State budget 2023: Essential points

Portugal’s socialist majority government on Friday approved the draft state budget for 2023 after a marathon vote on almost 2,000 amendments, introducing few changes due to the rejection of most of the opposition measures.

In a repeat of the first reading vote, the 2023 draft state budget was approved only with the votes in favour of the Portuguese Socialist Party (PS) and the abstention of the sole members of the PAN (People, Animals and Nature party) and Livre party.

It was precisely these two parties that managed to get approval for the largest number of amendments, some of them only after changes to the initial proposal: PAN saw about 10% of the proposals it presented being vetoed, while Livre had the ‘green light’ for about 20%.

The budget underwent few changes compared to the government’s initial proposal and with little budgetary impact compared to the ‘Geringonça’ (coalition of the Left) period, leaving ‘out’ important flagships for the opposition, but accommodating proposals that point to studies and evaluations.

PSD (Social Democratic Party), Chega (right-wing populist party), IL (Liberal Initiative Party), PCP (Communist Party) and BE (Left Bloc) rejected the budget once again, and throughout the four days of debate and voting at the committee stage they heard the word ‘disapproved’ to almost all of their proposals.

The largest opposition party, PSD managed to get approval for seven of its proposals, a higher number than those that PS (Socialist Party) had enabled from former ‘Geringonça’ partners BE and PCP.

It is also important to note that the new legislation will be adopted by the end of this year.

The Liberal Initiative ‘won’ two victories (ie. two of its proposals were approved) on the first day, the number with which it reached the end of this budget process.

Chega was again the only party to see all its proposals rejected.

Without surprise, the socialist parliamentary majority ensured the ‘green light’ to all the proposals for amendments and additions with the signature of the PS Parliamentary Group.

Despite the absolute majority of the PS, this was the year in which the parties broke the record of proposals submitted: more than 1,800.

Here are some of the proposals approved during the debate and vote.

PS

The absolute majority ensured the viability of all the proposals presented by the PS, including one that opens the way for a new pension update in 2023 if inflation is higher than forecast.

The PS also introduced in the budget for 2023 the end of the differentiated tax treatment between residents and non-residents in the capital gains generated by the sale of real estate, the reinforcement, up to 55% of the Social Support Index, of the complement for accommodation for displaced students with scholarships who have not managed to find a place in social action service residences, as well as the non-application of the tax benefit that compensates the ‘brake’ on rent increases to landlords who interrupt contracts before the deadline.

With the budget for 2023 and as proposed by the PS, restructuring operations of housing loans to extend the term or refinance the debt will be exempt from Stamp Duty during the year 2023. On the other hand, the IMI (property tax) rate for properties located in areas of urban pressure and used for tourist accommodation may be increased by up to 100% of the rate for the year to which the tax relates.

Livre

Livre managed to introduce in the budget that the government create, until the end of the second quarter of 2023, a national rail pass for regional trains, costing €49 and also the increase of the allowance for single-parent families from the current 35% to 50% up to the 1st income bracket.

Also of note is the increase from the current €12,500 to €13,500 of the annual limit of income of VAT exempt independent workers, the white paper on sex work and prostitution, along with a study on violence against disabled people and another on “the impact of menstruation on health and quality of life in Portugal”.

PAN

Among the measures that the PAN managed to get approved are the extension of access to the social energy tariff to families whose total annual income is equal to or less than €6,272 or the deduction in IRS of VAT borne on the purchase of public transport tickets, as well as the reduced VAT rate on butter, margarine and vegetable creams obtained from products of vegetable origin and vegetable-based drinks and yoghurts.

Inês Sousa Real, the sole MP, also saw approved a study on the impact of what she calls the “pink tax”, i.e. how much more women spend than men on similar products and the increase of €1.05 million in the appropriation for animal collection centres, totalling €13.2 million, as well as the extension of the carbon tax to private jets as of July next year.

PSD

Among the various proposed amendments to the budget for 2023 that the PSD managed to see approved is one that allows families to deduct part of the expenses with periodic subscriptions to newspapers and magazines, including digital ones, from the IRS, for which the respective invoice is required.

The social democrats also got the ‘green light’ on the proposal that extends the range of situations for the use of the balances of savings plans, such as the PPRs, in the amortisation of home loans during the year 2023, and that allows the redemption to be made without tax penalties before five years have passed and on one on strengthening the prevention of and fight against violence against the elderly.

BE

Among the ‘conquests’ of the BE, it is worth mentioning that the early payment of rents cannot exceed two months – the ‘bloquistas’ (members of the party) initially wanted it to be only one month – a measure that aims to combat “abuses of guarantees” that are currently requested from tenants, as well as the revocation of the framework of tax incentives directed at real estate investment funds.

Among others, it also managed to make viable a proposal for the implementation of the National Strategy for Green Public Procurement, which provides for its follow-up and monitoring and one that ‘tightens’ the IMT (property purchase and transfer tax) exemption rules attributed within the scope of the resale of property.

PCP

The PCP, in turn, also managed to get several proposals approved, such as the one that extends from 20 August to 20 September the deadline for submission of VAT declarations for June or the second quarter, providing that the payment of the tax may be made until 25 September.

The Communists also got approval for the proposal that guarantees resources to the Authority for Working Conditions (ACT) to inform companies about legislation that protects victims of domestic violence and one that determines the progressive elimination of architectural barriers.

 IL

The budget will contemplate two proposals from IL: the bringing forward of the calendar for the disclosure of the contest for access to higher education and the definition of the terms and criteria for the deposit system for returnable packages.