Families First - questions and answers
Source: portugal.gov.br
FAMILIES FIRST
Learn how to update your IBAN.
What is this plan for?
With this new package of measures, the Government is strengthening the Portuguese people's income, offsetting the impact of price increases, and returning the additional tax revenue collected due to inflation.
When will it be implemented?
The yield enhancement package will be implemented starting in September 2022.
What are the main measures and for whom are they intended?
This package consists of eight measures:
- Workers: Exceptional income support. The measure covers resident adults with gross income up to 2700€ per month;
- Children and young people: Exceptional support for children and young people. The measure covers dependents up to the age of 24 (inclusive) and dependents with disabilities regardless of age;
- Pensioners: Exceptional support for pensioners. The measure covers all Social Security and Caixa Geral de Aposentações pensioners who receive old age, disability and survival pensions;
- Limiting rent increases to 2%, covering tenants and landlords with leases entered into at least one year ago, subject to compensation by the landlords;
- Transportation price freeze;
- Reduction of VAT on electricity to 6%;
- Reduced gas tariff;
- Extension of the reduction of the tax burden on fuel, covering all consumers.
What is the overall value?
The plan to respond to price increases totals €2.4 billion (M€), the equivalent of 1% of Gross Domestic Product (GDP). This is in addition to the amount already spent on measures to mitigate the impact of inflation adopted this year, which totals €1,682 million. In total, in 2022, the Government has adopted measures to mitigate the effects of inflation amounting to 4082M€, about 1.8% of GDP.
Exceptional income support and exceptional child and youth support
Who benefits from the exceptional income support?
The extraordinary income support is granted to residents with a gross income of up to 2700€ per month (37,800€ per year), equivalent to twice the average monthly income in Portugal, whether they are income earners who submit IRS (above 8500€/year) or income earners who do not. Beneficiaries of certain social benefits are also targeted by the measure:
- Unemployment benefits;
- Unemployment benefits;
- Parental benefits with a monthly reference remuneration not exceeding EUR 2,700.00;
- Benefits for sickness and occupational illness, provided for a period of not less than one month and with a monthly reference remuneration not exceeding 2,700.00
- Social insertion income, if they are over 18 years old;
- Social benefit for inclusion, being over 18 years of age;
- Solidarity supplement for the elderly, without an assigned pension;
- Primary informal caregiver support allowance.
It is estimated that about 5.8 million people are covered.
How much is the exceptional income support?
Exceptional income support will be €125 per adult and €50 per dependent up to and including 24 years of age, or no age limit in the case of disabled dependents. For example, a couple where each person has a gross monthly income from work of €1,000 and with two dependent minor children, will receive support of €350: of which €125 for each adult and €50 for each child. The eligibility criterion is individual income and not household income, even in cases of joint taxation.
A married couple with one dependent that has opted for separate taxation, how is the split of the $50 for that dependent made?
Each member of the couple will be entitled to $25 per dependent.
In the case of two divorced accountholders with one dependent living alternately, how is the 50 euros per dependent divided?
The distribution of the €50 follows the proportion defined for tax purposes, i.e. each holder receives €25 per dependent. In cases where the dependent belongs to only one household, that household member receives the entire support for the dependent.
Does a single-parent family with a dependent who is of legal age but has a disability receive extraordinary income support? If yes, how much?
Yes, a single-parent family with one incapacitated adult dependent will receive exceptional income support of up to €175. The main breadwinner will receive €125 if he or she has an income of up to €37,800 per year or is receiving one of the eligible social benefits. In addition, an amount of €50 is granted for each dependent up to the age of 24 (inclusive), or without an age limit in the case of disabled dependents. The latter support for dependents is not limited by the income of the principal holder.
Does a 26-year-old living at home with his parents fall under the measure?
Yes, if this young person has declared income for IRS and, as long as it does not exceed the determined maximum gross income, he/she receives a support of 125€. If he/she has income below 8500€ per year, and has not declared IRS (because he/she is exempt from the obligation to declare), he/she will benefit from the support if he/she has made social security contributions. If you have not paid SS contributions, you can still file your income tax return (for 2021) to benefit from the support.
If you have no income, you also receive a support of €125 as long as you receive social benefits (for example, unemployment benefit or social insertion income).
If this young person is considered dependent due to disability, the amount is €50 and there is no age limit. If this young person benefits from social benefits eligible for support he/she will receive 125€. These supports are not cumulative.
Are dependent ascendants considered in the calculation of the value of the exceptional income support?
