Portugal's Minister of State and Finance, Maria Luis Albuquerque, has presented a number of proposals to overhaul the country's personal income tax regime.
One of the main proposals is an increase to the exempt income tax threshold for households from €4,104 to €8,145, a measure which would affect about 20% of the population. The threshold would be adjusted based on the number of family members in a household, to ensure that the system is progressive.
Other measures affecting families include an option for spouses to be taxed separately, and a change in the concept of dependent for tax purposes to include unemployed individuals of up to 25 years of age who live with and are dependent on their parents.
Other proposals contained in the income tax draft reform include incentives to encourage entrepreneurship through individual income tax breaks of 50% and 25% during the first two years of self-employment, as well as simplified compliance arrangements. Other measures aim to promote saving, and a tax exemption is proposed to be introduced for pensions paid to widows of soldiers killed while serving in the military. Tax relief would also be introduced for those travelling more than 100 kilometers to work.
A simplified tax return would be introduced, allowing all taxpayers accounting for tax individually to benefit from information being pre-populated by tax authorities. This is estimated to support 1.7 million taxpayers.
The draft reform proposals are open to public consultation until 20th September 2014.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.
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