THE ANSWERS – How to pay off more than 400 euros per month from your PPR without penalty

Cartão Crédito AB Gold Activo Bank

In this article HERE, I pointed out to you an extraordinary opportunity to: repay about 7 thousand euros of his PPR without a fine from the Treasury. But the news sounded so “good” that doubts arose. I questioned the Treasury Department, which referred it to the Socialist Party parliamentary faction (which wrote that part of the law). These are the legislator’s own answers, so I don’t think I can get any more credible answers than these, which I’m sharing with you now. Then everyone will do what they understand with this information.

Redeem PPR without penalty

On October 21, the Legislative Decree has been published that offers various forms of support to help the Portuguese to cope with inflation and one of these forms of support is the possibility to increase the value of the IAS (Social Support Index) of their PPR without penalty. part of finance.
This is important because — apart from the exceptions provided by the law (which are in the article in the previous link) — if you were to withdraw your money, you would have to return the tax benefits you deducted from the IRS ( 300 to 400 euros per year depending on your age) plus 10% “fine” for each year that has passed. This is usually a big loss. You should only redeem a PPR you have filed with the IRS as a last resort.

How much can you redeem per month?

The value of the IAS (Social Support Index) varies every year and is used to value support for the most vulnerable people.

In 2022, the value of the IAS is €443.20. For example, in 2022 (in October, November and December) you can redeem a total of € 1,329.60. If you’ve only seen this article now, you’ve already missed October. There are no retroactive effect.

In 2023, the value of the IAS will increase to € 478.70. That is why you can repay a total of € 5,774.40 in the coming year – without penalty from Finance.

Doubts and answers

The law was written in Portuguese and has raised several doubts. One of the questions from some institutions was whether it was an IAS per period or even an IAS per month. Let’s go to the questions I have asked and the answers I have received from Parliament.
Q: “Is it an IAS for the whole period up to 2023 or an IAS per month?

A: The equivalent of one IAS can be repaid per month.
Q: Can I retroactively redeem the previous months since October 2022? (For example, can I redeem the previous 6 months in March 2023?)

A: This exceptional regime is inspired by what was mobilized during the pandemic and does not explicitly provide for a retroactive rescue.
Q: Is there a minimum subscription duration for the amount to be redeemed? (Can I redeem PPR values ​​in 2022 that I subscribed in 2021, or only those older than 5 years as some institutions interpret?) And in 2023 can I redeem values ​​that I subscribed in 2022?

A: As it is an exceptional regime, it does not affect the compensation under the general regime. In these conditions, the minimum conditions applicable to each case must be followed.

Article 6, No. 1, of Law No. 19/2022, refers to paragraphs 1 to 4 of Article 4 of Legislative Decree 158/2002. Thus, whenever one of the cases provided for in paragraphs 1 to 4 of Article 4 of Legislative Decree 158/2002 occurs, the time limits specified therein continue to apply. For other cases, Law 19/2022 does not provide for a specific minimum period.
Q: If I reinvest the amounts that I have repaid, I can basically get a PPR deduction in 2023 with PPR amounts for which I already received a tax deduction in 2022, right?

A: In addition to the previous answer, regarding the minimum period for subscribing to the refundable amount, it should be considered that the purpose of this regime is to provide households with more liquidity to meet their most urgent needs. At the limit, reinvestment may mean that redemption is not necessary in the end, but these are independent processes.
In summary, in view of these official clarifications from the PS parliamentary group, I can tell you what my conclusions are for you to judge whether you should and want to do something:

  1. You can withdraw 1 IAS per month between October 2022 and December 2023, for a total of 15 IAS.
  2. When applying to your institution, you must specifically state the law no. 19/2022, of October 21:
  3. If you subscribed to PPR amounts this year (2022) and withdraw them later this year (2022), you will only be deducted for the amount that you have not repaid. It seems clear and fair to me.
  4. You can redeem PPR amounts in 2022 that you subscribed in 2021 and previous years without paying off the deduction you had in the year following the year you subscribed them and without the relevant penalty.
  5. You can make penalty-free repayments from the Treasury in 2023, amounts that you underwritten in 2022 that gave rise to deductions in the IRS for 2022, delivered in 2023.
  6. You can reinvest the repurchased amount in the same or another PPR and thus give rise to a new deduction between 300 and 400 euros with the same money. (You should judge this situation by your values, as the law has no exceptions and you can use your exchanged money as you wish). As the legislator replied, the aim is to help affected families, but one has nothing to do with the other: “These are independent processes”.

In view of these answers, you already have all the data to decide what to do with your PPR or even make your first PPR in 2022, pay it off in 2023, be entitled to the IRS deduction for 2022 and this reinvest in 2023 and a new IRS deduction in 2023, to be delivered in 2024.
In theory, and in the best of situations, with the same 2 thousand euros you can deduct 800 euros from the tax authorities over the next two years. We are talking about an “interest rate” of 40% divided by 2 years, which gives an annualized interest rate of 20% (net).

The receivable is not net

Keep in mind some details: not having a fine from the Treasury does not mean you won’t have a fine from the bank if you pay off your PPR for 1 year. For example, I have to pay 1% to redeem before 12 months. Still, it would win 19%. See specifically the terms of your PPR.
Also keep in mind that when withdrawing money from your PPR, in most cases the institution will look for the oldest amounts (FIFO – First In, First Out). See if those values ​​pay out well before you redeem them.
If you have a negative PPR fund, it can be a bad thing to trade it in. If you have PPR insurance, it can be a great way to switch to one that seems more profitable or even monetize it again.
Finally, you must always pay capital gains tax. It ranges from 21.5% to 8% depending on the time elapsed and the reason for the redemption.
Do your math.

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