Deco applauds changes to IRS for retired pensioners

Tax authorities did not accept the correction of income tax returns from pensioners with income until September 30, 2019. Only guarantee corrections after this date. Parliament has now approved proposals for the correction of the income tax return retroactively, up to a limit of four years.

The tax authorities will finally return IRS to pensioners who have received pensions late. Law passed in the previous legislature said that pensioners who were penalized by the IRS because of late payment of pensions would get the money back. But tax authorities clarified the law, which did not provide for retroactivity, and only accepted corrections of pensioners' IRS statements to resolve situations of overdue pension payments made as of October 1, 2019. Parliament has now approved a rule that provides for the correction of the tax return statement. income retroactively, up to a limit of four years. The Consumer Protection Association (Deco) applauds the measure.

"The taxpayers penalized by delays in the IRS pensions can finally see their situation resolved. The Parliament approved proposals for the correction of the income tax return retroactively, up to a limit of four years ”, advanced this Monday, July 27, to Deco.

Parliament unanimously approved last Thursday, July 23, the proposals of the PS and CDS-PP on the regularization of the collection of the IRS to retired people who have suffered delays in receiving their pensions and on the retroactive application of the measure. The measure allows the regularization of the IRS to pensioners who have been taxed in excess.

“As we considered this penalty unacceptable, at the beginning of this year, we denounced the situation and contacted all parliamentary groups, demanding an urgent change in the law”, stresses Deco.

According to this association, when the diploma now approved comes into force, the Finances must communicate in writing to the pensioners, within 60 days, who can correct their IRS declaration. After receiving this notice, taxpayers will have 30 days (counted from the end of the term given to the Tax Authorities to contact taxpayers) to proceed with the delivery of the corrected declaration.

Deco recalls that the problem of delays in pension processing has affected thousands of pensioners, waiting several months (in some cases more than one year) for his reforms. “When the missing amounts are paid, they add to the income received that same year, raising the tax rate applied to them. In other words, as the IRS is progressive, taxpayers in this situation are placed at higher levels, ending up paying more ”, he explains.

At the end of last year, a law came into force that intended to correct the situation, but, as it did not expressly say it was retroactive, it only applied to cases after its entry into force, leaving out precisely those it intended to cover. That is, it only allowed to change the IRS declarations related to pension payments made after October 1, 2019. With the retroactivity now introduced, pensioners who have received payments prior to that date, up to a limit of four years, will see their situation resolved.

Fifteen years ago that pensioners complain with the Ombudsman's office are paying excessive IRS for a situation which is not their fault and in Parliament, political parties are working on a solution, but has yet to be a discussion on specialty of the bills, however, presented.

With the legislative change introduced last year, the matter was not closed once and for all as the form the rule was initially drafted allowed the tax authorities to apply it only to income obtained from 2019, preventing the recalculation of the overpaid tax in cases previous years, in a reality that mainly affects retirees with lower incomes. That is, the changes in the legislation only took effect from October 1, 2019 and with no retroactive effects that have now been introduced.

Pension delays have doubly penalized taxpayers

Deco stresses that in addition to depriving pensioners of income due to them, delays in pension payments have penalized some taxpayers by thousands of euros. And he gives an example: a couple, in which each member receives a monthly pension of 800 euros. Despite retiring since 2017, pensions only started to be paid in early 2019. When they handed over the IRS in 2020, 2019 income had to add two years of retroactive payments, which increased their taxable income from 7.096 euros to 21.288 euros.

With this increase, explains Deco, they went from the second to the third income bracket, that is, instead of being applied an IRS rate of 23%, they were taxed at 28,5%. Thus, in addition to the 3.987 euros that the couple had already withheld at source, they had to pay another 1.219 euros in IRS. With the timely allocation of pensions, in addition to the withholding tax, they would have nothing to pay.

But worsening the IRS rate is not the only problem, Deco says. As, in the year that taxpayers receive pensions in arrears, there is an increase in their income, some also lost the right to social benefits, such as exemption from the payment of out-of-pocket fees.

“Parties have heard our demands”, says Deco

In February of this year, Deco recalls that it criticized this situation of "enormous injustice" and exposed the problem to all parliamentary groups. “We demanded that the law be revised, in order to allow pensioners to retroactively alter the income statements for previous years, and thus recover the overpaid tax”, he adds.

The proposals now approved, he says, will allow to correct the situation. To this end, after being contacted by the Tax Authority, the affected taxpayers must access the Finance Portal and submit a replacement declaration for the year to which the income in question is reported.

Although welcomed, however, Deco concludes, these legislative changes did not fully safeguard the interests of taxpayers: the obligation to correct the income statements in question should fall to Finance and not to pensioners, “already so penalized by late payment of your pensions ”.

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