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 instalments 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 or August 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.

 

Are there any transitional measures applicable to employees  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, or self-employees also subject to the regime for employed workers if they did not receive, under this regime, more than €438.81, 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 as self-employees or the activity of the respective sector (upon commitment of honour 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 instalments.

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, or self-employees also subject to the regime for employed workers if they did not receive, under this regime, more than €438.81,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.

It has also been established the granting of financial support to residents in the Portuguese territory who are in a situation of economic and social vulnerability and in one of the following situations:

  • Termination of their activity as employees (including domestic service employees), as a result of the outbreak of COVID-19;
  • Self-employed workers that are in a situation of abrupt breakdown of at least 40% of their invoicing, resulting from the stoppage, reduction or suspension of their activity as a result of the outbreak of COVID-19;
  • Self-employed workers who benefit from one of the above-mentioned financial supports, but its total amount is less than € 438.81.

The financial support will be granted between July and December 2020 and its monthly value will be equal to € 438.81. During this period, only 1/3 of the Social Security contributions sue should be paid. The remainder 2/3 must be paid from the month following the end of the support and may be paid within a maximum period of 12 months, in monthly and equal instalments, without the payment of late interest.

 

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 following amendments to the tax calendar year:

  • Extension of the deadline for offsetting the amount of Stamp Duty assessed and paid until January 20, 2021
  • Suspension of the Monthly Stamp Duty Declaration during 2020
  • Extension of the deadline for submitting the VAT periodic returns, under the monthly regime, concerning the months of September to December of 2020 and January to March of 2021, until the 20th day of the second month following the month to which concern the operations
  • Extension of the deadline for submitting the VAT periodic returns, under the quarterly regime, concerning the third and fourth quarters of 2020 and the first quarter of 2021, until the 20th day of the second month following the quarter to which concern the operations
  • Extension of the deadline for paying the VAT assessed in the periodic returns until the 25th day of the second month following the month or quarter to which concern the VAT returns
  • Extension of the deadline to submit the Model 10 Declaration (income and non-final withholdings regarding resident taxpayers) until February 25, 2021
  • Extension of the entry into force of the new file to communicate the inventories to the Portuguese Tax Authorities to 31 January 2022, regarding the inventories for 2021
  • Maintenance of the deadlines to submit the IES/DA return for the 2020 tax year, for the 15th day of the seventh month following the end of the taxable period

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 addition to those measures, a new set of rules was approved aimed at softening the tax obligations for which micro, small and medium enterprises are liable for:

  • Temporary suspension of the payments on account of corporate income tax
  • Possibility of requesting, during 2020, the refund of special payment on account of corporate income tax, which was not deducted until 2019, without complying with the 90 days deadline established in the corporate income tax code for such purpose
  • Maximum deadline of 15 days to receive the VAT, corporate income tax and personal income tax in the situations where the provisional tax withheld is higher than the final tax due.

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 instalments, 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)

A VAT reduction was determined to the sale of respiratory masks and sanitizer gel to a reduced rate of 6% applicable, until 31 December 2020.

It was also established the possibility of a refunding of an amount equivalent to 50% of the VAT incurred and not deductible with expenses related to the organization of congresses, fairs, exhibitions, seminars, conferences and similar events, incurred by entities classified with the main code «82300 – Organization of fairs, congresses and other similar events» under the Portuguese Classification of Economic Activities.

For the purpose of redemption of Retirement Savings Plans (PPR), their value can be reimbursed, up to the monthly limit of the social support index (€ 438.81), without applying the provisions of paragraph 4 of article 21 of the Tax Benefits Statute, provided that: (i) one of the members of the household is in a situation of prophylactic isolation or illness or provides assistance to children or grandchildren; or (ii) one of the members of the household has been placed in reduction of the normal period of work or in suspension of the employment contract, due to a business crisis, in a situation of unemployment registered at the Institute of Employment and Professional Training, I. P.; or (iii) there is a reduction in the economic activity of the self-employed person whose establishment or activity has been closed during the period of state of emergency; and (iv) the PPRs have been subscribed until March 31, 2020

It was also established that the Portuguese Tax Authorities shall, by their initiative, provide the taxpayers with the possibility of paying the personal and corporate income tax debts in instalments, regardless of the submission of a formal request and the provision of a guarantee, if the following conditions are simultaneously verified:

(i) The amount of the debt is equal to or less than € 5,000 (personal income tax) or € 10,000 (corporate income tax);
(ii) The debt not under a collection enforcement procedure;
(iii) The taxpayer has his/her tax situation regularized;
(iv) The debt maturity occurs until December 31, 2020.

The number of instalments is established in an instalment plan made by the Portuguese Tax Authorities and notified to the taxpayer.

The micro, small and medium enterprises, under the VAT quarterly regime, or the companies which have initiated their activities from January 1, 2019 or re-initiated their activity from January 1, 2019 but did not register any turnover in 2018, may pay the self-assessed VAT regarding the third quarter of 2020:

  • Until November 30, 2020;
  • In three or six-monthly instalments, of a value equal or higher to € 25.00, without interest or provision of guarantee. The request to pay in instalments should be submitted electronically, until November 30, 2020.

It was also established that the employers in the private and social sectors which are micro, small and medium enterprises and the self-employed persons are entitled to a postponement of the obligation to pay the Social Security contributions concerning November and December of 2020. The Social Security contributions should be paid in three or six equal and consecutive instalments, without interest, between the following months:

  • July to September of 2021;
  • July to December of 2021.

The employer entities and the self-employed persons should inform the Social Security, in February 2021, regarding the payment option that they intend to choose.

The issuance of PDF invoices must be accepted until March 31, 2021. In addition, the PDF invoices will be considered electronic invoices for all purposes set forth in the Tax Law.

 

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

The Portuguese Tax Authorities’ services are open by appointment only. For this purpose, the appointments should be scheduled through the telephone line (+ 351 217 206 707) or through the taxpayer’s private area at the Portuguese Tax Authorities’ website(www.portaldasfinancas.gov.pt), at e-Balcão.

 

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

Until 31 December 2020, 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 this type of goods.

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.