No. The value of the exceptional income support considers only adult breadwinners and dependent children. Pensioners are covered by the exceptional pensioners' supplement.
What is the purpose of the measure?
The measure is intended to give families additional support to help them cope with the impact of rising prices.
When will it be paid?
Exceptional income support will begin to be paid in October 2022.
What do I need to do to receive exceptional income support?
Entitlement to exceptional income support is determined automatically by the Tax and Customs Authority and the Social Security Institute.
In the case of people with an income of up to 37,800€ per year and who have submitted an IRS declaration for 2021, payment will be based on the bank details shown on the Finance Portal. In the other cases covered, the exceptional income support is processed by Social Security.
Exceptional income support is preferably paid by means of a transfer to the IBAN provided on the Finance or Social Security Direct Portal. Thus, holders who have not yet indicated an IBAN should provide one through the website or at the counter.
Families First - questions and answers | Will the exceptional income support be paid in one lump sum?
Yes, people who are entitled to exceptional income support will receive it in one lump sum.
Will the exceptional income support be monthly?
No. Exceptional income support is an extraordinary measure and will be paid only once, starting in October 2022.
Is the exceptional income support taxed under IRS?
No. Exceptional income support is not subject to IRS.
Will the calculation of the income for the purposes of the 125 euros support be made based on 2021 in the case of those who have submitted an IRS declaration?
Yes.
In a couple where one member earned $30,000 in 2021 and the other member earned $100,000 , will the first member receive the $125 ,000 ?
Yes, the support is granted on an individual basis and not per household. In this case, since the first has an annual income of less than 37,800€, he is entitled to the support. The second, with income above this amount, should not receive it.
Does this separation by person occur even if the couple has opted for joint taxation with respect to 2021 income?
Yes.
When should those who have IBAN with the AT start receiving the support?
Processing will begin in October. Everyone can validate their IBAN on the Finance Portal or with Social Security.
How will the Ministries of Social Security and Finance be articulated for the payment of the support? For example, a couple in which one of the elements is receiving unemployment benefit and the other is working, earning less than 2700€ gross per month, will there be different entities to pay this support?
Yes. One will be identified via AT (because he has income from work and fills out the IRS Model 3 income declaration) and the other via SS (because he is a beneficiary of one of the social benefits covered by the measure).
What is the cost of the measure?
The exceptional income support will cost, in all, about 840M€.
How do you make sure that the same person doesn't receive both supports?
The Tax Authority determines the universe of people who benefit from the exceptional income support and the Social Security Institute determines the pensioners and social benefit recipients. The two universes are crossed and the status of the pensioner prevails - receiving exceptional pension supplements, no longer exceptional income support.
In the case of exceptional income support, a person who meets two types of criteria (e.g. dependent with unemployment benefit) receives the total amount of 125€.
Exceptional supplement to pensioners
What is the purpose of the measure?
The exceptional pensioners' supplement is intended to help pensioners cope with rising prices at a time when this help is most needed.
Does the exceptional pensioners' supplement replace the pension update in 2023?
No. In 2022 pensions have already been updated and pensioners now receive exceptional support. In 2023, pensions will be updated again to compensate for the effects of inflation, according to the percentages already announced.
Do pensioners lose out with this measure?
All pensioners will have until the end of next year an identical income to that which would result from the strict application of the legal formula. Pensioners will thus fully recover the purchasing power lost during this year.
How many pensioners will benefit?
Around 2.7 million Social Security and Caixa Geral de Aposentações pensioners will receive this exceptional supplement. The beneficiaries of this measure are those receiving old age, disability and survivor pensions.
When will the exceptional pensioners' supplement be paid?
Pensioners will receive their support in October via transfer, in the same way as they currently receive their pension.
What is the value?
The exceptional pensioner supplement will be worth half a month's pension. For example, a pensioner receiving €600 per month will receive a support of €300.
Who will pay the exceptional pensioners' supplement?
The entities that already process pensions today: Social Security and Caixa Geral de Aposentações.
Is the value of the exceptional pensioner complement taxed under IRS?
Yes, however, the withholding tax rate applicable to the exceptional pensioner supplement will be the one usually applied to the pension. This extra income will be excluded when determining the IRS rate to be applied in the month in which the support is paid, thus avoiding an increase in the tax bracket. When adjusting the IRS at the end of the year, this income is considered for tax purposes, following the general rules and rates.
Are there limits as to the value of the pension to be entitled to the exceptional pensioner's supplement?
