The government’s proposal to reduce IRS rates by 500 million euros this year was approved in Parliament today with the supportive votes of PSD, CDS-PP, Chega, IL, PAN, and JPP, while PS abstained.
The BE, Livre, and PCP voted against the measure.
This initiative, aiming to lower rates from the first to the eighth bracket, will now proceed to further discussion in the specialty stage.
All legislative proposals from opposition parties suggesting changes to the IRS table or amendments to other IRS code norms for increased tax deductions, such as deductible expenses related to real estate charges, were rejected. This included proposals from IL, BE, PAN, Livre, and PCP.
Chega, which had proposed a more significant IRS reduction from the 2nd to the 5th bracket by 2026 and an expansion of housing expense deductions, withdrew both initiatives before they could be voted on.
The withdrawal occurred following comments by PSD parliamentary leader Hugo Soares, who stated during the debate that the social-democratic bench was open to including a provision in the State Budget for 2026 (OE2026) that aligns with Chega’s proposal.
In the final stages of discussing the government’s proposal, Chega leader André Ventura announced that his party would support the executive’s initiative if it committed to “a 0.3 percentage point reduction from the 2nd to the 5th bracket,” as outlined in their proposal.
Responding to this challenge, Hugo Soares expressed willingness to integrate such a provision in OE2026, leading Chega to decide against bringing their project to a current vote.
According to the government’s proposal, the first bracket rate 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 rate for the highest income bracket remains at 48%.
Though there is no change in the top bracket, the proposed IRS reduction benefits all taxpayers due to the table’s progressive nature. Hence, reductions in the previous brackets also benefit those in the new highest bracket.
Chega’s proposal suggests lowering the IRS rate for the second bracket to 15.7%, the third to 21.2%, the fourth to 24.1%, and the fifth to 31.1%, with these additional reductions set to take effect in 2026.
During today’s debate, Finance Minister Joaquim Miranda Sarmento called for “responsibility” from opposition parties to ensure taxpayers receive the reduction as soon as possible.
For taxpayers to feel this relief, the Ministry of Finance must approve new withholding tables, a move the minister promised the government would undertake.
Joaquim Miranda Sarmento emphasized that the reduction should be reflected “as immediately as possible” to expedite the tax refund to taxpayers, so families “do not have to wait” for next year’s IRS settlement.
