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Moves on the tax front…

Apart from the increase in Tax on Local Lodging (from net 3,75% to net 8.75%) the State is planning indirect taxes and changes for 2017.

An added assessment, dubbed “Additional Municipal Property Tax (AIMI), will cover the entire ratable value (VPT) with an exemption on the first €600,000. For properties above this evaluation, the rate of 0.3% will apply. Property Owners with outstanding taxes will forfeit this exemption and will have to pay the new levy whatever the VPT.

On the other hand, owners of buildings with ratable values over one million euros should pay less overall tax in 2017 than last year, even with the proposed increase in Municipal Property Tax (IMI), due to the elimination of the 1% Stamp Duty on this type of luxury real estate.

Tax Hike on Local Lodging

In the 2017 Portuguese State Budget there will indeed be a change to the tax on Local Lodging. After heated discussions on Thursday evening, it seems that the Government is not going to increase the overall tax rate to 28%.

Instead, the taxable part of the income will increase from 15% to 35%. This means that the current tax rate of net 3.75% will go up to net 8,75% .

An example:  A Local Lodging owner has an income of 100€.

Until 31.12.2016, a tax rate of 25% is applied to 15% of the 100€,

so 15€ are taxable. On this amount,  the tax rate is 25%.

The result: of 100€ income: he pays 3.75€ to the state.

 

As of January 2017, a tax rate of 25% is applied to 35% of the 100€,

so 35€ are taxable. On this amount,  the tax rate is 25%.

The result: of 100€ income: he pays 8.75€ to the state.

 

New Social Security rules for Sole Traders

The Government has confirmed that, for independent workers under the Simplified Regime, Social Security deductions are to be based on net taxable income after application of the appropriate coefficient, not the gross received. In addition, overall Social Security deductions due may not exceed 10% of gross income from all sources.

Probing public opinion…

On the weekend, a notice appeared in the national media that the Government may plan to increase the taxation on the AL sector in the 2017 budget.

This information is probably a test balloon to gauge public opinion on this matter.

There has already been strong opposition by some industry members, and NALLE will be voicing its opposition any such move with the Authorities.

For the moment, any news in this regard should be taken with calm. Nothing is eaten as hot as it is cooked!

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