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Next year, the Portuguese will have more disposable income at the end of the month through a reduction in the withholding rate at origin. The measure is contained in the proposal for State Budgets for 2021 (OE2021), delivered to Parliament earlier this week and the Government has announced that it will have an impact of the order of 200 million euros in the pocket of Portuguese families. The Association for the Defense of the Consumer (Deco) has already reacted to the measure and warns that less discounts on your salary does not mean less tax, which will be exactly the same to pay if there were no changes in withholding rates. The difference, he emphasizes, is that taxpayers will begin to advance less money to the State on a monthly basis, closing the gap between the amounts withheld and those they will have to pay when they settle accounts with the tax authorities in 2022.
“The tax payable will be exactly the same as it would be if there were no changes in the withholding rates. The main difference is that instead of deducting more money each month and settling accounts with you the following year, when you file the IRS return, you now advance less money to the State each month and the agreement continues to earn the following year, after the delivery of the IRS declaration ”, Deco advances in reaction to the measure announced by the Executive, concluding that“ in practice, the amount that will be delivered to the State, as IRS, does not undergo any change ”. .
Deco emphasizes that if the reduction of the withholding tax rate that will apply during the year 2021 is confirmed, this means that the part that employers deduct from employees each month can be reduced.
“The withholding rate that is applied to each worker depends not only on their salary level, but also on their personal family situation: marital status, place of residence (peninsula or regional), number of taxpayers who make discounts and number of dependents. In 2020, the retention rates applied to salaries range between 0.1 and 45.1%, ”explains this Association.
The objective of the measure is, therefore, to increase the monthly disposable income of dependent workers with this tax instrument, which will bring the tax charged to taxpayers closer to the amount actually owed, resulting in lower returns from the IRS when accounts They are settled with the tax authorities. A detour that, according to the Executive, will be addressed with “greater intensity” next year.
With the new update of the tables, an increase in the liquidity of families is expected by 200 million, in an effort that the SEAF says will be very aimed at dependent workers with households with one or two income holders (universe where there is a mismatch between withholding tax and the amount to be paid by the IRS).
According to António Mendonça Mendes, there are 2.5 million Portuguese in this situation, aware that, on average, the tax relief will be 2%, “which will vary greatly depending on the income bracket.” The SEAF assured that the tables will be published in December, in time for the wages and salaries for January to be processed.
In government accounts, the reduction of retention rates will guarantee “significant” gains: “we can speak of 200 euros per year, or variations of 12 to 14 euros per year.” This is a neutral measure from the budgetary point of view, since withholding tax acts as an advance on the tax that dependent workers and pensioners pay to the State through the Internal Revenue Service that they have to pay. But, according to the Government, “with a great impact on the disposable income of households.”
Deco also recalls that when settling accounts with the tax authorities in 2022, lower withholding rates will mean lower IRS refunds and even situations where taxpayers will have to pay more taxes.
“Both hypotheses are possible. If, in fact, you advance less money to the State in each month of 2021, the settlement of accounts performed in the following year, after the filing of the IRS return, may reveal that you still have money to pay or that the refund to receive it will be shorter. than usual ”, he explains, adding that“ even so, the calculations will always take into account the expenses with health, education, housing and other deductible expenses that the household has made in 2021 ”.
However, Deco concludes, “it is already known that, for many families, 2020 is being a year of retraction in consumption and reduction of some expenses that the moratoriums allowed to postpone, so there may be large changes in the amounts to discount in the 2021 IRS ”.
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