The Law n.º 20/2023, of May 17, circumscribed the exemption from IRS (Single Income Tax) on income from dependent work earned abroad
After the 1st of July, only taxable persons who carry out functions or commissions of a public nature at the service of the Portuguese State continue to be able to benefit from IRS exemption on income from dependent employment.
In 2015, the Portuguese State, seeking to combat the economic crisis by encouraging the internationalization of Portuguese companies, and, at the same time, fixing the tax residence of expatriates in Portugal, created a special tax regime for employees and staff of companies working temporarily in the foreigner.
An IRS exemption was then provided for the maximum annual amount of EUR 10,000 of dependent employment income referred to in article 18 of the IRS Code earned by any taxable person who, in the year to which the income relates, having been moved abroad from their normal place of work for a period of no less than 90 days, of which 60 must necessarily be in a row, are considered residents in Portuguese territory, in the part relating to the remuneration paid or made available to the worker exclusively by way of compensation for travel and stay abroad that exceeds the legal limits provided for in the IRS Code.
The limit of EUR 10,000 has, since the creation of the regime, been pointed out as too low, considering the objectives that were intended to be achieved with the 2015 tax reform, and, above all, in comparison to similar tax regimes, such as the one in Spain, which provided for a limit of more than 60,000 EUR. However, the scheme remained in force as initially approved.
At the end of 2022, the Government, in a “review of tax benefits in Portugal”, proposed the revocation of several benefits, considering them already inadequate or unnecessary in view of the objectives outlined when they were created.
In this context, in May 2023, Parliament approved Law No. 20/2023, of May 17, through which it came to circumscribe the IRS exemption on income from dependent work earned abroad to taxable persons who perform functions there or commissions of a public nature at the service of the Portuguese State.
In this way, the IRS exemption will only be available for the remaining displaced workers until the next 30th of June.
