December is often a demanding month for a company’s cash flow. On top of the usual expenses come two payments with the same deadline, 15 December, which are worth preparing for in advance.
The Christmas allowance
The Christmas allowance is equal to one month’s pay for each employee and must be paid by 15 December. Social security contributions apply to it, just as they do to salaries. When it is paid in one go, staff costs for that month come close to double a normal month.
The third corporate tax payment on account
The third payment on account of corporate tax (IRC) is due on the same date, for companies that had tax to pay the previous year. It is an advance on the current year’s tax, worked out from the previous year’s tax.
If this year’s expected tax is lower than last year’s, the law allows this payment, in certain cases, to be reduced or skipped. The decision should, however, rest on a sound estimate of the results, because a mistake can lead to interest charges.
Planning ahead
Two months ahead, there is room to act: estimate the amount due, keep track of customer collections and, where it makes sense, bring forward collections or agree terms with suppliers. A cash flow forecast up to January shows whether liquidity needs strengthening before the month arrives.
Guiding these decisions throughout the year is part of our work with every client. Talk to us or book an exploratory meeting.
Sources: Portuguese Labour Code, article 263; Corporate Income Tax Code (CIRC), articles 104, 105 and 107; Social Security Contributory Code.