The tax measures addressing the current COVID-19 situation are included in Decree Law 10-F/2020 of 26 March 2020 and other ad-hoc ministerial orders. We provide below an outline of those tax measures.
1. Tax Deferral Measures
The tax deferral measures are primarily intended to support small and medium-sized enterprises but their application to others depends on a demonstration of a reduction of activity or to specific sectors impacted by state of emergency closure measures.
1.1. VAT and CIT/PIT Withholding Taxes
The payment of VAT and CIT/PIT withholding taxes may be deferred and paid in installments with no interest and without the need of providing guarantees in the following terms:
payment in three monthly installments; or
payment in six monthly installments.
This measure applies to companies and self-employed with a turnover lower than €10 million in 2018, whose activities are closed under Article 7 of the Decree 2-A/2020 (State of Emergency Rule), or those whose activity was initiated during 2019.
Companies not fulfilling the said requirements may also request the deferral rule in cases where there is at least a 20% decrease on the average invoicing (communicated via the electronic invoicing system) of the preceding three months (of the tax obligation) as compared to the same period of 2019. To apply for this, the company will need a certificate confirming the activity decrease issued either by Statutory Auditor (ROC) or Certified Accountant (TOC).
The request to pay in installments is made electronically until the end of the voluntary payment period.
1.2. Social Security Contributions
There was a suspension of the payment date of the employees' contribution withheld by the employer and payable to the authorities on 20 of March. These contributions can be exceptionally paid by 31 of March.
There is also the possibility to reduce to 1/3 any Social Security contributions due between March and May 2020 for companies, and April and June 2020 for self-employed. For the companies which already paid the Social Security contributions on 20 March may still defer the payment of the Social Security contributions due between April and June 2020.
The remaining amount 2/3 should be payable under the same installment deferral rules set out above, i.e. payable between July and September 2020 or between July and December 2020, depending whether payable in three monthly installments or six monthly installments (free of interest).
The deferral measures apply to: (i) self-employed; (ii) companies with less than 50 employees; (iii) Companies with 50-249 employees in cases where there is at least a 20% decrease on the average invoicing of the preceding three months (as from the payment obligation) as compared to the same period of 2019; (iv) Companies with more than 250 employees that are Private Institutions of Social Solidarity (IPSS) or companies from the tourism sector, civil aviation sector and any other sector that is mandatory closed under Article 7 of Decree 2-A/2020 (State of Emergency Rule) and which has at least a 20% decrease on the average invoicing (communicated via the electronic invoicing system).
The proof of decrease of activity is issued either by Statutory Auditor (ROC) or certified accountant (TOC).
The companies or self-employed that do not pay the 1/3 in the respective months cannot benefit from this deferral measure. In addition, companies that unduly benefit from the payment in installments will have to pay the total amount in June plus interest.
2. Ongoing Tax Procedures
Suspension until 30 of June 2020 of any ongoing tax and social security enforcement procedures currently in progress or expected to be initiated by the respective authorities.
3. Other Ad-hoc Tax Measures
Postponement of the payment of the first CIT “special payment on account” (“pagamento especial por conta”) from March 31st to June 2020;
Extension of the payment of the first CIT payment on account and “additional payment on account (“pagamentos por conta”) from July 31st to August 31st;
Extension of VAT exemption for donation of goods to the state, social security public institutions and non-profit non-governmental organizations for subsequent distribution to people in need, which now includes people who have received health care in the current pandemic context and are deemed as victims of catastrophe;
Simplification procedures for filing of VAT declarations until June and impediments and exceptional recognition of PDF invoices as “electronic invoices” in April, May and June for every legal effect;
Extension of Monthly Stamp Tax Declaration (“DMIS”) that becomes only mandatory for facts as from 1 January 2021 onwards. Stamp Tax assessment and payment obligations referring to 2020 can still be fulfilled through the former procedures and with deferral for the first months; and
Temporary exemption of Social Security contributions for entities benefiting from the exceptional and temporary measures set for labour protection in the context of the Covid-19 pandemic. They are applicable to entities (i) whose activities are closed under Article 7 of the Decree 2-A/2020 (State of Emergency Rule), (ii) had to, totally or partially, stop their activities or (iii) when had, at least, a 40% decrease on invoicing in last 30 days before the submission of the request, with reference to the average invoicing of the preceding two months, as compared to the same period of 2019. To apply for this exemption in (ii) and (iii) situations, the company will need a certificate confirming the activity decrease issued either by Statutory Auditor (ROC) or certified accountant (TOC).