There are no additional limits to those resulting from the pension update law. All pensioners with old age, disability and survivor pensions up to 12 IAS (5318€) will receive their exceptional pensioner supplement.
What is the expected cost of the exceptional pensioners' supplement?
The measure will have a cost of about 1000M€ in 2022. Being an exceptional measure, it does not imply budgetary pressures for the following years. In 2023, the estimated cost of the update is around 1155M€.
Limiting rent increases
What does the measure consist of and what is the goal?
To mitigate the increase in rents borne by residential and commercial tenants, the increase is capped at 2%. Without this measure, prices could rise 5.43% by 2023.
Who will benefit from this limitation?
All tenants of rented accommodation with contracts concluded by December 2022.
I currently pay a monthly rent of 500€. What is the maximum rent in 2023 with this measure?
The monthly rent will increase by a maximum of 2%, or 10€, and therefore cannot exceed 510€. Without this measure, the monthly rent could increase by €27.15.
Does this limitation apply to all rentals regardless of their value?
Yes. The restriction on rent increases in 2023 applies to all rents, regardless of the amount involved.
A 700€ rent could increase by a maximum of 14€ and a 1500€ rent could increase by a maximum of 30€. Without this measure, rents could increase by €38.01 and €81.45 respectively.
When will it go into effect?
This limitation on rent increases applies as of January 1, 2023, as the contracts are renewed.
The tax benefit applies to rents received in 2023, in the IRS assessment that occurs in 2024.
Will landlords be compensated?
Yes, the direct application of the law results in a 5.43% increase (CPI without housing in the 12 months ending in August). To compensate landlords for the differential in relation to the 2% increase, part of their property income will be excluded from taxation (IRS or IRC).
The value of the excluded income will be calculated so as to neutralize the impact of the rent cap for landlords, depending on the tax rate to which their property income would be subject. These rates differ depending on the duration of the contracts:
|
Contract duration |
IRS Rate |
Taxation Coefficient |
|
< 2 anos |
28% |
0,91 |
|
2 to 5 years |
26% |
0,90 |
|
5 to 10 years |
23% |
0,89 |
|
More than 10 years |
14% |
0,79 |
|
More than 20 years |
10% |
0,70 |
In IRC, the updating coefficient is always 0.87 because the applicable rate does not vary depending on the contract.
I am a landlord and I have a building with annual rents of 6000€. What is the amount excluded from taxation under IRS in 2023?
It depends on the duration of the contract. If the contract is for 3 years, 600€ of property income earned in 2023 will be excluded from taxation, the remainder being taxed at 26%. If the contract is for 5 years, 660€ of property income earned in 2023 will be excluded from taxation, the remainder being taxed at 23%.
What is the estimated cost of the measure?
The measure has an estimated cost of 45M€ in 2023.
Transportation price freeze
What does the measure consist of?
The prices of transport passes will remain unchanged, avoiding a fare price increase of about 8%. Thus, there is no price increase for urban passes (PART and PROTransP) nor for trips on CP regional and long-distance transport.
Are single tickets bought at the ticket office or directly from the driver in urban transportation covered?
No. The transport price freeze only covers urban passes and regional and long-distance CP travel.
What is the scope?
Around 1.2 million monthly passes are involved. It is estimated that in 2023 there will be more than 17 million individual trips on regional and long-distance transport.
When does it take effect?
The measure takes effect in January 2023.
What is the cost?
The measure has an estimated annual cost of 66 million euros: about 50 million euros for the passes and about 16 million euros for CP trips (regional and long distance).
Electricity VAT at 6%
What does the measure consist of?
For families with contracted power up to 6.9 KVA and the first 100kWh of consumption (or up to 150kWh for large families), the VAT on electricity (on the consumption component) will be reduced to 6%.
The 7 percentage point reduction in the VAT rate is equivalent to a reduction of about 6.2% on the monthly bill for the first 100kWh of consumption (150kWh for large families).
Who will benefit from this measure?
All families with power up to 6.9 kVA will benefit from this reduction in the VAT on electricity, covering 87% of consumers (low voltage), totaling 5.3 million beneficiaries.
When will it be in effect?
It will be in effect between October 1, 2022 and December 31, 2023.
On average, how much will a family with a contracted power of 6.9 kVA and average consumption of 90 kWh save?
Considering the decrease in VAT from 13% to 6% and a family with average consumption of 90 kWh, this family has an annual savings of 11.64 €. Considering also the decrease in the VAT rate from 23% to 13% in December 2020, the aggregate annual savings is 28.30 €.
