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

It was 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 financial supports granted directly by the Social Security to employees in connection with COVID-19 special measures will be deemed as Social Security System benefits.
The following financial supports granted by the Social Security are excluded:

  • Exceptional family support granted to self-employees;
  • Exceptional family support granted to employees.

 

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.

The State Budget for 2021 introduced the granting of financial support, since January 1, 2021 to the employees who are in a situation of economic and social vulnerability as a result of the outbreak of COVID-19 and who are in one of the following situations:

  • Employees (including domestic service employees), self-employed workers and directors of private limited companies (i) whose unemployment protection ends after January 1, 2021 or (ii) due to external constraints, become unemployed without having access to unemployment protection and have been subject to the social security contributory regime for at least 3 months in the previous period of 12 months;
  • Employees (including domestic service employees), self-employed workers and directors of private limited companies who have been subject to the social security contributory regime for at least 3 months and who are in a situation of abrupt breakdown of at least 40% of their invoicing in the previous period between March and December of 2020,  with reference to the monthly average of 2019 and, cumulatively, between the last quarterly declaration and the monthly average of 2019;
  • Employees who do not have access to any social protection instrument or mechanism, and who register themselves in the social security system and maintain their register during the period of payment of the financial support and for the following 30 months;
  • Managers of micro and small enterprises, individual entrepreneurs and members of statutory bodies of foundations, associations or cooperatives, exclusively falling under the general social security regime, who have been subject to the social security contributory regime for at least 3 consecutive months or 6 interpolated months in the previous period of 12 months before the request of the support and who are in a situation of stoppage, reduction or suspension of their activity as a result of the outbreak of COVID-19, or in a situation of abrupt breakdown of at least 40% of their invoicing; and
  • Trainee employees under the professional traineeship regime.

The value and duration of the financial support will vary according to the specific situation of the employee, with the maximum duration of 12 months. In addition, the value of the financial support can not be accumulated with any unemployment benefits or compensations regarding the suspension of the employment agreement.

 

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

An order of the Secretary of State for tax affairs announced the following amendments to the tax calendar year:

  • 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
  • Extension of the deadline for submitting the 2020 CIT annually return (“Modelo 22”), and for paying the CIT assessed, until the 30 June 2021
  • Extension of the deadline for submitting the VAT periodic returns, under the monthly regime, concerning the months of April, May and June 2021, until 21 June, 20 July and 31 August 2021, respectively
  • Extension of the deadline for paying the VAT assessed in the periodic returns, under the monthly regime, concerning the months of April, May and June 2021, until 25 June, 26 July and 31 August 2021, respectively
  • Extension of the deadline for submitting the VAT periodic returns and for paying the VAT assessed, under the quarterly regime, concerning the second quarter of 2021, until 31 August 2021.

Tax losses registered in 2020 and 2021 tax years by entities that develop a commercial, industrial or agricultural activity as main business may be carried forward to taxable profits of one or more than one of the following 12 tax years, regardless of whether or not the entity is a micro, small or medium enterprise

The general limit of deduction of tax losses carried forward (up to 70% of the profits of the entity in the year where the losses are deducted) may be increased in 10% whenever the difference results from tax losses registered in the tax years of 2020 and 2021.

The deadline to carry forward tax losses which was applicable to tax losses that were deductible as of 01.01.2020 is suspended within the tax years of 2020 and 2021.

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.

It was established a deferral mechanism regarding the payment of the CIT due related to the taxable period of 2020, that foresees the payment of the CIT in the following methods:

  • In the usual terms, i.e., until the last day of the deadline established to submit the CIT return;
  • In the maximum of 4 monthly instalments, of a value equal or higher than € 25.00, without interest or provision of guarantee: (i) the first instalment corresponds at least to 25% of the CIT due (that should be paid until the last day of the deadline established to submit the CIT return) and (ii) the remaining amount must be paid in three equal instalments.

The payment in instalments should be requested until the last day of the deadline established to submit the CIT return.

The above regime also applies to the first and second payments on account of CIT regarding the 2021 taxable period. The payments on account may be made in the usual terms (i.e., until 15 July and 15 September) or in three equal monthly instalments, of a value equal or higher than € 25.00, without interest or provision of guarantee. The payment in instalments should be requested until 15 July 2021.

