Are there any transitional social security measures to mitigate the impact of COVID-19?

Regarding social security contributions to maintain jobs due to the impact of the COVID-19, the following measures were announced:

  • Reduction of 1/3 of social security contributions due in March, April and May 2020;
  • Payment of the remaining of the contributions (2/3) in equal and successive installments during the months of July, August and September 2020 or, alternatively, in the months from July to December 2020, without charging interest. For companies that have already made the payment of all contributions due to the contributory period of March 2020, the deferral of payment of the contributions starts in April 2020 and ends in June 2020.

The approved deferral regime neither requires a request from the entities that can take advantage of it (they must only indicate, in the social security website “segurança social direta”, the intended payment term, during the month of July 2020) nor does it prevent the full payment of contributions by the entities.

The deferral in the payment of contributions applies to all companies in the private and social sector with:

a) Less than 50 employees;
b) Between 50 and 249 employees as long as they have a drop of at least 20% of their turnover (to be verified through the invoices communicated on the Portuguese tax authorities website “e-fatura”) in the months of March, April and May 2020, compared to the same period of the previous year or, in the case of entities that started the activity less than 12 months ago, compared to the average of the elapsed activity period;
c) A total of 250 or more employees, provided that it is a private institution of social solidarity entity or equivalent
d) A total of 250 or more employees when the employers activity is one of the sectors in which the closure of establishments was decreed due to the emergency state or in the sectors of aviation and tourism, and provided that they present a breach of at least 20% of invoicing (to be verified through invoices communicated on the Portuguese tax authorities website “e-fatura”) in the months of March, April and May 2020, compared to the same period last year or, in the case of entities that started the activity less 12 months, the average of the activity period elapsed.

If the communication of invoices through the website “e-fatura” does not reflect all the transactions carried out by the company subject to VAT (although exempt) for the period under consideration, the breach of at least 20% can alternatively be verified with reference to the company’s turnover (provided it is authenticated by a certified accountant).

The approved decree also clarifies that, for the purpose of benefiting from the abovementioned regime, the number of employees should be measured by reference to the monthly income statements submitted by the employer to the social security in February 2020. There is the possibility of the employers benefiting from such deferral regime being audit at any time.

Suspension until 30 June 2020 of tax enforcement proceedings currently being carried out or that may be instituted within that period, regarding the collection of social security debts.

Suspension until 30 June 2020 of installment plans in progress requested for the payment of social security debts. Without prejudice, such installment plans can still be promptly paid.

 

Are there any transitional measures applicable to self-employed persons to mitigate the impact of the COVID -19?

It has been established the granting of financial support to self-employees subject exclusively to the general regime for self-employed workers provided that:

  • they are not pensioners;
  • they have been subject to the social security contributory regime for at least 3 consecutives or 6 interpolated months in a previous period of 12 months;
  • they have been in a proven situation of total stoppage of their activity or the activity of the respective sector (upon commitment of honor or declaration of certified accountant, if applicable), as a result of the outbreak of COVID-19, provide they resume their activity within 8 days from the request; or
  • they have been in a situation of abrupt breakdown of at least 40% of their invoicing in a period of 30 days prior to the request to the social security services, with reference to the monthly average of the two months prior to that period, or to the same period of the previous year or
  • they have initiated the activity less than 12 months ago and register a breakdown of 40% of their activity considering the average of that period, by means of a declaration of the beneficiary jointly with an authenticated accountant's certificate attesting it.

The value of the financial support corresponds to (i) the value of the remuneration recorded as a contributory base, with the maximum limit of €438.81, in situations where the value of the remuneration used as an incidence base is less than €658.22; or (ii) 2/3 of the value of the remuneration used as a contributory basis, with a maximum limit of €635, where the value of the registered remuneration is higher or equal to € 658.22. However, never less than € 219.41. This financial support is calculated based on the average of the contributory tax base of the last 12 months in which there was a register of remunerations paid to the beneficiary.

This financial support lasts for one month, extendable monthly, up to a maximum of six months, being paid during this period by bank transfer. Without prejudice, the information on which the beneficiary was based to apply for financial support must be kept for a period of three years.

It was further determined that this support may also be granted to directors of private limited companies and members of statutory bodies of foundations, associations or cooperatives, exclusively falling under the general social security regime in that capacity and carrying out that activity in one single entity that, in the previous year, had reported turnover of less than € 80.000 through the E-fatura.

The application form for the request of this financial support is available on the Social Security website (www.seg-social.pt).

During the period of attribution of this financial support, the beneficiary has the right to defer the payment of Social Security contributions, which must be paid as from the second month after the end of the support and can be made within a maximum period of 12 months, in monthly and equal installments.

It has also been established the granting of financial support to self-employees that, in March of 2020, were subject exclusively to the general regime for self-employed workers, provided that they met the above-mentioned conditions (proven situation of total stoppage of the activity or abrupt breakdown of their invoicing) and:

  • they have initiated their activity more than 12 months ago but have not been subject to the social security contributory regime for at least 3 consecutives or 6 interpolated months in a previous period of 12 months.
  • they have initiated their activity less than 12 months ago; or
  • they are exempted from the payment of social security contributions, as there has been an obligation to pay contributions for a period of 1 year resulting from income equal to or less than € 2.632,86.

This financial support lasts for one month, and can be monthly renewed, up to a maximum of three months. The value of the financial support may vary from €93,00 to €219,41 and corresponds to:

  • 70% of the total value of the services rendered, based on the average invoicing reported between 1 March 2019 and 29 February 2020;
  • 20% of the income connected with the production and sale of goods, based on the average invoicing reported between 1 March 2019 and 29 February 2020.

