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17 July 2010

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Government's austerity plan – Additional measures approved by parliament

On 9 June 2010, the parliament approved the Bill Proposal 26/XI which includes additional measures to the "Program of Stability and Growth" (Programa de Estabilidade e Crescimento – PEC). The approval was made by means of the Decree of the Assembly 23/XI, which must be ratified by the President and published in the Republic Gazette.

Details of the Bill are summarized below.

(a) Increased withholding taxes. The Bill provides for an increase by 1.5 percentage points of IRS withholding tax rates, as follows:

-   16.5% on royalties paid for copyrights, patents, trademarks and know-how (currently, 15%);
-   21.5% on fees from rendering listed independent personal services (currently, 20%);
-   11.5% on fees of self-employed individuals and any subsidies in connection therewith and on isolated business acts (currently, 10%);
-   21.5% on investment income (except royalties) derived by resident individuals (currently, 20%); and
-   21.5% on employment, professional, pension and investment income derived by non-resident individuals (currently, 20%).

(b) Increased pre-payments. Taxpayers deriving business income are required to make three pre-payments representing in total 76.5% (currently, 75%) of the previous year's IRS liability on account of their final income.

Corporate taxation

The Bill provides for the introduction of a state surtax (derrama estadual) at the rate of 2.5% on income subject to corporate income tax (imposto sobre o rendimento das pessoas colectivas – IRC) exceeding annually EUR 2 million.

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