Decrease in the Special Payment on Account (PEC) will cost 34 million euros to the Treasury
The draft law will create a transitional regime until December 31, 2018. The government is committed to implement the simplified regime on the first of January, 2019.
The decrease in the Special Payment on Account (PEC) will cost the Portuguese state around 34 million euros, according to ECO. The draft law to implement the measure — which was the compromise found to compensate employers and still act in accordance with the social concertation agreement — has been sent to the Portuguese Parliament last Friday.
The numbers disclosed stem from internal estimates, which considered data from 2016 – meaning the number could be an underestimate. The Portuguese prime minister had previously stated the impact of this new measure would be “equivalent” to the cost predictions for the reduction in the Single Social Tax (TSU) for employers paying minimum wages, which did not move forward in Parliament. According to the government, the TSU decrease would have costed 40 million euros.
It is not stated in the PEC draft law that it is a compensation for the minimum wage increase, nor is it related to companies paying minimum wage to their employees. It will be presented as a measure supporting enterprises’ liquidity. As explained after the Ministerial Council Meeting, “companies that had, in the previous year, salary expenses equivalent to, at least, a full time employee throughout that year, can benefit from the temporary reduction in the Special Payment on Account (PEC)”.
At issue are 122,489 enterprises, stated the Ministry of Finance to ECO. António Costa, Portuguese PM, had previously stated the measure would be more comprehensive than the TSU decrease. In 2016, there were 99,235 companies paying minimum wages who benefited from the cut in contributions, Finance also stated. However, since the measure is broader, the number of companies could be different this year.
According to ECO, the draft law reducing PEC also introduces an amendment to the Company Tax Code (IRC code). The article will establish a transitional regime until December 31, 2018. During that period, there will be a 100 euros’ reduction of the amount of the Special Payment on Account in accordance with the rules already in force, combined with the 12.5% reduction.
The draft law makes the government approve a simplified regime, which will come into effect on January 1st, 2019. When this regime enters into force, the Special Payment on Account (PEC) may cease to exist.
