Taxpayers who, in 2024, had capital income, such as interest, and income not subject to tax – daily allowances or meal allowances-, greater than 500 euros will have to declare them to the IRS.
This reporting obligation is part of an amendment to the IRS code, introduced by the State Budget law for 2024 (OE2024). Its aims are not to create additional tax burdens, but to bring to the annual IRS declaration a more general picture of the income obtained by taxpayers, facilitating the process of those eligible for benefits, including income support.
Lourenço Gouveia Fernandes, from law firm PARES, emphasises that the carry-forward of this income will serve, “from the outset, enable the Tax Authority to collect data namely, for the purpose of creating systems for the taxation of wealth and other unjustified asset increases, provided for in article 89-A of the General Tax Law [manifestation of wealth].”
The IRS code that determines that taxpayers must submit, annually, “an official model declaration, relating to all sources of income from the previous year and other information relevant to their specific tax situation, ” a paragraph was added that provides that, for this purpose, “income subject to non-included withholding taxes and income not subject to IRS are mandatorily reported, namely, income subject to non-inclusive withholding taxes and income not subject to IRS, when greater than 500 (euros), as well as assets held in countries, territories or regions with a more favourable tax regime.”
Although they consider that the wording of the rule is not entirely clear and that it should still be clarified by AT or in the instructions of Modelo 3 (annual IRS declaration), the tax experts believe that the minimum limit of 500 euros applies to all types of individual income.
This will mean that a person who in 2024 has had 450 euros in interest (from deposits or savings certificates, for example) will not have to fill in this field, but if they have had 600 euros they will have to declare it.
At stake are, as Samuel Fernandes de Almeida, from MFA Legal, says, the meal allowance within the legal limits, or income in kind not subject, as is the case, for example, of the assignment of a vehicle to the worker without a written agreement. Allowances are also income not subject to IRS.
Taking into account that the limit of the meal allowance not subject to taxation is six euros, when paid in cash, Luís Leon, from the consultancy Ilya, says that this will mean that most workers who receive this allowance will have to report it to the IRS. Because, even if they are of a lower daily value, they will easily exceed 500 euros.
In parallel with the scope, they refer to the difficulty that taxpayers will have in fulfilling this reporting obligation (especially in the case of interest), which, believes Samuel Fernandes de Almeida, “will be an additional factor of complexity and bureaucracy” aimed at crossing elements that the AT somehow has in its possession – since banks are already obliged to report and deliver to the AT the amounts they withhold as discharging rates.
“In terms of the feasibility of this rule, our biggest concern is related to its possible attempt to apply to non-resident citizens and nationals of a European Union country who are required to submit an IRS return in Portugal, for whom this obligation may result in a disproportionate effort,” says Lourenço Gouveia Fernandes.
Luís Leon underlines the case of interest, noting that, as its payment is subject to a discharge tax (which is ‘charged’ by the bank or entity paying these income at the time they ‘fall’ into the customer’s account), most people will have no idea how much they received throughout the year. However, this can be overcome by asking the bank for a tax and income statement.
Lusa questioned the largest banks operating in the national market about the availability of this type of statement and possible costs. An official source from “Caixa Geral de Depósitos, confirmed they provide this service with no additional costs to the customer.”
Millennium BCP also said that the OE2024 measures referred to do not imply changes to the tax returns that the bank already makes available to customers. “If a customer wants to access their income statement, they can always request the declaration of capital aggregations, at no cost,” he added.
Media outlet, Lusa, is still waiting for responses from the other banks.
Lourenço Gouveia Fernandes believes this reporting obligation does not imply any additional payment of IRS because it is income that has already paid tax (via the withholding tax) or is not subject to taxation (in the case of daily allowances or meal allowances within the legal limits).
“This is a reporting obligation and, although they are now declared, this income should not be subject to additional taxation,” said the lawyer, adding that the regime may end up having “little applicability,” as its purpose “seems to be, essentially, to allow better control of situations of manifestations of wealth and other unjustified asset increases,” there is a risk that the AT “does not have the technical and human means to carry out this verification in relation to all the IRS declarations submitted.”
This amendment to the IRS Code also requires the declaration of assets held in the so-called ‘offshores.’ In this case, Lourenço Gouveia Fernandes understands that the measure aims to “provide the AT with more information that can be useful in combating tax evasion and applying anti-abuse rules, as well as reversing the burden of proof in case of omission.”
This new reporting obligation will have to be reflected in the ordinance that approves the models of the annual IRS declaration – which must be published every year.
Lusa asked the Ministry of Finance if the amounts in question will be pre-filled in the IRS declaration, and whether it is up to taxpayers to validate them or not (as they do with the amount related to income from work, rent, or pensions). So far, they have not received a response.
Samantha Gannon
info at madeira-weekly.com
