The New Year brings a new budget and it’s time to make a brief analysis of the changes that may affect you or your business, in terms of your IRS.
INDIVIDUAL DECLARATIONS First of all the government will from now on assume that all married people will deliver the tax return separately, something that was not possible until now in Portugal, despite is common in other countries. This option in many cases it is not favourable to the tax-payer so it’s advisable to make a tax simulation prior to deciding whether the tax declaration should be submitted together or not.
The IRS allowances are now only accepted if they have your NIF number on the invoice. You can start immediately asking for invoices, as part of these will be deducted on your IRS bill as below.
FAMILY EXPENSES (clothing, grocery, fuel, etc.) 35% of each invoice, with a maximum of €250 per taxpayer (for single parents deduction is 45% up to €335)
EDUCATIONAL EXPENSES 30% of education expenses and training of any household member, with an overall limit of €800 per year. Books and textbooks are also deductible.
HEALTH EXPENDITURE 15% of the costs of any household member to an overall limit of €1,000. The private health insurance premiums are from now on allowed to be included.
HOME EXPENSES 15% of the interest on your mortgage, up to a maximum of €296 per year; or 15% of your rent up to € 502 per year. These amounts are higher in case of lower income.
FOOD PENSION In case you are divorced and pay a food pension, you can now deduct up to 20% of the pension without limit on your IRS.
CHARGES WITH RETIREMENT (SENIOR) HOMES 25% of the cost, with a limit of €403.75 per year.
VAT As per the previous years, all your invoices with hairdressers, car repair, restaurants and accommodation can be deducted on your IRS. This deduction is based on 15% of the VAT on each invoice, with a limit of €250.
And who needs to submit a tax return? Everyone that is resident in Portugal or being non-resident have income with Portuguese source, except those which have pension or employment income, from Portuguese source and this does not exceed €8.150. Please contact us if you are unsure whether you are resident or not for tax purposes and need to fill an IRS declaration.
Although the majority of these measures will only be felt in 2016, when you submit your IRS for 2015, it’s important to take notice of these changes, so you don’t get caught by surprise. But please note that this is just a summary, there are many other alterations and some good news, for instance the retention on source for employment income of Portuguese source, will be lower this year.
On another note, all landlords will necessarily have to be online and start declaring their rental receipts through the tax Portal, speak with us and we can help you with that.
Last but not least; sole traders also have some significant changes in 2015, ie:
- Those on the simplified regime can deduct social security contributions, when these exceed 10% of their gross income
- Who is now starting an activity as sole trader, can get a 50% IRS reduction in the first year and 25% in the 2nd, if they have not ceased activity during the previous 5 years
- Any sole trader can now opt in or out from the simplified regime annually
- All of those with organized accountancy shall be able to deduct expenses for travelling and accommodation
There are many other alterations that may affect your IRS and it may come as a surprise that filing a correct tax return in Portugal can save you money. Submitting a tax declaration does not necessarily mean that you pay tax, but may avoid you paying fines for non-compliance and offer you peace of mind.
Please feel free to visit us to discuss your personal situation and avoid any late submission fines.