New Minimum Wage and Social Support Indexation (IAS)
According to the decree law 156/2017 of 28th of December the minimum wage for the mainland is updated from 557€ to 580€ starting on 1st of January 2018.
The regional Legislative decree 5/2018/M of 28th of February establishes 592€ for Madeira.
Ordinance 21/2018 of 18th of January establishes the amount of the IAS for 2018 in 428,90€.
Meal allowance Updates
For 2018 the maximum exempt limit for the meal allowance is 4,77€, when paid in cash, and 7,63€ when paid through voucher (electronic card).
School Voucher loses tax exemption
This Benefit in kind can be attributed to employees with sons between 7 and 25 years old. In 2017 it was tax exempt until the annual limit f 1.100,00€/year. In 2018 it lost exemption and is taxed in the totality.
The daycare/kindergarten voucher (attributed to employees with children until 7 years old) keeps total tax exemption in 2018, maintaining the tax benefit.
End of Payment of Christmas and Vacation Allowances in Twelfths
The twelfths regime was approved initially in 2013 by the Law No. 11/2013 of 28th of January and established the payment of 50% of the Vacation and Christmas allowances divided by 12 months and the other half in one time. This regime was first established to be I force in the period from 2013-2016 (3 years) and was automatically applicable to the permanent employment contracts.
In 2017 the twelfths regime was extended by the Law 42/2016 of 28th of December.
It ended in 2018, which means that the companies should apply the Labour Code rules by paying the Vacation Allowance before the biggest period of vacation or proportionally when the vacation is taken in more than one single period. For Christmas Allowance the rule is to pay until the 15th of December.
Even though it might be possible that the twelfths are applied in 2018, if there exists a written agreement between employer and employee.
End of Extraordinary rates (PIT Tax Income Extra Tax)
The Extra Tax Rate ended in November 2017 by suffering a progressive reduction.
New Withholding Tax Tables in 2018
Published in decree 84-A/2018, the new IRS Tax rates to be applied in the monthly withholding. The withholding taxes are applied according to the fiscal situation of the employee (if married, not married, number of children in the household). In the act of employee incorporation, the employer must gather the fiscal data of each employee but during the contract it’s on the employee side to inform of any changes/updates so the withholding tax is duly applied in the payroll.