Portuguese Tax regulations over the corporation Tax Reform

por | Feb 13, 2014 | Sin categorizar

 

 ALERT

 

Last October 15th the proposed  Law 195/XII, that includes proposals for changes to company tax (IRC), was put before Parliament.
The reformed Company Tax Regulations  (CIRC) that came into effect at the beginning of this year, 2014, contemplates an increase to stand-alone tax rates, in place of the Personal Income Tax Regime (IRS), with the aim of disincentivising the awarding of company cars to employees that are not declared as part of the employee´s personal income.

 

To this end a generalised increase to stand-alone tax rates is proposed. Expenses regarding light passenger vehicles, mopeds and motorbikes,  with the exception of electronic vehicles, will be subject to stand-alone tax at the following rates:

  • 10%  with regard to vehicles with a purchase price of less than 25.000 €
  • 27,5% with regard to vehicles with a purchase price between 25.000€  and 35.000€; and
  • 35%  with respect to vehicles with a purchase price of more than 35.000€..

Note that the rates of stand-alone taxation now proposed will apply to vehicles acquired before 2014. At the present moment, expenses relating to such vehicles purchased in 2013 are subject to the following tax rates (Art. 88º CIRC):

  • 10%  where the purchase price of the car does not exceed 25.000€.
  • 20%  where the purchase price of the care exceeds 25.000€.

A vehicle purchased in 2010 for € 40,000, which up until 2013 had a rate of stand-alone tax of 10 % (as it did not exceed the limit applicable at the time) with the reform of the IRC will now see a stand-alone tax rate of 35%.

 

Furthermore, the figure of 10% from the above-mentioned rates will continue to apply in the case of tax losses (nº 14 of the current 88º CIRC), leading to a possible maximum tax imposed of 45%.

 

Finally, the reform of the IRC clarifies that expenses or charges attributable to a permanent establishment outside of the Portuguese territory, including those not related to vehicles, and the activity carried out by such permanent establishments, are not subject to the stand-alone tax.