Changes to the Personal Income tax for “IRS jovem”
Article written by Catarina Rosado ([email protected])
The State Budget 2022 repealed the article that contemplated the tax regime for young people who obtain income from dependent work after the conclusion of their studies.
The first two news are in the extension of the maximum age of benefit, which is now between 18 and 29 years of age, if workers, not being considered dependent, obtain income from dependent work and business and professional income (independent work). This last category of income, which was not included in the previous article, allows young people who start an individual activity to also benefit from this tax benefit. The maximum age of the benefit may reach 30 years of age, even if we are facing the conclusion of a Doctorate (level 8 of the QNQ).
Another change has been made to the partial exemption period, which has been increased from 3 to 5 years, counted as follows: in the first year in which income is obtained, after completion of the study cycle and in the following 4 years, or in consecutive years, provided that the maximum age of the taxpayer in any of these years does not exceed 35 years, inclusive.
Currently, in the first and second years, 30% of the gross Category A and B income, the exempt amount may not exceed 7.5 x IAS, in the third and fourth years, 20% of the gross Category A and B income, the exempt amount may not exceed 5 x IAS and in the fifth year, 10% of the gross Category A and B income, the exempt amount may not exceed 2.5 x IAS.
The requirement for aggregation of exempt income and the limitation that young people can only benefit from this regime for a single study cycle has been maintained. Although this is a regime which applies to young people whose first year of receipt of income in Categories A or B after completion of the study cycle is 2022 or after, a transitional regime has been created in view of the revocation of the previous regime, which allows young people who have applied for the Young Persons’ Income Tax (IRS Jovem) in 2020 and/or 2021 to still benefit from the new regime for the remaining period, with the necessary adaptations.
However, the period of “IRS JOVEM” resulting from the combination of the two regimes may never, in any case, exceed the maximum limit of 5 years.
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