Portugal’s State Budget in a Nutshell

Portugal’s new finance minister and ex-mayor of Lisbon, Fernando Medina, delivered the government’s State Budget for 2022 at the end of last week.

The two new main takeaways are that because of the inflationary pressures on energy prices, the government will offset the effects on the economy by reducing ISP fuel tax by an amount equivalent to a reduction in the VAT rate from 23% to 13%.
Also two new tax brackets on IRS have been introduced by splitting the 3rd and 6th scales to give middle income groups “slightly more money”. However, thanks to the rising costs of several key foodstuffs, petrol and diesel and domestic energy bills, the sweetener will be cold comfort to families as they see their purchasing power eroded all the same.
According to Lusa’s appraisal of the State Budget for 2022 the changes and introductions pertaining to and/or effecting business are as follows:

COMPANIES

Companies will no longer have to make the special payment on account (PEC) of IRC. This measure responds to the demands of several business confederations and associations and aims to give companies more liquidity, especially smaller ones.
The OE2022 provides €2,615 million in support for the recovery of companies and €1,150 million for climate and digital transition.
With regard to the Capital and Resilience Fund, the recapitalisation of companies affected by the Covid-19 pandemic is foreseen, amounting to €1.3 billion.
The capitalisation of the Banco Português de Fomento (BPF) to support companies is €250 million and in the incentives and subsidies under the Recovery and Resilience Plan (PRR) €900 million are available for innovation, digitalisation, qualification and decarbonisation.

COMPANIES TAX RELIEF

Tax relief for companies is also planned, with a tax incentive for recovery (IRC tax deduction of up to 25% of investment), amounting to €150 million, and the end of the PEC – special payment on account and relief from autonomous taxation of IRC, of €15 million.

JUSTICE

In a budget that foresees over €1.6 billion for Justice, reforms and investments to be implemented this year include “availability of the information system for monitoring the national Anti-Corruption Strategy” and “promotion of electronic interoperability of the Administrative and Fiscal Courts with the Tax Authority, with a view to dematerialised access to the electronic process as a tax enforcement body”.
The introduction of the new Magistratus and MP Codex IT platforms in the courts of first instance is one of the investments scheduled for completion by 2022.
The government intends to conclude the revision of the Insolvency and Company Recovery Code (CIRE), for the “optimisation and speeding up of insolvency processes, to adapt it to digital format and establish exclusively electronic procedures, as well as “the amendment of the status of the judicial administrator with a view to reducing restrictions on the exercise of highly regulated professions”.

PUBLIC INVESTMENT

In terms of investment in the justice sector, the OE2022 provides for a sum of “€87.6 million euros, of which €38.6 million are allocated to the Justice Financial Management and Equipment Institute (IGFEJ) — essentially to finance works and/or construction in Ministry of Justice buildings (courts, prisons, judicial police facilities, among others).
€30.3 million euros are to be allocated to the funds budgeted under the Recovery and Resilience Plan (PRR).
Public investment will increase by 30% compared to 2021, according to the proposal, representing, together with the Recovery and Resilience Plan (PRR), 3.2% of GDP.
The increase in investment includes “in addition to the boost that comes from the PRR”, a trajectory “consistent with the degree of maturity of structuring investments planned before the pandemic, estimated at €1,997 euros in 2022”.
Added to these structuring investments is the PRR, whose “public investment by the government associated with the PRR projects represents around 1,026 million euros”.

BANKS

The Government expects public coffers will collect €495 million from dividends from the Bank of Portugal and state controlled Caixa Geral de Depósitos (CGD) bank — the same amount that was included in the proposal presented in October last year. The executive led by António Costa provides for €295 million euros from the Bank of Portugal and €200 million from CGD.
The OE2022 maintains the special contribution on the banking sector, which is expected to raise revenues of €178.8 million, and the additional solidarity contribution on banking, which is estimated to raise €34 million.
Fernando Medina explained at a later press conference that the government has not included in the OE2022 any transfer to the Bank Resolution Fund for lending to Novo Banco.

Truncated version compiled from Lusa by The Portugal Resident www.portugalresident.com