Study on the main changes to the IRS
The tax team presents the study on the main changes to the IRS, as part of the 2022 State Budget Proposal. Read the document here [Portuguese only], with the following parts:
- Fiscal impact of changes to tax brackets
- Portugal's position compared to other European countries
- Capital gains, the impact of progressivity and the European context
- How will the tax burden in 2022 compare with that of 20 years earlier (2002) on the same income?
General comment
The tax part of the Draft State Budget for 2022 presents a very different picture to the one that has been drawn up by the countless reports of planned changes in the media in recent weeks, especially with regard to Personal Income Tax (IRS). Any increase in this tax, which has seen countless increases over the last 20 years, always attracts a great deal of attention and is likely to stir up tempers, especially when it breaks, even if still timidly, with principles that have been stabilised in tax law, such as the optional inclusion of income from capital and capital gains. The compulsory inclusion of capital gains from shares and other securities in the strict terms proposed will not be a major change.
But if recent tax history in Portugal has taught us anything, it's that once a first tax dam has been broken, the flooding of yet another protected area always ends up spreading and is rarely completely reversed.
For all these reasons, and because at Morais Leitão we cultivate a taste for and interest in delving deeper into issues and providing our clients with more knowledge and added value, we decided to dedicate our now traditional Guide to the State Budget Bill to the IRS. We have done so with the aim of offering a comparative analysis of the tax burden on personal income between Portugal and some EU member states that we believe are more representative. This analysis will also include a comparison between the current IRS tax burden and the one that existed precisely two decades ago, so that we can appreciate the exact measure of the large tax increase that has taken place in the space of just one generation. In this way, we hope to contribute to as rigorous and informed a discussion as possible in this controversial but fundamental area for the economy and private initiative.
Morais Leitão is available to provide any further further clarification on these matters. Please contact our tax team.