Working in Portugal ? Here is why your net salary will drop from January

The Portuguese Parliament approved the new fiscal law 2018 that includes the end of the system of payment of the subsídios of Ferias and Natal spread over the year and this from January 1th. At the end of the year the net amount received will be the same but the effects for the first months of the year will be more or less important depending on your income and which option you choosed regarding subsídios. The net amount that you will receive at the end of January will be lower than last year (if you have opted for the spread of the payment of subsídios). This measure also applies to public employees and retirees in 2018.

 

A net impact of 40 to almost 100 euros

According to simulations made by Luís Leon, Deloitte's tax advisor, the loss of net income can reach 89.72 euros for a single taxpayer with no dependents whose gross monthly income is 1,500 euros. This is the maximum limit analyzed because it covers the majority of remunerations paid in Portugal.

For a taxpayer with a gross monthly income of 1000 euros, the salary reduction can reach 64 euros. The most significant impact in relative terms will, however, be on the lowest maturities. The simulation for a single single person who earns 557 euros gives a reduction of 41.3 euros, or 7%. And in these cases, there is no relief from the tax burden on wages because these workers no longer pay IRS.

A call center employee will see his net salary drop about 60 € and this from the end of January. Companies seem to have poorly communicated about this new measure and the short-term impact it will have on the income of their employees. Human Resources already anticipates endless queues once January wages are sent and employees see their payslip.

Here is a table with examples of the impact of this measure on net income.

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These calculations are made from the current IRS deduction tables and compare the income earned by these type contributors in 2017, if they chose to receive the twelfths, with the one they will receive next year.

There may be an adjustment, in this case, to a relief of the new tax brackets for 2018 that will reflect the race to the bottom of the IRS and that will benefit most of the income. However, this runoff from the IRS will not be enough to offset the impact on the net monthly income for those who lose the spread of the payment of subsídios, says Luis Leon.
 

Different reactions
 

For the president of the Confederation of Trade and Services of Portugal (CCP), João Vieira Lopes, the question of subsídios "is not very important" because at the end of the year the total is the same, but it has defended that "to pay completely subsídios has always been more favorable" for the companies that it represents.

On the side of the trade union centers, the CGTP general secretary, Arménio Carlos, considered the measure adopted in Parliament as positive, underlining that the union has always defended the replacement of the full payment of holiday and Christmas allowances. "The real net pay appears to employees, it's a good measure in the end," said Arménio Carlos, referring to the "sharp rise in taxes" and wage cuts over the Troika years. The head of the UGT, Sérgio Monte, argued that the subsídios should be paid in accordance with what is provided for in the collective agreements and that workers should be able to choose between the spread of payment or receive them entirely.

- How to calculate net salary from gross in Portugal

Bob is expats assistant in Lisbon and Portugal.