In addition, regarding the 2021 taxable period, it was established the possibility of not paying 50% of the value corresponding to the second payment on account due, provided that the taxpayer had a turnover of up to 2 million Euros in 2020 (determined under the terms of article 143 of the CIT Code).

In an effort to ensure the relief of the treasury of companies (and self-employed workers), it was determined that taxes related to the first quarter of 2021 (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 (the request should be submitted electronically until the last day of the deadline to voluntary pay the amount due).

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

(i) With a turnover of up to 50 million Euros in 2019 (determined under the terms of article 143 of the CIT Code) and with less than 250 employees, and that demonstrate a decrease of 25% in the invoicing corresponding to the monthly average of 2020, comparing to the same period in 2019; or
(ii) Which main activity is related to lodging, restaurants or similar or culture; or
(iii) That have initiated or reinitiated their activities on or after January 1, 2020.

The decrease in the invoicing 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 2021. In addition, the amount spent in the acquisition of the before mentioned products will be deemed as a deductible health expenditure, for Personal Income Tax purposes.

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 established that the self-assessed VAT, by the taxpayers under the VAT quarterly regime, regarding the first semester of 2021, may be paid until the end of the normal deadline or in three or six monthly instalments, of amount equal or higher than € 25.00 (without interest of provision of guarantee)

This option may also be granted to taxpayers under the VAT monthly regime, provided that they:

  • Had a turnover of up to 2 million Euros in 2019, or they have initiated or reinitiated their activity after January 1, 2020 (including); and
  • Have declared and demonstrated a decrease of at least 25% of the monthly average invoicing declared in “e-fatura” in the full calendar 2020 year, compared to the same period of the previous year. The demonstration should be made by a certified accountant.

The request to pay in instalments should be submitted electronically, until the end of the deadline to fulfil the tax obligation. The first instalment should be paid until the end of the deadline to fulfil the tax obligation and the remain instalments should be paid in the same day of the following months.

The issuance of PDF invoices must be accepted until September 30, 2021. In addition, the PDF invoices will be considered electronic invoices for all purposes set forth in the Tax Law.

It was established, until December 31, 2022, a tax exemption related to the Stamp Duty due in connection with insurance policies related to export credits, guarantee insurance policies and external bank guarantees, in order to encourage the internationalisation of the Portuguese Companies.

It was established that the 12-month period foresee in the VAT Code regarding continuous supplies of services – which includes leasing agreements – will not be applicable regarding payments which have benefited from the legal moratorium established in the Decree-Law 10-J/2020, of 26 of March, during the period in which it is in force (i.e., until 30 September 2021). According to the general regime, the taxpayer is obliged to pay the VAT due related to continuous supplies at the end of each 12-month period. As the 12-monht period is shorter than the legal moratorium period, the application of the 12-month period was suspended for continuous supplies of services which payments have benefited from the legal moratorium. 

It was established the “IVAucher” programme, that aims at supporting and stimulating the cultural, restaurant and lodging business sectors, severely affected by the COVID-19 pandemic, and simultaneously promoting the private consumption and a greater economic recovery. Under this programme, the consumers (physical persons) will be able to deduct the VAT incurred with expenses in the mentioned business sectors, in new expenses incurred in the same business sectors. In a first phase of the “IVAucher” programme, that will take place between the 1st of June and the 31st of August 2021, the consumers will be able to accumulate the VAT incurred with the acquisition of goods and services covered by the mentioned business sectors. After, in the second phase, that will take place between the 1st of October and the 31st of December 2021, the consumers will be able to deduct the VAT incurred and accumulated during the first phase.

 

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?

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.

The SNS health units with the status of corporate public entities and hospitals in the public administrative sector can accept donations under the patronage regime, to face the COVID-19 disease pandemic, which are considered a cost for the donor entity, as well as donations from DGS and the Central Administration of the Health System (article 35-Q/1 and 2 of Decree-Law no. 10-A/2020, of 13 March, as amended by Decree Law no. 99/2020, of 22 November).

 

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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.