From 2023 onwards, the IRS Jovem Tax regime will undergo some changes in order to cover more professionals and for a longer period of time.
What is the IRS Jovem regime?
The IRS Jovem regime allows the application of the exemption on part of the annual earned income. However, it is important to note that certain conditions must be met in order to benefit from this measure. As the name suggests, this regime is essentially aimed at younger taxpayers joining the work market.
Changes
The changes to be implemented already in 2023 include, at this moment, an extension of the exemption period, from 3 to 5 years. Another relevant change is the fact that, besides Category A, which corresponds to dependant work income, it will also be possible to include Category B income, which corresponds to income obtained by self-employed professionals.
As of this year, this regime only allowed Category A income to be exempted, hence why this alteration is one of the most important ones.
Exemption limits
The IRS code in its current redaction stipulates that the exemption percentage to apply over the annual income is as follows:
- 30% in the first 2 years
- 20% over the following 2 years
- 10% in the last year
However, the maximum exempt limit is 7.5 times the value of the IAS (Social Support Index) in the first two years, 5 times the value of the IAS in the following two years and 2.5 times the value of the IAS in the last year. Considering that the IAS for 2023 has been increased to 478.70 euros, the maximum values are 3590.25€, 2393.50€ and 1196.75€ respectively.
However, it is still necessary to include all the income obtained in order to determine the rate applicable to the remaining income.
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