All posts by admin

Government Simplifies Taxes: VAT, Invoicing, and Vehicle Tax

The Portuguese Government has announced a set of 30 measures to simplify the tax system, covering areas such as VAT, invoicing rules, and the Vehicle Tax (IUC).

Faster VAT Refunds
One of the main changes is the acceleration of VAT refunds. Businesses and self-employed professionals can receive refunds faster by providing a guarantee equivalent to the refund amount, allowing for an automatic process while the tax authority reviews the request.

Simplified Invoicing Rules
Invoicing rules will be simplified to make it easier for businesses and professionals to issue and manage invoices. This measure aims to reduce bureaucracy and costs associated with fulfilling tax obligations.

Changes to Vehicle Tax Payment
Regarding the IUC, also known as the “vehicle tax,” changes in payment deadlines are planned. Starting in 2026, taxpayers will have the option to pay the tax by February or in two installments, offering greater flexibility in meeting this tax obligation.

These initiatives are part of the Tax Simplification Agenda, approved by the Council of Ministers, aiming to make the relationship between taxpayers and the tax administration simpler and more efficient.

Minister of Finance Predicts Economic Growth Above 3% in the Medium Term

Joaquim Miranda Sarmento, the Minister of Finance, expressed optimism regarding Portugal’s economic future, forecasting sustained economic growth with a rate exceeding 3% in the medium term. These positive expectations reflect the Government’s confidence in the structural reforms being implemented and the country’s ability to attract investment and enhance its economic competitiveness.

According to the Minister, the Government’s planned reforms include key measures such as the progressive reduction of the Corporate Income Tax (IRC), which will make Portugal more attractive to both domestic and foreign companies. The reduction in the corporate tax burden is seen as a strategy to encourage the creation of new businesses, boost employment levels, and promote investment in strategic sectors.

Additionally, fiscal simplification is another crucial priority. The Government aims to reduce bureaucracy associated with the tax system, making it easier for companies and individuals to meet their tax obligations. This simplification will allow economic agents to focus more on growth and innovation, directly contributing to the potential increase in the country’s Gross Domestic Product (GDP).

Another important pillar of the reforms is the restructuring of the labor market, which aims to increase flexibility and efficiency in the labor market in Portugal. The Government intends to promote worker qualification, facilitate the transition to new employment areas, and reduce barriers to hiring, thereby creating a more dynamic and favorable environment for economic growth.

In summary, the Minister of Finance emphasized that these structural reforms are essential to consolidating Portugal’s economic growth. The goal of achieving economic growth above 3% in the medium term demonstrates the Government’s ambition to ensure sustainable development, improving citizens’ quality of life and reinforcing the country’s position in the global economy.

Portuguese Government Reinforces Tax Benefits for Young People Up to 35 Years

As part of the State Budget for 2025, the Portuguese government introduced a proposal that offers significant tax benefits aimed at young people up to 35 years old. This set of measures, reflecting a strategy to encourage the retention of young talent in Portugal, seeks to combat emigration and create better conditions for the settlement of skilled labor in the country.

According to the proposal, young people entering the job market for the first time, with annual incomes below 28,000 euros, will be fully exempt from paying the Personal Income Tax (IRS) during the first year of work. In subsequent years, a reduced tax rate will be applied progressively, offering considerable fiscal relief and greater savings capacity in the initial stages of their careers.

The government emphasizes that this measure aims to alleviate the tax burden on young workers and provide them with greater financial security during a phase of life where they face challenges such as housing demands, career beginnings, and the possibility of starting a family. The reduction in tax burdens will thus allow for greater flexibility in personal investments and contribute to improving the purchasing power of this segment of the population.

Furthermore, this fiscal policy is part of a broader plan to retain talent in Portugal and mitigate the negative effects of the emigration of young, qualified individuals to other countries—a phenomenon that has affected the labor market and economic growth in the country over the past decades. By creating a more attractive fiscal environment, the government hopes not only to retain skilled workers but also to attract young Portuguese emigrants who wish to return.

In summary, the tax benefits proposed in the State Budget for 2025 are a strategic attempt to create more favorable conditions for young people in Portugal, promoting a more welcoming economic environment and ensuring that the new generation has opportunities to thrive in the country.

Increase in European Industry Investment in Research and Development (R&D)

In 2023, European industry recorded a 9.8% increase in investment in Research and Development (R&D), surpassing the average global growth. This progress highlights European companies’ commitment to strengthening innovation and maintaining a competitive position in the international market.

Portugal, as part of the European Union, benefits from this growth context, with national companies intensifying efforts to modernize processes, create new products, and adopt emerging technologies. This scenario is particularly relevant for entrepreneurs seeking to explore new market opportunities and differentiate through innovation.

The rise in R&D investment is driven by strategic sectors such as technology, healthcare, and renewable energy, aiming to address global challenges like energy transition and digitalization. For Portuguese entrepreneurs, this means greater access to international partnerships, European funds, and tax incentives aimed at innovation.

Difference between Profit and Liquidity in Companies: Understanding to Prosper

The distinction between profit and liquidity is fundamental to the financial health of any company. Although both concepts are interconnected, they represent different aspects of corporate finance.

Profit: The Profitability Indicator

Profit is the surplus of revenues over expenses in a company. There are different types of profit:

  • Gross Profit: Total revenue minus the cost of goods sold (COGS).
  • Operating Profit: Gross profit minus operating expenses.
  • Net Profit: Operating profit minus non-operating expenses, such as interest and taxes.

The latter reflects the company’s overall profitability and is essential for assessing financial performance.

