Notícias ao Minuto have put together some of the most important proposals from the 2023 state budget (OE2023).

1. IRS bands will be updated by 5.1%

According to the budget proposal, the limit of the first taxable income bracket (which corresponds to gross income minus a specific deduction per taxpayer) increases from €7,116 annually to €7,479, an increase of €363 compared to the current value.

The next tier, with a rate of 23 percent and which is currently set between €7,116 and €10,736, now applies to income ranging between €7,479 and €11,284. In the model proposed for 2023, the rate from this step still drops to 21 percent.

In practice, this means that those who have an annual taxable income - deducted from Social Security discounts or €4,104 - of the order of €10,730 will not pay more tax in 2023 if they have a 5 percent salary increase.

The limit for the 3rd and 4th brackets is increased to €15,992 (€776 more than the current one) and €20,700 (€1,004 more) respectively. In the two following brackets, on which rates of 35 percent and 37 percent apply, the increase in the maximum limit would be €1,279 euros (to €26,355) and €1,875 (to €38,632).

2. IRS child benefit increases

The OE2023 includes a new increase in the deduction per dependent, concluding a process that places this deduction at €900 for the second and subsequent child up to six years of age. With this measure, the extension of this deduction, which began with the OE2022, which now applies to children up to six years of age, is concluded.

3. Social Support Index increases by 8%

The Social Support Index (IAS) will be updated by 8 percent, to €478.70. The IAS is the reference value for the calculation and determination of various social supports, such as family allowance, social benefit for inclusion, the Social Insertion Income (RSI), among others, "which can impact the lives of 1 .6 million beneficiaries", says the Government.

The minimum amount of unemployment benefit is expected to rise in 2023 to €550.50 and the maximum amount to €1,196.75, following the update of the IAS.

4. Do you have a home loan? IRS withholding may be reduced

Families with a home loan will be able to benefit from a reduction in the rate of the IRS withholding tax, with the measure benefiting those with a monthly income of up to €2,700 gross.

The measure, of voluntary adhesion, could benefit up to 1.4 million people and will have an impact on income from the IRS in the order of €250 million next year, according to government estimates.

In order to benefit from this relief in the monthly tax payment, workers will have to, cumulatively, have a loan for a permanent home of their own, and earn a monthly remuneration of up to €2,700 - the reference that the Government used to define the allocation of the extraordinary support of €125 that is paid this month.

5. Electricity VAT reduction

Consumers will save €9 a year on their electricity bills, with a VAT reduction from 13 percent to 6 percent, for families with contracted power up to 6.90 kilovolt-ampere (kVA).

According to the document, the measure will allow an annual saving of €9 and an aggregate annual savings of €46.50. The measure will cover more than five million consumers and will have a budget cost of €90 million next year.

6. Pensions increases

Around 2.7 million pensioners will have an increase between 4.43 percent and 3.53 percent in January, depending on the value of the pension.

The increases are, however, below the inflation forecast for next year, of 7.4 percent. The Minister of Finance admitted, however, that if inflation in November, without housing, exceeds the estimated 7.4 percent, there will be a correction of the pension update next year.

The Government underlines that, adding the pension increases in 2023 to the exceptional supplement paid to pensioners in October 2022, equivalent to half of their pension, "it is guaranteed that pensioners do not lose purchasing power next year".

7. Minimum existence increases to €10,640

The value of the minimum existence will be set at €10,640 and will be updated in the following years based on the Social Support Index. At issue is the minimum amount of net income that the State guarantees to all people, that is, an amount of income on which IRS is not levied.

As already indicated by the Government, the rules of the minimum existence are reformulated, with the report accompanying the OE2023 detailing that this reformulation aims to "guarantee the progressiveness of the tax and the reduction of the average tax rate for those who earn up to €1,000 per month". This change will, according to government estimates, benefit around 800,000 households.