Portuguese Budget for 2024
The Portuguese Budget for 2024 was presented in parliament with three main objectives: strengthening family incomes, promoting investment, and protecting the future of the next generations.
Despite the Prime Minister's resignation, next year's budget was approved, and the Government will remain in office until the legislative elections and the respective inauguration of a new Government.
In this article, you will learn the main changes already approved for next year, broken down by tax type.
Portuguese Budget 2024 Highlights
IRS
IRS Ranges - General Rates
In 2024, the 9 IRS rates in force since the change made in 2023 will remain, however, there will be a 3% update to the limit of each bracket, in addition to a change in taxation rates up to the 5th bracket, having the following table:
Existence Minimum
With the increase in the national minimum wage, from 760€ to 820€, the reference value for the existing minimum wage is updated to 11.480€ (14 times the national minimum wage).
Increase in Union Dues
Union contributions made within the scope of category A (dependent work) and category H (pensions) income, in 2024, will be increased by 100% instead of the 50% that was in force until 2023.
“Young IRS”
Once again, the Portuguese Budget changes the “Young IRS” regime, reinforcing the support that has been given in recent years.
This support is aimed at young people between 18 and 26 years of age (or up to 30 years, for those who have completed a doctorate), with the following income tax exemptions now applying:
100% in the first year of work, with a limit of 40 times the IAS (20.370,40€);
75% in the second year of work, with a limit of 30 times the IAS (15.277,80€);
50% in the third and fourth year of work, with a limit of 20 times the IAS (10.185,20€);
25% in the fifth year of work, with a limit of 10 times the IAS (5.092,60€).
“Former Residents”
The current exclusion from taxation on 50% of the total income of category A (dependent work) and category B (business and professional income) will also apply to taxpayers who become tax residents in Portugal in the years 2024 to 2026 if they have not been considered tax residents in Portuguese territory in the previous 5 years.
Non-Habitual Residents (NHR)
The State Budget for 2024 revokes the regime that was in force, as of January 1st, 2024, with the safeguard of maintaining the applicability of the regime for taxpayers, who on December 31st, 2023, are registered as non-habitual residents.
Additionally, the possibility of joining the Non-Habitual Resident regime is provided until March 31st, 2024, referring to the year 2023, for those who meet the necessary conditions on December 31st, 2023.
Tax Incentive Scheme for Scientific Research and Innovation
This is a new regime created for 2024 and follows the end of the NHR regime, maintaining the application of the special rate of 20% of income on category A (dependent work) and category B (business and professional), for 10 consecutive years, as well as the exemption on income from dependent work, business and professionals, capital, property and capital gains, obtained abroad.
However, this regime only applies to taxpayers who become tax residents in Portugal and who earn income that falls into the following situations:
careers of higher education and scientific research teachers, including scientific employment in entities, structures, and networks dedicated to the production, dissemination, and transmission of knowledge, integrated into the national science and technology system;
qualified jobs within the scope of contractual benefits to productive investment;
research and development jobs, for workers with doctorates, within the scope of SIFIDE.
Provision of Housing by the Employer
These types of situations, being considered income in kind for workers who enjoy this benefit and, consequently, taxed in terms of IRS, will, from 2024 onwards, benefit from an exemption from IRS and Social Security, up to the limit value of rents provided for in the “Lease Support Program”, applying exclusively from January 1st, 2024 to December 31st, 2026 and for the use of a house as a permanent home, located in Portugal.
Profit Sharing
In 2024, there will be an IRS exemption of up to 4.100€ (5 times the amount of the national minimum wage) for the amounts allocated to workers as a share in the company's profits.
However, this is a progressive exemption, in the sense that, even though exempt, this income will be considered when determining the IRS rate applicable to the worker's remaining income.
For this exemption to apply, however, the employer must have, in 2024, carried out a salary update in a percentage equal to or greater than 5% of fixed remunerations, per employee.
Cost Allowances and Compensation for Traveling in Own Vehicle
In 2024, the exemption values/limits (IRS and Social Security) that have been in force for many years will be updated, in the following terms:
travel in your own vehicle: 0,36€ per km, increases to 0,40€ per km;
national travel:
workers: 50,20€ becomes 62,75€;
members of the Government and comparable individuals in the private sector: the value of 69,19€ remains the same.
traveling abroad:
workers: 89,35€ becomes 148,91€;
members of the Government and comparable individuals in the private sector: 100,24€ becomes 167,07€.
Training and Education Expenses
In 2024, education deductions will include expenses related to professional training, however, the overall limit in force will remain unchanged (30% of expenses on education and professional training, with a limit of 800€).
IRC
IRC Rate for Start-ups
Start-ups, in 2024, will enjoy a reduced IRC rate of 12,5%, on the first 50.000€ of taxable income, if they meet the following requirements:
are innovative companies with a high growth potential or which have been recognized as suitable by ANI, in the practice of research and development activities or certification of the recognition process for companies in the technology sector;
have completed at least one round of venture capital financing or through the contribution of equity or quasi-equity instruments by, in particular, business angels;
have received investment from Banco Português de Fomento, funds managed by it or its affiliated companies, from one of its capital or quasi-equity instruments.
