed on the same income in two different countries
Double taxation mechanism only applies to…
DIVIDENDS
Final flat rate
an income that is subject to a final flat rate means that the withholding rate and the tax rate is the same
