The discussion is scheduled for late afternoon in the Budget, Finance, and Public Administration Committee, following the plenary session of the Assembly of the Republic.
During the general vote on July 4, the initiative was supported by PSD, Chega, IL, CDS-PP, PAN, and JPP, while PS abstained, and Livre, PCP, and BE voted against it.
The initiative reduces tax rates from the 1st to the 8th income brackets, offering a broad tax relief across various income levels.
Although the rate cuts apply only up to the 8th bracket, taxpayers in the ninth bracket also benefit due to the progression rules of the tax.
According to the government’s proposal, the rate for the first bracket decreases from 13% to 12.5%, the second from 16.5% to 16%, the third from 22% to 21.5%, the fourth from 25% to 24.4%, the fifth from 32% to 31.4%, the sixth from 35.5% to 34.9%, the seventh from 43.5% to 43.1%, and the eighth from 45% to 44.6%. The top income bracket rate remains at 48%.
Typically, when tax bracket rates are altered, governments update IRS withholding tables to adjust monthly salary and pension tax deductions closer to the final tax owed.
In this instance, the executive has indicated that it will do so, intending to reflect the tax relief in August and September with retrospective effect to the years’ earlier months, during which the reduction was not yet applied.
In Brussels, speaking to Portuguese journalists upon arriving at the Eurogroup meeting on July 7, Finance Minister Joaquim Miranda Sarmento expressed hope that after the specialty vote, the proposal will be approved in the last plenary session of the current legislative session.
“If the IRS rate reduction is approved — the rates of Article 68 of the IRS Code — the Government will immediately publish the withholding tables to allow retroactive adjustments to January of this year,” stated the minister.
Contrary to the executive’s proposal, which passed in the general vote, all opposition parties’ initiatives — from IL, BE, PAN, Livre, and PCP — proposing alternative IRS rate cuts or changes to other IRS Code provisions to increase tax deductions (such as deductible expenses for property charges) were rejected in plenary.
The only legislative projects not voted on were two Chega initiatives, withdrawn by the presenting parliamentary group. One aimed to reduce IRS rates significantly from the 2nd to the 5th bracket in 2026, with an additional government reduction of 0.3 percentage points. The other sought to expand deductions for housing expenses.
The withdrawal followed a debate on the government’s proposal, where PSD parliamentary leader Hugo Soares indicated the possibility of including a provision in the 2026 State Budget aligning with Chega’s initiative to reduce rates in the specified income range.
The Finance Minister today expressed the expectation that the IRS reduction proposal, now in specialty, will be approved by mid-month, allowing the Government to publish new withholding tables.
In the specialty, PS presented an initiative but it does not include changes to the IRS table.
The Socialist parliamentary group’s proposal solely concerns aligning IRS Jovem rules with an existing measure, the wage premium for young workers as a means of refunding tuition fees during their initial years of professional activity.
PS aims to clarify in the legislation that the premium is cumulative with IRS Jovem, effective this year.
