ou can already read about Savings and Retirement Plans on our blog, and also about PPR Coverflex REAL Seguro E, the Savings and Retirement Plan that Coverflex has available for employees. In this article, we look at Savings and Retirement Plans in the context of taxes.
Do you invest in a Savings and Retirement Plan in Portugal and want to understand how to file your income tax return in 2023? In this article we'll tell you what to look out for.
The entities that sell Savings and Retirement Plans are responsible for informing the Portuguese Tax Authority (AT) of the amount of the deliveries and to whom they relate, that is, if you invest in a Savings and Retirement Plan, the amount corresponding to your contributions will be pre-filled in the Annex H of Model 3 of your income tax return, unlike your contributions to capitalisation life insurances (such as Real Vida Grupo Aberto, which is available at Coverflex).
When you invest in a Savings and Retirement Plan, the State gives you a benefit for that investment (this is called “tax benefit”). Usually, this tax benefit is established by the State, and the amount depends on several factors, such as your age, the amount you invested in the Savings and Retirement Plan, among others. If you find yourself in this situation, you have two options: you can accept the tax benefit, or you can refuse it.
To decide what to do, the question that must be asked is: how long do you want to keep your investment in the Savings and Retirement Plan? This question is important since the tax benefit is an incentive given under the assumption that you will keep the amount invested in the Savings and Retirement Plan for at least five years, so if you make a withdrawal ahead of time or predict that you will have to do so, and it does not fit into the legal conditions provided for by law*, we suggest that you remove the amount of the contributions from your income tax return (that is, that you remove the "check" in Annex H of Model 3 of the income tax return), otherwise, you may incur a tax penalty according to which the AT will require you to return the benefit, and you'll get an additional penalty of 10% for each elapsed year.
If you make a withdrawal ahead of time or predict that you will have to do so, and it does not fit into the legal conditions provided for by law*, we suggest that you remove the amount of the contributions from your income tax return (that is, that you remove the "check" in Annex H of Model 3 of the income tax return), otherwise, you may incur a tax penalty according to which the AT will require you to return the benefit, and you'll get an additional penalty of 10% for each elapsed year.
In any case, we can find both situation below, with a small overview of what you should do in each of them.
1. If you accept the tax benefit...
... it is probably because you intend to keep your Savings and Retirement Plan for the long term, that is, without making any withdrawal any time soon. In this case, your income tax return already has a “check” in Annex H of Model 3, and it is in your best interest to keep it, so that you can receive the tax benefit. If, at any time, your situation changes, remember to make the necessary change in this Annex, that is, to remove the “check”!
If you have used the tax benefit in previous years, and have made a withdrawal outside of the conditions set out in the law, you should fill in box 8 of Annex H of the income tax return, in order to return the deductions from which you benefited, aggravated with a 10% rate for each elapsed year.
2. If you refuse the tax benefit...
... you do not receive the amount in question, but you have the flexibility to perform a withdrawal at any time without running the risk of incurring a debt in the process. This option is the right one for you if you are not planning to invest in your Savings and Retirement Plan for the long term, or if you simply want to ensure that if your situation changes and you need to withdraw money, you have one less thing to worry about at the time of filing your income tax return.
Did we manage to turn this tricky topic into something clearer for you? We surely hope so!
Any questions you may still have regarding this matter, or if there's any other topic with which we can help you, you know where to find us: in our chat or via the email [email protected]
*Legal conditions provided for by law, without penalties:
- old-age retirement;
- long-term unemployment of the participant or any member of the household;
- permanent incapacity for work, of the participant of any member of the household, regardless of the cause;
- serious illness of the participant or any member of the household;
- death of the participant;
- from the moment the participant turns 60 years old.
In addition to these conditions, in October 2022, according to the provisions of article 6.º of Law n.º 19/2022, of October 21st, an exceptional regime was created, applicable to the early withdrawal of Savings and Retirement Plans, up to the overall monthly limit of the amount of the IAS (Social Support Index - 2023 - 480.43 euros) in force, per participant. This means that if you have made or will make, until the end of 2023, withdrawals of 480.43 euros or less per month, you may take advantage of the tax benefit. This exception only applies to deliveries prior to October 2022.