Autonomous Taxation Rates
In 2024, the following changes will come into effect for charges for passenger and light goods vehicles referred to in paragraph b) of paragraph 1 of article 7 of the Vehicle Tax Code:
Additionally, in 2024, charges relating to electric vehicles will not be subject to autonomous taxation, regardless of their acquisition cost.
Intangible Assets
The acquisition cost recognized as Goodwill acquired in a combination of business activities is now accepted only during the first 15 years of taxation. Until now this same cost was accepted during the first 20 years.
Property Depreciation
For properties that are covered by the housing tax incentive mentioned above, it is now possible to carry out annual depreciation at a rate of 4%, whereas until now the maximum annual depreciation rate was 2%.
TAX BENEFITS
Tax Incentive for Salary Enhancement
It is no longer mandatory for salary increases to be determined through a dynamic collective labor regulation instrument (IRCT), with the minimum increase for 2024 set at 5% (previously, 5,1%).
It is clarified that the salary range must be calculated through the ratio between the portion of the fixed annual remuneration of the 10% of workers best paid with the total and the portion of the fixed annual remuneration of the 10% of workers least well-paid with the total.
Charges incurred with members of corporate bodies are now also eligible for the benefit, with workers who are part of the household of partners holding a qualified majority in the company's capital being ineligible.
The amount of the benefit remains in relation to 2023, with a 50% increase in expenses related to the salary increase.
Extraordinary Support Regime for Charges Incurred with Electricity and Gas
Like what happened in 2023, the 20% increase in expenses incurred with electricity and natural gas remains in place when calculating taxable profit.
Tax Benefits for Productive Investment and RFAI
The salary costs resulting from the creation of jobs for employees with a master's degree or a doctorate become relevant applications, and the jobs created must be maintained for a minimum period of five years (or three, in the case of SMEs).
In the case of RFAI, salary costs and investments in intangible assets cannot exceed 50% of relevant applications when companies do not qualify as micro, small, and medium-sized companies.
Tax Regime to Incentive the Capitalization of Companies
The annual deduction is now calculated by applying a variable rate, corresponding to the average Euribor rate for 12 months in the tax period, plus a spread of 1,5%, or, if the taxpayer is an SME or Small-Mid Cap of 2%.
To calculate the tax benefit, the amount of eligible net increases in equity now includes the increase in the year itself and the six previous periods (currently, the year itself and the last nine).
The deduction is increased by 50%, 30%, and 20% in the tax periods of 2024, 2025 and 2026, respectively.
VAT
End of application of the 0% VAT rate on the food basket.
The VAT exemption applicable to the transmission of fertilizers, soil improvers, and other products for feeding livestock, poultry, and other animals, when used in agricultural production activities, is extended until December 31st, 2024.
Juices, nectars, and carbonated waters, when supplied in catering activities, are now covered by the intermediate VAT rate.
IMI (MUNICIPAL PROPERTY TAX)
In 2024, there will be an exemption for urban buildings built, expanded, improved, or acquired for consideration, when intended for rental for housing, and will only apply when the rental is for the tenant's permanent residence.
IMT (MUNICIPAL TAX ON ONEROUS TRANSACTIONS ON PROPERTY)
The taxation brackets to apply the IMT rate are updated by 5%, applicable to the transfer of urban properties, or autonomous units of urban buildings, intended exclusively for housing.
Due to this change, the IMT exemption limit is updated to 101.197€ (currently 97.064€), in the case of purchasing an urban building or an autonomous fraction of an urban building intended exclusively for personal and permanent housing.
IEC (SPECIAL CONSUMPTION TAXES)
Tax on Alcoholic Beverages and Non-Alcoholic Beverages with Added Sugar (IABA)
Beer:
A generalized increase of around 10% was introduced. There is a reduction in the thresholds for the percentage of alcohol volume for taxation under this tax.
Non-alcoholic drinks with added sugar
There will be a generalized increase of around 10%.
The rates are now as follows, depending on the sugar content and additional sweeteners:
1,16€ per hectoliter, if less than 25 grams per liter;
6,95€ per hectoliter, if between 25 and 50 grams per liter;
9,26€ per hectoliter, if between 50 and 80 grams per liter; It is
23,18€ per hectoliter, if equal to or greater than 80 grams per liter.
IUC (SINGLE CIRCULATION TAX)
A generalized 3% increase in the IUC value was introduced.
Light passenger and mixed-use cars with a gross weight not exceeding 2500kg registered between 1981 and June 2007 and motorcycles, mopeds, tricycles, and quadricycles registered since 1992 suffer an increase in IUC due to the inclusion of the CO2 emissions component in your calculation. A maximum annual increase of 25€ per vehicle is established.
ISV (VEHICLE TAX)
An across-the-board 5% increase in tax rates was introduced.