The State Budget Law for 2022, Law 12/2022 of 27 June (“SBL2022”) was published on 27 June 2022 and came into force on the following day. SBL2022 is framed in a context of expectations for the economic recovery of the country in what is hoped will be a post-pandemic period.

It has been presented as a budget that promotes economic recovery and reinforces policies favourable to investment. However, the greatest changes that have been proposed relate to the taxation of individuals. The proposals for companies are modest, particularly in terms of relief from the tax burden they currently have to bear in their operations. We are therefore seeing a clear choice by the Government to introduce a Budget that is more geared towards families than to businesses.

In relation to individuals, SBL2022 benefits families and young people and the highlights include: (i) splitting the third and sixth Personal Income Tax (Imposto sobre o Rendimento das Pessoas Singulares- IRS) brackets so there will be nine brackets instead of seven; (ii) an increase in the deductions from taxable income relating to dependants; and (iii) an improvement in certain special arrangements including Youth IRS (IRS Jovem) and the Return (Regressar) programme.

However, unlike the increase in family and middle class incomes highlighted by the Government, there will now be compulsory aggregation of certain income, such as the income resulting from capital gains from the sale of shares and other securities acquired less than one year ago and for those earning taxable income in the highest Personal Income Tax bracket. There are no transitional arrangements for investments already made under the law currently in force and
in which the capital gain is realised after 2022 with the need for compulsory aggregation of income. Moreover, fairness and compliance with the principle of legal certainty of a potential increase in taxation may be questioned.