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Amnesty Law in Portugal

On November 1st 2013, the new “exceptional” and “temporary” regularization regime for tax and social security debts, which was approved by Decree-Law nº151-A/2013 entered into force.

This regime allows a full exemption or a reduction from the default interest, compensatory interest, or administrative costs relating to the tax enforcement proceedings, if the regularization payments are totally or partially made until 20thDecember, 2013.

I. Brief Summary

1. Type of debts- tax and social security debts declared by the taxpayers or their representatives, under the law, before making the payment, even if they were unknown to the Tax Authorities or the Social Security.

 2. Advantages

Waiver of default and compensatory interest;

Waiver of administrative costs relating to the tax enforcement proceedings;

Significant reduction of fines.

3.  Period of Application- the regime is applicable to the taxpayers who- fully or partially – settle their debts until December 20, 2013.

4.  Beneficiaries- any taxpayer, natural or legal person, of any nationality.

II.Exceptional and Temporary regularization regime for tax and social security debts

The main goal of the regime

The battle against fraud and tax evasion has been one of the Government´s main goals and several of high range measures have already been approved in this area.

However, in order to intensify and strengthen such measures, with this regime the Government not only grants the taxpayers contributive status, but simultaneously allows that a significant part of the tax and social security debts is recovered.

Also, this regime will enable the debtors to rebalance their financial situation, preventing companies from facing insolvency and assuring the maintenance of the levels of employment.

Scope

This regime applies to the tax and social security debts which payment deadline has expired on 31st August 2013.

It includes the tax and social security debts which were declared by the taxpayers or their representatives, under the law, before making the payment, even if they were unknown to the Tax Authorities or the Social Security.

Full partial payments

The total or partial payment of the amounts made at the initiative of the debtor until December 20, 2013 will allow the proportional waiver of default interest, compensatory interest and administrative costs relating to ongoing tax enforcement proceedings.

-   Applicable regime in case of full payment of debts

Taxpayers who pay the full amount of their tax or social security debts until December 20, 2013, will benefit from a special reduction of the applicable penalties.

According to the law, this reduction corresponds to a reduction of the applicable fines, to:

a) 10% of the minimum amount of the fine foreseen provided that this will be the payable amount;

b) 10% of the fines imposed in case of tax enforcement proceeding, provided that this reduction is not lower than € 10,00, in which case this will be the payable amount.

The payment of the penalties in the abovementioned terms, also determines the waiver of administrative costs relating to the correspondent offence proceedings and to the tax enforcement proceeding.

Moreover, there may be a waiver of penalty for crimes punishable with imprisonment up to three years.

It is also mentioned that this regime is applicable to all offenses against Social Security until August 31st, 2013, provided that the payment of the fine is made during the period for voluntary payment.

Interest debts and expenses remaining

If, by December 20, 2013 a proceeding aiming only to charge the interest or expenses that remain from an already paid debt is still pending, it will be considered extinguished or terminated without further formalities.

Payment Methods:

- Tax debts

Taxpayers may choose to pay their tax debts in the ¨Portal Finaças¨ website.

- Social Security Debts

Taxpayers who wish to benefit from this regime should request to the Social Security Services, the issuance of the respective payment document.

However, the payment of social security debts which coercive collection is still being carried out by the tax authorities shall be paid in the tax office where the executive proceeding is pending.

- Payment in kind

The payment in kind is not an acceptable method of payment for the purposes of his regime.

- Payment by a third part

Third parties who carry out the payment of the abovementioned amounts may benefit from this regime, without prejudice to the right of subrogation on the entire debt.

Final Notes

- Tax execution proceedings in case of a partial payment

When the full payment is not made, the application of this regime does not suspend the progress of the execution proceeding that corresponds to the amount that remains in debt, which shall continue its terms.

- Failure to comply with the tax filing obligations

When the amount due depends on a prior settlement by the tax administration, the application of this regime will be subject to the fulfillment of the tax filing obligations, which should be completed until November 15, 2013.

- More favorable regimes

Taxpayers will be able to benefit from this regime, provided that until December 20, 2013, they anticipate the total or partial payment of amounts framed in other regimes.

The application of Decree-Law n.º151-A/2013 does not preclude the application of other more favorable existing regimes.

- Defense Mechanisms

The payment of the debts does not preclude the use of any defense mechanisms available to the taxpayers, who will continue to have the possibility to challenge, administratively or judicially, the relevant debt. Moreover, in case of favorable decision, all debts paid under this regularization mechanism will be reimbursed, accrued of an indemnity interest.

Source: Tiago Caiado Guerreiro

 

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