The value of the financial support granted due to the beneficiary’s invoicing breakdown should be multiplied by the percentage of such breakdown.

 

Are there any transitional tax measures to mitigate the impact of COVID-19?

On corporate income tax (CIT), an order of the Secretary of State for tax affairs announced the extension of the deadline for compliance with the following obligations:

  • Postponement of the 1st installment of the special payment on account from March 31 to June 30, 2020
  • Extension of the deadline for submitting the CIT return (Modelo 22) and payment of the CIT due to 31 July 2020
  • Extension of the 1st payment on account from July 31 to August 31, 2020
  • Extension of the deadline to submit the 2019 IES / DA until August 7, 2020
  • Extension of the deadline for companies to present their transfer pricing dossier until August 31, 2020
  • Extension of deadlines to pay the tax withheld during the months of April and May until May 25 and June 25, respectively
  • Extension of deadline to pay the stamp tax incurred during the months of April and May 2020 until May 25 and June 25, respectively
  • Extension of the deadline to submit the VAT periodical declarations concerting the months of February, March and April 2020 until April 17, May 18 and June 18, respectively
  • Extension of the deadline to pay the tax resulting from the VAT periodical declarations concerting the months of February, March and April 2020 until April 20, May 25 and June 25, respectively

Still regarding the accounting and tax obligations, it was clarified that the following situations are considered as a “fair impediment”: (i) case of infection; (ii) prophylactic isolation determined by a health authority; and (iii) the establishment of a sanitary fence that prohibits the travel of taxpayers or certified accountants, provided that they have their professional or tax domicile in those areas.

In an effort to ensure the relief of the treasury of companies (and self-employed workers), it was determined that taxes related to the second quarter of 2020 (VAT charged, personal income tax and corporate income withheld) could be paid as follows:

  • Immediately, in the usual terms;
  • In three or six-monthly installments, without interest or provision of guarantee.

This measure applies to entities (companies and self-employed workers):

(i) With a turnover of up to 10 million Euros in 2018 (determined under the terms of article 143 of the CIT Code),
(ii) That have initiated their activities on or after January 1, 2019 (or that have resumed their activity on or after January 1, 2019 and did not achieve any turnover in 2018);
(iii) Whose activity is carried out in one of the sectors in which the closure of establishments was decreed under the emergency state.
Any other company or self-employed person may require the same flexibility in the payment of tax obligations in the second quarter of 2020, provided they demonstrate that they have only invoiced 20% on the average of the three months prior to the month in which the obligation exists, compared to the same period of the previous year (this should be verified through the invoices communicated on the Portuguese tax authorities website “e-fatura” and certified by a statutory auditor or certified accountant)

It was also decided that the issuance of PDF invoices must be accepted during the months of April, May and June 2020, these being considered electronic invoices for all purposes provided for in the tax legislation.

Suspension until 30 June 2020 of tax enforcement proceedings in progress or that are initiated within that period.

A VAT reduction was determined to the sale of respiratory masks and sanitizer gel to a reduced rate of 6% applicable.

The suspension of procedural acts was revoked. Consequently, the procedural acts may take place as from the 3rd of June.

The administrative deadlines which would originally expire:

  • Between 9 March and June 3rd, will expire on the 3rd of July;
  • After June, 3rd, will expire on (i) the 3rd of July; or (ii) at the original expiry date, if later than the 3rd of July.

 

There are measures regarding the interaction between taxpayers and the Tax and Customs Authority due to the impact of the COVID -19?

During the period in which the state of emergency is in force, the tax offices are closed. Any interactions with the Portuguese tax authorities should be made through the telephone line (+ 351 217 206 707) or through the website in the taxpayer’s online profile at (www.portaldasfinancas.gov.pt).

 

Are there incentives for donations due to the impact of the COVID -19?

As long as the emergency period due to the COVID-19 pandemic lasts in Portugal, free supplies of goods used to fight the pandemic (for example, medical or protective equipment) are exempt from VAT provided that such supply is made to Portuguese Government, to private social solidarity institutions and to non-profit and non-governmental organizations, for being later on made available to people in need. For this purpose, people in need are also considered those who are receiving health care in the current pandemic context, who are considered victims of catastrophe.

A VAT exemption was determined for the supply of individual protection equipment granted to hospitals and organizations in need for these type of goods.

A VAT exemption was determined for the free supply of goods which are subsequently distributed to people in need, performed to Portuguese Government, private solidarity institutions and ONG’s, even though those entities remain the owners of such goods. For this purpose, are considered as “in need” those who were affected by pandemic and are receiving health care in the current context.

At the level of patronage, it was announced that SPMS- Serviços Partilhados do Ministério da Saúde and, the hospital entities of the Regional Health Services may now benefit from the deduction for the purpose of determining the CIT taxable profit. Therefore, the amount of the donations made exclusively for solidarity purposes y these entities to the Portuguese Government, Autonomous Regions and local authorities and any of their services, establishments and bodies, can be considered as costs or losses of the tax year, in an amount corresponding to 140% of the respective total.

It was also determined that all donations carried out exclusively for solidarity purposes made by the aforementioned entities to the Portuguese Government, Autonomous Regions and local authorities and any of their services, establishments and bodies, can now benefit from all the tax benefits provided for in the Portuguese Patronage Statute, including the exclusion of Stamp Duty applicable to Patronage.

 

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This information is being updated on a regular basis.

All information contained herein and all opinions expressed are of a general nature and are not intended to substitute recourse to expert legal advice for the resolution of real cases.