A parafiscal tax is a levy on a service or a product which a government charges for a specific purpose. It can be used to financially benefit a particular sector (public and private).

Unlike the drastic changes in Stamp Duty reporting within the Portuguese region, the parafiscal taxes have remained consistent and unchanged for many years. Sovos helps customers report the central parafiscal taxes within the region:

• ANPC: National Authority for Civil Protection Contribution
• INEM: National Institute of Medical Emergency Contribution
• FGA: Motor Guarantee Fund Contribution
• PR: National Road Safety Authority Contribution
• ASF: Contribution to Insurance and Pension Fund Supervision Authority

The reporting of these taxes is varied and comprehensive which can become confusing for businesses unfamiliar with the requirements. The parafiscal charges, more notably INEM and ANPC, are reported on a monthly declaration structure, whilst PR and FGA are reported on a quarterly structure, and ASF is reported on a half-yearly basis.

ANPC and INEM: monthly reporting

The ANPC and INEM are reported quarterly, and premiums concerning the Azores, Continent (mainland Portugal), and Madeira must be split. This should be identified by the insurer and declared to the corresponding tax authorities.

The tax ANPC (also known as the National Authority for Civil Protection Contribution) can be applied in classes 3 – 13 and is commonly applied at 13% of the fire risk premium. However, this rate is not consistent for all classes of business and can fluctuate accordingly.

Moreover, the tax INEM (also known as the National Institute of Medical Emergency Contribution) can be applied to classes 1, 2, 3, 10 and 18 and at 2.5% of the taxable premium. The rate of 2.5% is consistent between all classes of business and reported on the compliant tax point with Portugal, which is the cash received date (much like ANPC, FGA, PR and ASF). Finally, an annual report for INEM needs to be reported directly to the tax authorities, confirming the total liabilities due throughout the fiscal year.

FGA and PR: quarterly reporting

The reporting of FGA and PR is completed quarterly and submitted on two separate returns. The tax PR is reported at 0.21% of the premium (relating to motor insurance) for classes of business 1, 3 and 10; whilst an FGA rate of 2.5% of the premium (relating to Compulsory Third Party Liability) is only applicable to class 10.

ASF: half yearly reporting

The ASF tax is applied at a tax rate of 0.242% of the taxable premium and is calculated on all classes of business. The rate of 0.242% is confirmed annually by ministerial order within Portugal. So, the tax authority can effectively change the rate annually. It’s also important to mention that a separate rate of 0.048% applies to life insurance and is included within this return.

The most recent update to the Portuguese Stamp Duty system has included some of the most comprehensive tax reporting changes seen in recent years. Stamp Duty is the oldest tax in Portugal and has been around since the Royal Decree in 1660. Considering its age, updates to bring it in line with the global standard of tax reporting were much needed. Although the tax rates within Portugal have remained unchanged, the reporting process to incorporate the provincial liabilities within one return has been greatly appreciated.

Portuguese Stamp Duty – Required information

The additional information that insurers are obliged to collect, disclose and submit in their Stamp Duty Declaration is as follows:

• Territoriality: The precise location the risk has been issued from (i.e., within or outside Portugal)
• Insured name (Tax ID): The policyholder’s tax ID
• Insured country code: The policyholder’s country code to which the tax ID resides
• Location of the risk insured in Portugal: The postcode to which the contract relates, due to the requirement by the Portuguese authorities to file Stamp Duty on a provincial level, or at least whether the risk is located in Mainland Portugal, Azores, or Madeira.

Negative impacts of Portugal’s stamp duty reporting changes

It’s important to note that the ability to offset taxes relating to previous periods has been revoked by Law Decree no. 119/2019, which allowed insurers to report reduced tax amounts for overpaid liabilities. The modifications to the reporting procedure enable companies to amend previous periods through their internal system. Consequently, this permits adjustments to prior periods and the reclaiming of overdeclared liabilities directly from the Portuguese tax authority. It is our understanding that reclaims will be reimbursed to the client two months after an amended return is submitted.

How can Sovos help with reporting?

Sovos has developed a unique relationship with the Portuguese tax authority, allowing for comprehensive reporting between Sovos systems and the Portuguese API. The reporting procedure can confirm validated IDs to ease data validation and reporting. This collaborative process has allowed Sovos to provide our customers with a smoother and more fluid submission process for Stamp Duty reporting.