The government’s proposal for the State Budget for the coming year, 2022, was adopted by the Council of Ministers on Saturday, October 9th. Finance Minister Joo Leo handed the paper to Parliament two days later, at 11:40 p.m. on Monday.
«It is an investment-friendly budget, aimed at the middle classes and focused on young people, keeping the characteristics of past budgets, such as the bet on the NHS, the strengthening of social protection, and the growth in worker and pensioner income,» Prime Minister David Cameron stated. And the assurance of accurate accounts.
As in previous years, the government drafted the State Budget proposal in consultation with the parties to the left of PS. Before the paper was given, we were in the last stages of talks.
The PCP, or Communist Party, has indicated that it will be adamant in protecting initiatives like as labor law amendments, pension and civil service salary increases, and energy cost restrictions. The objective for the Left Bloc is to increase investment in the National Health Service by removing the exclusivity rule for physicians and ending the penalization of long-term workers’ pensions. After a breakdown in discussions last year that resulted in the Left Bloc voting against the State Budget Proposal, the Prime Minister has declared that he is optimistic in recovering the Left Bloc’s support, although no left-wing party has yet committed to making the document feasible.
The draught State Budget 2022 was still being put together in the aftermath of the Covid-19 pandemic’s financial impact. Nonetheless, the government has updated the key indicators higher, predicting that the country would regain its pre-pandemic wealth levels in 2022. The government anticipates the economy to grow by 5.5 percent next year (up from 4.8 percent this year) and the deficit to shrink from 4.3 percent to 3.2 percent of GDP, the same level as in the Stability Programme. The government forecasts a reduction in public debt to 122.8 percent of GDP and 0.9 percent inflation. Unemployment is predicted to drop from 6.8% at the end of 2021 to 6.5 percent in 2022, marking the lowest level since 2003.
Measures in general
Pensions are automatically updated in line with inflation and GDP. Pensions for the poorest people have seen a huge boost.
IRS tax brackets are being split, with adjustments to the levels above the third bracket and the addition of two new brackets with rates of 26.5 percent and 43.5 percent.
Short-term capital gains on assets, such as shares or bonds held for less than a year, must be reported to the IRS by people in the final IRS bracket.
The duration of the Young Persons’ Income Tax (IRS Jovem) has been extended from three to five years. Workers who are self-employed are eligible for a partial tax exemption.
Extension of the Regressar Program, which permits persons who have emigrated and desire to return to Portugal to pay a reduced personal income tax until 2023.
Incentives and measures for businesses
PEC (Special Payment on Account) is being phased out for all businesses.
In the first half of 2022, the Fiscal Incentive to Recovery (IFR) will be established to encourage private investment. The highest amount that may be deducted from the IRC collection is €5 million. Companies that invest more than the average over the past three years can deduct up to 25% of their investment. In exchange, the government demands that employment be kept for three years and that payouts be prohibited.
For the exploitation of intellectual property, including the sale of software, the IRC exemption on income from patents increases from 50% to 85%.
Companies facing tax execution procedures will be able to take advantage of a 60-month payback scheme.