The Government’s proposal to reduce personal income tax (IRS) was approved last week by the Assembly of the Republic and has been sent to the committee stage. Finance Minister Joaquim Miranda Sarmento expects the proposal to receive the green light this month, enabling pay increases, with retroactive effect, in August or September.
“If all goes well, [it will be paid] already in August and September with the so-called retroactive payments and then from October, new tables reflecting monthly reductions” in personal income tax, stated the minister in a statement to Portuguese journalists upon arriving at the Eurogroup meeting in Brussels.
The Government is currently awaiting the proposal’s debate at the committee stage before publishing the new tax tables.
“What was approved in Parliament was the draft law, which was sent to the committee stage. Our expectation is that it will be approved in the final parliamentary vote, which I believe is on the 16th of this month, so we are just a few days away from that,” said Joaquim Miranda Sarmento.
It is noteworthy that, on Friday, the Government’s proposal to reduce IRS rates by 500 million euros this year was approved in the Assembly of the Republic with votes in favor from the PSD, CDS-PP, Chega, IL, PAN, and JPP, while the PS abstained. The BE, Livre, and PCP voted against it.
What does the Government’s proposal entail?
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 the current 32% to 31.4%, the sixth reduces from 35.5% to 34.9%, the seventh from 43.5% to 43.1%, and lastly, the eighth decreases from 45% to 44.6%.
The rate for the highest income bracket remains at 48%.
Although this top bracket remains unchanged, the proposed IRS reduction by the Government covers all taxpayers required to pay taxes, due to the progressive nature of the tax table.
The decreases in the lower brackets ensure that taxpayers in the new bracket also benefit from the tax relief.
To implement the tax relief, the Ministry of Finance will approve new withholding tax tables, which the minister assured the government will carry out.
Joaquim Miranda Sarmento argued that the reduction should be reflected “as immediately as possible,” aiming to expedite the tax return to taxpayers, so that families “do not have to wait” for the IRS settlement the following year.
