If the 2021 budget in Portugal is passed as is, next year could bring new social support, wage and pension increases and relief from the IRS. All these measures that are foreseen in the preliminary version of the 2021 budget proposal by the Portuguese government clearly announce the color. They want to get back on the path of pre-covid growth and are ready to put the means to it.
Budget 2021 in Portugal, what the government plans
The Portuguese government predicts when this year-end, the country' s economy will collapse by around 8.5% , a more pessimistic figure than the 6.9% decline predicted by the former Finance Minister in the 2020 budget .
Here are the main measures planned in Portugal's draft 2021 budget for next year:
Employment and Social Supports
- Extraordinary increase of 10 euros for the lowest pensions, paid from August, which will cost the state 99 million euros.
- Increase of the minimum social income, which is currently 438.81 euros and should increase to 505.10 euros. This measure is estimated to cost 75 million euros.
- Creation of extraordinary income support for workers in response to the pandemic crisis, covering employees, domestic services and the self-employed, to a minimum value of 50 euros. This measure will cost around 450 million euros.
- Support continues for informal workers for up to six months.
- Income from IMI and part of IRC will be redirected to the social security budget.
- Allocation of an extraordinary risk premium of up to 219 euros to healthcare professionals working in covid-19 zones. A measure estimated at 60 million euros.
- Recruitment of 261 professionals for INEM and 4,200 for the National Health Service ( SNS ).
- The respiratory protection masks and disinfectant gel will remain subject to the reduced VAT rate. The measure is estimated to cost 23 million euros.
- Reinforced investment of 90 million euros in the primary healthcare units of the National Health Service (SNS).
- Exemption from payment of user fees in primary care , a measure that will have a financial impact of 47.3 million euros.
- A budget of almost 26 million euros will be made available for construction work on the new Central do Alentejo hospital in Évora , and 5.5 million euros to launch the call for tenders for the construction of the do Seixal hospital in the Setúbal district .
- Companies will be able to deduct from their profits the donations allocated to the hospital entities EPE .
- Hired over 3,000 employees in the schools next year.
- Increase in the number of free crèche places, including children from families up to the 2nd income bracket, benefiting around 65,000 children. A measure estimated at 11 million euros.
- Primary and secondary education and administration with a school budget of 7 billion euros, an increase of 7.1% compared to 2020.
- Scientific and higher education establishments will be exempt from paying VAT on activities related to reducing the spread of Covid-19 .
- The Institut de l'Habitat et de la Réhabilitation Urbaine ( IHRU ) will receive 10 million euros for the recovery of state assets for housing purposes and 317.6 million euros for housing promotion policies.
- The VAT paid by consumers on accommodation, cultural and catering expenses incurred during a quarter can be discounted on consumption in these same sectors during the following quarter. The measure is estimated to cost 200 million euros.
- VAT paid on sporting activities will be partially deducted in the IRS in the same way as the deduction currently allowed for expenses at restaurants, hairdressers and veterinary surgeons.
- IRS withholding tables will be reduced by the equivalent of 200 million euros in 2021.
- The permanent reduction in the VAT rate on electricity will save families 150 million euros next year.
- Offshore entities are excluded from public aid created in the context of exceptional and temporary pandemic measures.
- Large companies with profits in 2020, which use the support granted during the pandemic or which benefit from certain tax advantages can not lay off workers and will have to maintain in 2021 the level of employment registered on October 2020.
- The government has earmarked 500 million euros in guarantees for TAP, so that the company can eventually finance itself on the market, in addition to the 1,200 million euros already approved in loans.
- Funding of around €260 million for the Public Transport Fare Reduction Program (PART).
- The Environmental Fund plans to allocate more than 36 million euros to Metropolitano de Lisboa, to finance the extension of the network and purchase new trains.
- Investment of 384 million euros in rail infrastructure: 147 million euros for Corredor Internacional Sul, 99 million euros for Corredor Internacional Norte, 78 million euros for Corredor Norte-Sul and 60 million euros for Corredores Complementares.
- Implementation of the "Lotaria do Património", in the form of "scratch cards", and introduction of an "extraordinary cultural patronage" scheme, with tax benefits.
- Creation of the status of cultural professionals.
The 2021 budget in Portugal, is very courageous on the part of the Portuguese government, it clearly wishes to put the country back on the path of growth, let's hope, now that it will be well heard after some corrections voted by the majority by the assembly and accepted by Europe.