Liquidity: The Ability to Meet Obligations

Liquidity refers to a company’s ability to meet its short-term financial obligations without incurring significant losses. It is a crucial indicator for measuring financial health and the ability to respond to immediate commitments.

The Importance of Differentiating Profit from Liquidity

A company can report high profits and still face liquidity problems. This can occur due to poor cash flow management, excessive investments, or ongoing debt payments. Therefore, it is vital for managers to understand that profit is not synonymous with immediate cash availability.

Essential Financial Indicators

To assess a company’s financial health, it is important to analyze indicators such as:

  • Liquidity Ratios: Measure the ability to pay short-term debts.
  • Profitability Ratios: Evaluate efficiency in generating profit from sales.
  • Debt Ratios: Analyze the level of debt in relation to own resources.

Conclusion

Understanding the difference between profit and liquidity allows for more effective financial management, ensuring that the company is profitable and capable of meeting its financial obligations, thus ensuring its long-term sustainability.

National Minimum Wage Increase to €870: Implications for the Economy

The Portuguese Government has announced an increase in the national minimum wage, officially referred to as the Guaranteed Monthly Minimum Wage (RMMG), to €870 for 2025. This represents a significant 6.098% rise compared to the current level. While this measure aims to enhance workers’ purchasing power and quality of life, it carries potential implications for the broader economy.

On the one hand, this wage adjustment is expected to benefit employees, particularly in lower-income brackets, addressing economic disparities and improving social well-being. However, there is concern that this increase might trigger a rise in the cost of goods and services, potentially exceeding the wage growth rate.

For businesses, especially small and medium enterprises (SMEs), this adjustment could lead to higher labor costs, forcing companies to reevaluate pricing strategies or implement efficiency measures. While this change is likely to stimulate short-term consumption, it may also exert pressure on business profitability and competitiveness in both national and international markets.

The balance between maintaining fair wages and ensuring economic stability is at the core of this decision. As the impact of this wage increase unfolds, it will be essential to closely monitor its effects on consumer spending, inflation, and corporate operations to ensure sustainable growth.

For further details, consult Decree-Law No. 112/2024, available on the official Diário da República website.

Portugal Records the Largest Increase in Construction Production in the European Union

Portugal stood out in October as the country with the largest increase in construction sector production among EU Member States, recording a year-on-year growth of 6.9%. This increase contrasts significantly with the 0.2% growth in the Eurozone and the 0.8% decrease in the EU, according to preliminary estimates released by Eurostat this Wednesday. This national performance can be partially attributed to the progress of works associated with the Recovery and Resilience Plan (RRP).

In an annual analysis, the indicator measuring the evolution of production volume in the sector, which includes building construction, civil engineering, and specialized construction activities, shows that the largest increases were recorded in Portugal (+6.9%), Spain (+6.3%), and Bulgaria (+6.2%). On the other hand, the biggest declines were observed in Romania (-14.5%), Slovenia (-13.4%), and Poland (-11.4%).

In the Eurozone, construction sector production rose 3% in civil engineering, 0.6% in building construction, and fell 0.9% in specialized construction activities, year-on-year. In the EU, increases were 1.3% in civil engineering, while building construction fell 0.5% and specialized activities declined 1.2%.

Compared to the previous month, construction production grew by 1% in the Eurozone and 0.7% in the EU in October. Portugal recorded the third-largest monthly increase, with a rise of 4.6%, alongside Hungary. The highest positive monthly variations were observed in Slovakia (+7.9%) and Austria (+6.5%), while the largest declines occurred in Romania (-8.3%) and Poland (-2.7%).

IRC rate 2025

The corporate income tax (IRC) rate for 2025 is expected to undergo significant changes, reflecting a reduction in the tax burden for companies in Portugal. It is anticipated that the standard IRC rate will be lowered by 1 percentage point, decreasing from the current 21% to 20%. This change is part of a continuous effort to create a more competitive tax environment and support business growth.

Additionally, Small and Medium Enterprises (SMEs) and Small Mid Caps will benefit from a reduced rate applied to the first €50,000 of taxable income. The rate, currently set at 17%, will be reduced to 16%. This adjustment represents an additional support measure for smaller businesses, promoting their financial sustainability and market competitiveness.

These changes underline the Government’s commitment to fostering a more favorable environment for investment and economic development in the country.

End-of-2024 Inventory: Obligations for Early 2025

The communication of inventories is a tax obligation aimed at ensuring that the Tax Authority (AT) has access to accurate and detailed information about the quantities of goods in stock at the end of each fiscal year. This measure primarily seeks to guarantee transparency in evaluating the costs of goods sold and consumed, as well as in determining the final financial result of the taxable entities’ fiscal year.

Through this obligation, the AT can more rigorously monitor the values reported by companies, which are essential for determining taxable profit, thereby contributing to greater fiscal equity and fairness.

Who is required to report inventories?
The communication of inventories is mandatory for:

Individuals or legal entities with headquarters, a permanent establishment, or tax residency in Portuguese territory;
Companies with organized accounting, regardless of their turnover or business sector.
Reporting requirements
Since the legislation was updated, submitting a valued inventory has become mandatory. This means that, in addition to specifying the quantities of each item in stock, entities must indicate the acquisition value of each item, excluding VAT. This valuation applies to all inventory items, including finished products, raw materials, goods, and any other assets relevant to the company’s operations.

Deadlines and implications
The inventory for the end of 2024 must be submitted at the beginning of 2025, within the deadlines set by the AT. Failure to comply with this obligation may result in significant penalties, emphasizing the need for rigorous monitoring and good accounting practices by companies.

With this measure, the AT aims to increase the efficiency of the tax system, promoting greater transparency and accuracy in the financial and tax reports of companies operating in national territory.