Despite their obligation, payments on account (PPC) are not a final tax, but an advance to the State of the tax on the income obtained. In the case of companies, the IRC and in the case of self-employed workers, the IRS.
This is an advance because the amount is only calculated the following year, when the annual income tax declaration is submitted. That is, Model 22 for companies and Model 3 for self-employed workers. On occasion, the Autoridade Tributária (AT) calculates the difference between the amounts of payments on account already collected and the tax due. After all, two situations may arise:
- If the value of payments on account is greater than the tax calculated, you are entitled to receive a refund;
- If the value of payments on account is less than the tax assessed, you must pay the State the remainder of the amount.
In summary, payments on account made in 2024 are an advance from the Income Tax to be calculated in the declaration to be submitted in 2025. However, there is an exemption from paying the third installment of the PPC whenever it is foreseeable that the amount of tax payable in the year next installment has already been reached or exceeded by the amount delivered in the first two installments.
Before making the third payment, you must analyze your needs, according to your forecast for the end of the year and taxes to be paid. You may just be advancing an amount that will be fully repaid in 2025.
Taxes IRC IRS Payment on Account Autonomous Taxation Treasury Forecasting Results Taxation Accounting