As of September, Portugal will have new withholding tax tables for Personal Income Tax (IRS). These changes aim to adjust the withholding tax to the taxpayers’ income, reflecting changes in tax legislation and the impact of annual updates. It is important to note that these new tables will have retroactive effects from the beginning of the year, which may influence the way in which income is taxed and possible refunds or additional payments to be made.
What are Withholding Tax Tables?
Withholding tax tables are used by employers to calculate the amount of IRS that must be withheld directly from employees’ income and delivered to the Tax Authority. These tables determine how much must be withheld from each salary payment based on factors such as gross income, marital status and the number of dependents.
New Withholding Tax Tables
The new withholding tax tables that come into effect in September have been adjusted to reflect changes in personal income tax rates and income brackets. These adjustments are intended to make withholding more accurate and ensure that taxpayers pay tax more equitably throughout the year.
Main Changes:
Updated Personal Income Tax Brackets: The brackets have been revised to reflect changes in tax legislation and adjust the progressivity of the tax.
Changes to Withholding Rates: Withholding rates have been adjusted to better align withholding tax with the new personal income brackets.
Impact on Monthly Income: With the new tables, the amount withheld from each salary payment may vary, impacting employees’ net income.
Retroactive Effects
An important feature of the new tables is that they will have retroactive effects from the beginning of 2024. This means that, although the new tables will be applied in September, the adjustments will be made to take into account the entire current tax year.
What Does This Mean for You?
Possible Refund or Additional Payment: If the previous tables resulted in a higher or lower withholding than the tax actually due, you may be entitled to a refund or you will have to pay the difference. The Tax Authority will adjust these amounts, and taxpayers will be notified of any necessary changes.
Adjustment in the IRS Declaration: In your next IRS declaration, the retroactive effects of the new tables will be considered, which may result in adjustments to the final tax bill.
What Should You Do Now?
Review Your Tax Situation: Be aware of the impact of the new tables on your net income. Compare the amounts withheld before and after the change to understand how it affects you.
Consult Your Employer or Accountant: To ensure that your withholding is being done correctly based on the new tables, it is advisable to speak to your employer or an accountant.
Track Adjustments: Follow any communication from the Tax Authority regarding retroactive adjustments and prepare for the possible need to pay or receive a difference.
Conclusion
The new withholding tax tables, which come into effect in September with retroactive effect, represent a major update to the tax system in Portugal. Although the direct impact on your income may vary, it is crucial to be well informed and prepared for any necessary adjustments. Keeping an eye on updates and consulting the appropriate professionals can help ensure that your tax situation remains compliant and optimized.
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