IRS 2009 Income Nº 1 – Income from Salary

By DENNIS SWING GREENE [email protected]

Dennis Swing Greene is Senior Partner and International Fiscal Consultant for euroFINESCO s.a

In this series of articles, we examine different forms of income that must be reported on IRS tax declarations:

1. Income from Salaries;

2. Self-Employment – the Simplified Regime;

3. Income from Capital – Bank Interest;

4. Income from Capital – Dividends;

5. Rental Income;

6. Capital Gains on Investment Portfolios;

7. Capital Gains on Real Estate

Wage earners have little choice when it comes to submitting a tax return. Since tax on salaries is normally withheld at source, one of the main objectives in filing is to seek out ways to a refund.

Before exploring deductions and tax credits, first it is essential to understand what constitutes taxable salary income besides your pay cheque.

In addition to my salary, do I have to declare any fringe benefits?

Yes.  Salaried workers must declare all forms of income as well as all goods and services paid for by the employer, such as:

• Salaries

• insurance

• subsidies

• children’s education

• commissions, prizes

• personal use of company cars

• housing allowances

Other than occasional tips, is there anything else I should declare?

The following are also considered to be taxable income in this category:

• Tips and gratuities (taxed at a flat rate of 10%)

• Advances for pay or for non-reimbursed expenses

• Gains obtained from the sale of

Stock Options

• Acquisition of a company vehicle at a

reduced value

• Certain types of severance and redundancy payments.

How are these benefits reported? On my pay check?

At the end of the year?

The value of these benefits should be reported on pay statements and are subject to normal withholdings.

What about annual statements?

Employers are required to provide employees with an annual statement by January 20 which must include the following information:

• Salary

• Income tax withheld

• Contributions to Social Security

• Any taxable subsidies or support

My employer gives me lunch subsidies. Are these taxable?

Employer cost supports and subsidies above the following daily limits are also taxable:

meal subsidy € 6.42

meal subsidy voucher € 7.26

travel within Portugal € 62.75

travel abroad € 148.91

travel by: (per km)

own car: € 0.40

public transportation € 0.12

taxis:  one person € 0.38

             two € 0.16/each

             three or more € 0.12/each

Next:  Self-employment – the simplified regime

Dennis Swing Greene is Chairman and International Fiscal Consultant for euroFINESCO s.a. Consultations can be scheduled in Guia (Albufeira) 289561333, Lisbon (Chiado) 21342421 and in Funchal (Sé), Madeira 291221095.