The state budget for 2021 (OE2021) brings from January 1, 2021, 18 changes, ranging from the increase of the minimum wage and the decrease of the pensions to the creation of new social aid to the reduction of the VAT on electricity. Let's take a look together at what is changing in Portugal in 2021.
What changes in Portugal in 2021
1. Increase in the minimum wage
The national minimum wage (SMN) for the year 2021 is set at 665 euros. This is an increase of 30 euros compared to 2020 (+ 4.7 %) and an increase of 160 euros (+ 32 %) compared to 2015. This increase will also have an impact on the salaries of public administration (PA) workers in 2021.
2. increase in retirement pensions
Pensioners with pensions up to €658.2 will receive an extraordinary increase of €10. The Ministry of Finance guarantees that this increase "will guarantee real gains in purchasing power for about 1.9 million pensioners". The increase for the month of January will be paid together with the month of February.
3. New social support for unsheltered workers
Workers who have suffered income decreases due to the pandemic crisis. They will receive a new extraordinary social support, which will be based on the value of the poverty line (€ 501.16). It is estimated that the new social benefit could reach 258,000 people. The support will cover employees who lose access to unemployment benefits in 2021; economically dependent self-employed workers; self-employed workers with at least three months of contributions in the 12 months preceding the application and whose billing is less than 40 %.
4. Minimum unemployment benefits are increased and benefits are extended for six months
In 2021, the minimum threshold for unemployment benefit will rise from €438.81 to €504.6 for full-time workers, covering about 130,000 people. At the same time, workers whose unemployment benefit expires in 2021 will be entitled to an extension of this assistance for another six months.
5. Free daycare for over 60,000 children
In 2021, free day care will cover all children attending a public day care center or cooperative system. The measure is aimed at households in the 1st and 2nd income brackets and could benefit 60,000 children.
6. Extraordinary support for progressive recovery
The Extraordinary Aid for Progressive Recovery is extended until June 30, 2021, and provides for the payment of 100% of the salary up to three minimums (1,995 euros). Full pay also covers workers who are laid off.
7. More doctors, more beds and more equipment for the SNS
The OE2021 includes the hiring of 4,200 employees for the National Health Service and 261 additional workers for the INEM; the reinforcement of Continuing Care Units, with 400 new beds for the general network, ten Day Units and Autonomy Promotion (200 places), 600 new places in the Mental Health CCIs; in addition to a reinforcement of 150 million euros in primary health care for equipment and facilities and 50.5 million euros for the replacement and purchase of heavy hospital supplies.
8. Autonomies and modernizing the public school
During 2021, another five thousand operational assistants will be hired for public schools and a reserve of 400 million euros is planned for a school digitization program.
9. Adjustment of IRS withholding tables
In 2021, the Government promises to continue the gradual, phased-in path to blur the gap between the deductions made at source by dependent workers and the final tax liability. This adjustment will make about €200 million available to households next year, the Ministry of Finance estimates.
10. IRS exemption limit increases by €100
The IRS exemption limit increases by €100. The minimum amount up to which taxpayers are exempted from paying the IRS, will be increased by €100 to €9,215. There are about 30,000 new aggregates that will therefore also be exempt from this tax, reveals the Ministry of Finance.
11. Reduction of VAT on electricity
The VAT reduction on electricity - to an intermediate rate of 13 % for consumption up to 100 kilowatt hours (kWh) of monthly consumption - went into effect on December 1, which means the January bill may already reflect savings. Starting in March 2021, large families (aggregates with five or more elements) will receive an increase of 50 % and the VAT rate of 13 % applies to consumption up to 150 kWh per month.
12. Prohibition on cutting off water, electricity, gas and communications during the first half of the year
There is a rule in EO2021 that prohibits the disconnection of essential services such as water supply, electricity, natural gas, or communications (in the latter case, if the consumer is unemployed, has a drop in income greater than 20%, or is infected with COVID19) during the first half of 2021.
13. Extraordinary Investment Tax Credit
The Extraordinary Investment Tax Credit is a deduction from the collection of IRCs corresponding to 20% of the investment expenses incurred until the end of the first half of 2021, up to a limit of 5 million euros, to be used for a maximum of five years. It requires the maintenance of jobs during the period of use of the tax credit, with a minimum of three years.
14. The payment of VAT and IRC can be made in instalments
In the first half of 2021, companies and self-employed persons can benefit from a special and transitional phase of VAT supplies. Compliance with the benefit schemes is done with the tax authorities.
15. IVAucher encourages consumption in the sectors most affected by the pandemic
The program IVAucher aims to stimulate consumption in the sectors most affected by the pandemic while increasing disposable household income by approximately 200 million euros. Consumers will be able to accumulate 100 % of the VAT incurred in the accommodation, culture and restaurant sectors over a 12-week period, and this balance will also be available for use in these sectors over another 12-week period. However, the Government is conditioning the entry into force of the measure where the health crisis evolves.
16. Bank Moratorium Enrollment Extended to March
In order to address liquidity and cash flow constraints arising from the economic impact of the second wave of the pandemic, the government has approved an amendment to the bank moratorium scheme, allowing new enrolments until March 31 and for a maximum period of nine months from the date of enrolment. For example, families and businesses that apply for a moratorium in early January will be able to benefit until the end of September. If the bank is notified at the end of March, the moratorium will remain in effect until the end of the year. Companies in the sectors most affected by the pandemic can still benefit from an extension of the duration of their credits, over a period of 12 months, in addition to the credit deferral period, allowing them to make payments in a more gradual manner and according to the evolution of economic activity.
17. Public guarantees for economic support measures
The budget provides for the granting of public guarantees of up to 6 billion euros, allowing the creation of credit lines to support the economy. This amount, which is aimed at companies and households, includes maintaining employment and supporting the liquidity and cash flow of economic operators.
18. Reduction of tolls on ex-SCUTs and inland highways
Beginning January 11, frequent individuals and passenger vehicles will receive discounts on passing through the former SCUT tolls. Class 1 and 2 vehicles receive a 25 % discount from the 8th day of use in a month on the same route. The reduction applies to certain 10-lane routes or sub-lanes: A22 - Algarve; A23 - IP; A23 - Beira Interior; A24 - Interior Norte; A25 - Beiras Litoral e Alta; A28 - Norte Litoral; A4 - AE transmontana sub-concession; A4 - Marão Tunnel; A13 and A13-1 - Pinhal Interior sub-concession. In the case of freight vehicles, the current reduction of 30 % during the day and 50 % at night is reduced to 35 % and 55 % respectively. The 55 % reduction also covers weekends and holidays. This reduction scheme is extended to passenger transport on these ten routes, in addition to the Grand Port concession (A4, A41 and A42) and the Silver Coast concessions (A17, A25 and A29).