Nuno de Oliveira Garcia analyses Tax Authority interpretation of productivity bonuses | GA_P

Nuno de Oliveira Garcia, partner in tax at Gómez-Acebo & Pombo, believes that the Tax Authority limits the IRS exemption and could undermine the aim of promoting merit and productivity.

The Tax Authority limits the IRS exemption to “voluntary and non-regular” productivity bonuses, excluding most standard bonuses. According to Nuno de Oliveira Garcia, this interpretation “creates a restriction not foreseen by the legislator” and makes it difficult to apply the benefit to bonuses tied to contracts or internal policies.

The scheme only covers one-off bonuses up to 6% of the annual salary and requires minimum wage increases, leaving many variable pay strategies excluded. Experts warn that, if this reading persists, only discretionary, non-contractual bonuses linked to unpredictable results would be eligible.

The controversy opens the door to possible legal revisions or challenges, aiming to ensure the exemption achieves its intended purpose of encouraging performance and salary enhancement.

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