[ad_1]
The reduction of the IRS withholding tables announced in relation to the State Budgets for 2021 promises to anticipate the entry of 200 million euros into the pockets of taxpayers in 2021, a piece of pie of fiscal measures with the same objective and that it also includes lowering the VAT on electricity to minimum consumption levels (150 million euros) and the refund of VAT spent on accommodation and catering in spending in the same sectors (another 200 million euros).
In the case of the IRS, the measure will entail lower refunds the following year, in 2022, and – due to the impact it may have on the final settlement of the tax to be paid on earned income next year – it will not benefit all taxpayers.
What reduction is this in the withholding tax tables?
To begin with, there is no reduction in income tax, as the Executive has recognized. What the Government will do next year is to reduce the margin of what it collects monthly, directly from the salary (withholding at source), of employees or independent workers who are not exempt from the IRS. This charge is currently disproportionate to reality, that is, there is a high margin of taxpayers who pay more to the IRS per month than they should, hence the annual refunds at the time of the settlement of accounts. The Secretary of State for Finance recognizes the deviation, but Mendonça Mendes rejects the thesis that the total of the refunds made in the assessment of the tax in the following year, around 3,000 million euros, are overcharged (a large part of this value corresponds to deductible expenses).
The Government claims to be making a constant reduction during the last three years, by updating the withholding tables, and says that this has already resulted in not withholding 500 million euros; Most of this amount is due to adjustments resulting from minimum stock updates, salary increases and the relief in the IRS introduced in 2018. But there was also a correction of 100 million euros to this deviation, to which now add 200 million, just next year.
Will this change in the withholding tables be reflected in the monthly salary amount or only at the end of the year?
Monthly. Since there is a change in what is withheld when wages are paid, some taxpayers may feel a difference as soon as they receive wages. The Secretary of State for Tax Affairs even said that, contrary to custom, the withholding tables will be released in December, “just in time to begin processing in January.” But in 2022, when it’s time to turn in the IRS, the refund won’t be as high anymore.
Will the revision of the withholding tables affect all taxpayers?
No, the Government’s focus is, in this “particularly difficult period for families” -as described by the Minister of Finance-, on a very specific segment: dependent workers with one or two earners in the household and dependents. There are four million, of which about 2.5 million pay taxes, explained António Mendonça Mendes. It is in this group that there is, assumed the governor, “a large deviation between withholding taxes and due in the end.” The criterion, he also explained, is “where there is the greatest mismatch and where policy measures (such as increases in wages) justify making these updates.”
And how much more will it mean at the end of the month?
It varies a lot, but it won’t be very significant. In the best case, 17 euros of monthly salary (200 euros a year divided into 12 months), according to government accounts. Although it began by saying that it would be a measure with a “significant” impact for taxpayers, the Secretary of State for Tax Affairs ended by explaining that the net monthly earnings “will vary according to the income of each person. We can talk about 200 euros per year or variations that range between 12 and 14 euros per year ”. Once the invoices have been made, each month, what happens to each taxpayer will be between 17 euros and two or one euro.
Will those who earn less have less retention?
The Government wants to differentiate the reduction of the tax withholding tables to better benefit lower-income taxpayers. But at the end of the day, as they receive less, the withholding tax is also less significant, so from an absolute point of view, it will not be the lower income that the IRS will pay to those who will have more dispatch this way. . On the other hand, and when we reach the highest incomes from 3,000 gross euros per month, the impact of tax withholdings is less because there is more non-labor income. Furthermore, it is in these segments where expense deductions are worth more in reimbursements, in addition to withholdings at source.
Who has pensions as income is also covered by the measure?
Not in principle. This was clarified by the Secretary of State at the press conference to present the State Budgets, when he said that, “in the case of the pension retention tables, there is an almost perfect correspondence between what is withheld and what is paid. A slight variation, which was not due to salary updates or fiscal policy measures, would cause a change in the situation of these pensioners, who would probably begin to pay if there was an inappropriate intervention in these tables. When taxpayers approach the neutrality threshold, between withholdings and refunds, lowering the IRS tables next year, giving a greater monthly break, runs the risk of putting these taxpayers to pay the tax authorities the following year.
Could all the money withheld be returned?
The Secretary of State for Finance was adamant in rejecting the thesis that the 3,000 million euros of annual amortizations from the IRS correspond to taxes collected more than the previous year, through withholdings. The deductible expenses that are deducted from the tax also contribute to the calculation of these reimbursements, but also to the refund of this tax decided by each municipality, in addition to other income that enters into the final calculation of the tax to be paid. It is assumed that this excess, the result of successive changes in the IRS, which took time to be reflected in the tables, could range between 600 million euros and 1,000 million euros per year.
Is this adjustment temporary or will it remain?
It will remain. “This adjustment is not made in an extraordinary way, but on a permanent basis and it continues what the Government has been doing in recent years and which has allowed a smaller difference between the tax withheld and the tax payable,” guarantees António Mendonça. Mendes.
