The Decree Law No. 35-C/2016, published on 30 June 2016, which came into force on 1st July 2016, establishes important amendments to the rules on instalment payments of debts to the Social Security System, which simplifies these payments to the above mentioned entity.
These amendments arise from several goals in the Plan for Combating Contribution and Benefit Fraud and Evasion through the implementation of new debt recovery instruments and mechanisms.
This same regime establishes several changes in order to soften the payments of debt to the Social Security System. For instance, in Article 13 of Decree Law No. 42/2001, of 9 February 2001, (republished by the Decree Law 63/2014, of 28 April 2014, and changed by Decree Law No. 128/2015, of 7 July 2015), as well as the Articles 3, 4 e 5 of Decree Law No. 213/2012, of 25 September 2012. Additionally, Article 2-A is also added to Decree Law No. 213/2012, of 25 September 2012.
Thereby, Decree Law No. 42/2001, of 9 February 2001, allows companies and other contributors with debts to Social Security, which are under a tax execution procedure, to celebrate payment agreements with a higher number of instalments, facilitating the debt payments in order to maximise the debtor’s compliance and prevent new debts.
On the other hand, Decree Law No. 213/2012, of 25 September 2012, provides the possibility of increasing the payment up to 12 (twelve) instalments, upon the verification of the minimum debt amount.
Furthermore, the contracting parties have the ability to regularise their debts through these agreements.
This new regime introduces several amendments to the payment rules in an executive process, as well as provides new conditions for whomever intends to make a voluntary payment, before this stage.
Thus, the Government intends to facilitate the debt payments to Social Security through the reduction of the minimum amounts and, consequently, give beneficiary agents the possibility of paying up to 150 instalments, when the judicial processes are already filed in Court. Moreover, in case of an individual person, the new amounts become 3.060 euros. On the other hand, in the case of a company, the amounts become 15.300 euros. Indeed, before these amendments, the minimum amounts, which were allowed to be paid in 150 instalments, were 5.100 euros for individuals and 51.000 euros for companies.
The debts before tax execution procedures have also suffered amendments. In this case, the payment deadlines become 12 (twelve) months instead of 6 (six), and this is also applicable to agents when the debt amount is above 3.060 euros for individuals and 15.300 euros for companies.
This regime’s objective is to give better support to situations that are not yet critical and quickly prevent any difficulties, such as with company cash holdings. This occurs when a company’s recovery is still possible, without the intervention of pledges and judicial costs.
The debtors that are facing a judicial executive process are able to request a debt deadline renegotiation.
Debt on an Executive Process
Companies with debts above 15.300 euros can be payed in 150 instalments;
Before the above mentioned amendments, the 150 instalments could only be applicable to companies with debts above 51.000 euros;
Now, with this new legal regime, companies with debts between 15.300 euros and 51.000 euros can renegotiate the instalment plan, which could significantly extend the debt deadline payment.
The required minimum debt payment in 150 instalments, decreases from 5.100 euros to 3.060 euros.
These amendments are applicable to the ongoing instalment agreements, by submission of a request.
Voluntary payment into 12 (twelve) instalments – previous stage of tax execution procedure
Another relevant amendment is related to deadline payments in order to proceed with a voluntary debt payment, negotiated in a previous stage of the tax execution procedure.
The debt payment can be made in 12 (twelve) months, when the amounts are higher than 3.060 euros.
The debt payment can be made in 12 (twelve) months, when the amounts are higher than 15.300 euros.
Additionally, Article 2-A is added to Decree Law No. 213/2012, of 25 September 2012, under the title: “Voluntary settlement of debts agreement celebrated between contracting parties”. Through the celebration of voluntary settlement of debts, the Social Security System can authorize the differed payments related to companies and individuals which have conducted business activities.
The above mentioned agreements should be request within three months from debt notification. Besides, this process take into account the default interest until full payment.
Moreover, the contracting parties (like employers that have more than 80% of provision of services that involve so called “green receipts”) now have the possibility of entering into negotiations involving these instalment amounts, during a voluntary settlement period.
The previous regime stipulates that an individual with a debt higher than 5.100 euros, and already subject to judicial executive process, could pay in 150 instalments, at a rate of 34 euros per month;
The amendments introduced by Decree Law No. 35-C/2016, decrease the minimum to 3.060 euros, in 150 instalments, which results in a total amount of 20,4 euros per month.
Prior to the new rules, a maximum of 150 instalments was established under Court Procedure regarding debts higher than 51.000 euros. This corresponds to a total amount of 340 euros per month;
The new amendments changed the minimum amounts to 15.300 euros. Thereby, the instalments decrease to 102 euros.
The stated amendments, approved under the Plan for Combating Contribution and Benefit Fraud and Evasion, occur as a result of the significant increase in Social Security’s debts during the economic crisis.
This new regime has the prime objective of increasing compliance and preventing new debts. These amendments are also applicable to all contributors, who have instalment agreements in force. Although, submission of a requirement requesting a revision of the agreement is mandatory.