Midway through the month, employees earning up to €1,136 will not face Personal Income Tax (IRS) deductions in August and September under the new tax tables.
The updated IRS tables reduce monthly tax deductions for the rest of the year, and in August and September, individuals earning up to €1,136 will not incur any taxes, as the rate is set at 0%.
How much will you save with the IRS table adjustments? Here’s the calculation.
The directive from the Secretary of State for Fiscal Affairs, Cláudia Reis Duarte, introduces tables for two different periods.
For August and September, exceptionally lower rates are applied to compensate for deductions made from January to July, when it was not feasible to consider the IRS reduction approved by the parliament this month.
Other tables apply to October, November, and December, reflecting the final version of the IRS. In these months, the rates are higher than in August and September but lower than the current ones.
Employers must apply the new rates to August salaries as the directive takes effect on the first of the month. However, if they fail to do so, they may “rectify the deductions in the subsequent months,” up to December, according to the government directive.
In August and September, the retention rate will be 0% for gross salaries up to €1,136 for both single workers (with or without children) and married workers if both spouses earn income.
For married workers whose spouse has no income, the exemption threshold is lower, only covering salaries up to €1,081 gross. In the last three months of the year, the 0% rate only applies to gross salaries up to €870, the minimum wage, as is currently the case.
For instance, a gross salary of €1,000 previously faced a €58 IRS deduction monthly. In August and September, the worker will pay nothing. From October onwards, they will pay €56, two euros less than the rates from January to July.
The different rates planned for August and September aim to retrospectively apply the mid-year IRS bracket reduction, as the source deduction from the start of 2025 is now misaligned with the new table version.
With this overhaul, there are three distinct deductions throughout 2025: January to July, August and September, and October to December.
Consider these phases for a single worker without children earning €1,500 gross monthly.
Currently, this worker takes home €1,149 after retaining €186 for IRS (an effective rate of 12.4%), which results in a net salary of €1,314 after IRS. However, factoring in the €165 deduction for Social Security (11% of the gross salary), the final net amount deposited is €1,149.
In August and September, only €8 will be withheld for IRS each month, rather than €186 (the effective rate drops to 0.55% from 12.4%). During this time, the net salary after tax rises to €1,492, and the final net amount (after IRS and Social Security) is €1,327.
From October to December, retention increases but remains lower than the year’s first seven months. The net salary (after IRS and Social Security) increases to €1,154, a rise of five euros monthly compared to the current rate (January to July). The monthly retention will adjust to €181, a decrease from €186 in the initial months of 2025.