Is a family with a contracted power of 6.9 kVA and average consumption of 134 kWh covered by the measure?
Yes, the first 100 kWh of consumption will now be taxed at 6% VAT, and not at 13%. The remaining 34 kWh will continue to be taxed at 23%. This family will have an average annual saving of 12.84 euros (or 17.40 euros if it is a large family)
How much is the measure?
The measure has an estimated annual cost of 90 M€. In 2022, it will cost up to about 22.5 M€.
What are the current rules and what future rules flow from this measure?
- Currently:
- Power below 3.45kVa: 6% VAT on power, 13% VAT on the first 100kWh of consumption, and 23% VAT on the remainder
- Power between 4.60 to 6.9kVa: 23% VAT on power, 13% VAT on the first 100kWh of consumption, and 23% VAT on the remainder
- Power over 6.9kVa: 23% VAT on power, 23% VAT on consumption
- With the new measure:
- Power below 3.45kVa: 6% VAT on power, 6% VAT on the first 100kWh of consumption, and 23% VAT on the remainder
- Power between 4.6 and 6.9kVa: 23% VAT on power, 6% VAT on the first 100kWh of consumption, and 23% VAT on the remainder
- Power over 6.9kVa: 23% VAT on power, 23% VAT on consumption
Reduced gas tariff
What does the measure consist of?
The measure provides for the possibility of returning to the regulated natural gas tariffs regime for consumers with annual gas consumption of less than or equal to 10,000 m3. It is estimated that around 1.3 million families and small businesses, currently in the liberalized market, may benefit from this measure.
With this change, it is guaranteed that families and small businesses can now benefit from tariffs substantially lower than those already practiced today in the free market, translating into a minimum savings of 10% in their bills, even considering the increases expected as of October 1 of the regulated tariff.
When will it be in effect?
The measure comes into force on the day following its publication in the Diário da República, allowing the transition to the regulated market to take place immediately and for a period of one year, after which it will be evaluated.
How do you operationalize the change?
The change of supplier must be done in accordance with the Commercial Relations Regulation, approved by the Energy Services Regulatory Entity (ERSE).
The customer should first consult the list of last resort suppliers and choose the one they wish to contract with. The change request can be made over the counter, by phone or online with the supplier of last resort of your choice and the entire switching process is handled by this entity, including the termination of the contract with the previous supplier.
To change you do not have to pay anything, nor do you have to change the meter, and the change is not subject to extraordinary inspection. The service will not be interrupted, since the change is merely contractual.
What is the impact of the measure on tax revenue?
It is estimated that with the possibility of consumers switching from the liberalized to the regulated market, VAT revenue will decrease:
- 113 M€ if all consumers in the liberalized market switch to the regulated market;
- 61 M€ if half of the consumers in the liberalized market switch to the regulated market.
These values correspond to a loss of revenue compared to the scenario in which, after the increases in the liberalized market, the State would collect more tax revenue than it does now.
What is the estimated individual savings per family?
A couple without children will pay 65€/year less VAT (1st bracket). A couple with two children will pay 95€/year less VAT (2nd bracket). Under the same requirements and with central heating they will pay 125€/year less VAT (3rd bracket).
Extension of the fuel tax reduction until the end of the year
What is the purpose of the measure?
The reduction in the fuel tax burden currently in effect will be extended to support families and businesses in coping with rising fuel prices. The Government acts on the component of price formation on which it can act, which is the tax burden, through three dimensions of the ISP:
- Suspension of the carbon tax increase (which is reflected in the ISP);
- Return of additional VAT revenue via ISP;
- ISP reduction equivalent to the decrease in VAT from 23% to 13%.
How long does it last?
The fuel tax rebate will remain in place until the end of the year.
Who benefits from the measure?
Everyone who fills up with simple gasoline or road diesel, whether individuals or companies.
For a family with an average monthly consumption of 50 liters of fuel, what is the reduction in the tax burden?
On average, the tax relief is 30 cents per liter, which guarantees a saving of about 15 euros per 50 liter tank.
- Gasoline: 32 cents per liter, or a 16 euro saving for a 50 liter consumption;
- Diesel: 28 cents per liter, or a savings of 14 euros for a 50 liter consumption.
How much does this measure cost?
Considering only the months of September to December, the measure will cost 537M€, or 0.2% of GDP. In the whole year 2022, the measure has a cost of 1483M€ (i.e. 0.6% of GDP).
