Pensions between 1,117 euros and 1,581 euros will see a reduction of less than 10 euros in withholding tax in August and September, due to the low rates set by the government for these two months, as shown by PwC’s simulations.
Under the new withholding tax tables released on the Finance Portal on Tuesday, July 22, pensioners earning up to 1,116 euros monthly will not face any deductions in the next two months, as the rate is 0%.
Since the IRS rate was lowered mid-year, the government aims to compensate, in August and September, the withholdings made in the previous months of the year based on the older tax version, aligning with the recent reduction decided by parliament. Therefore, during these two months, some taxpayers will have a 0% deduction, while others will experience lower rates than usual.
For single pensioners or married pensioners with an income-earning spouse, deductions only apply to pensions exceeding 1,116 euros, with payments made by pensioners slightly above this income band continuing at rates close to 0% or below 1%, according to PwC’s simulations for Lusa.
Calculations indicate that a pensioner earning 1,250 euros gross per month will only have to deduct one euro in each of the months of August and September. The withholding rate stands at 0.08%. Previously, from January to July, the withholding tables required monthly deductions of 101 euros, reflecting a rate of 8.08%.
Another example involves a pensioner with a 1,500-euro income, where the upcoming two-month withholding will be 0.53% of the pension, or eight euros, contrasting with the 166 euros deducted monthly until July.
For a pension of 1,750 euros, the amount to be withheld in the next two months already exceeds ten euros. Social Security or the Caixa Geral de Aposentações will withhold 14 euros of IRS monthly, compared to the previous 231 euros.
An additional case involves a 2,000-euro retirement, where withholding temporarily drops to 21 euros, down from the previous 306 euros.
With a 3,000-euro pension, the withholding reduces to 95 euros, previously at 715 euros.
What happens after these two months of ‘benefit’?
From October to December, as new tables come into effect, rates will rise again, though remaining lower than those of the first seven months of the year.
For a 1,250-euro pension, the withholding amount will increase to 94 euros monthly; for 1,500 euros, it will rise to 155 euros; for 1,750 euros, it becomes 216 euros; the 2,000-euro pension will have 288 euros withheld; and in the case of 3,000 euros, the amount will be 692 euros.
After computing the withholding amount based on the tables, the value needs to be rounded down (for instance, a withholding of 154.5 euros is rounded to 154 euros).
Social Security and the Caixa Geral de Aposentações (CGA) will already process August pensions according to the new tables, unlike last summer when they couldn’t apply them immediately after the update announcement.
In 2024, the mid-year tax reduction by the government led to the announcement of new tables at the end of August, with updated amounts for September. However, Social Security and CGA had already processed the subsequent month’s pensions, thus applying the new rates only in October and adjusting for September’s pensions. This time, the forecast differs.
“Both Social Security and the Caixa Geral de Aposentações will apply the new tables already in August,” confirmed an official source from the Ministry of Labor, Solidarity and Social Security (MTSS) to Lusa.
Nevertheless, according to the government order published Tuesday on the Finance Portal, entities responsible for salary and pension payments can adjust withholding amounts by the end of the year if they cannot implement the special tables in August and September.
