The government’s proposal to reduce personal income tax (IRS) was approved last week by the Assembly of the Republic and has moved to the committee stage. Finance Minister Joaquim Miranda Sarmento hopes for final approval this month, enabling retroactive payments to be made in August or September.
“If all goes well, payments will be made in August and September with retroactive effect, and then from October, new tables will reflect the monthly reduction,” explained the minister upon arriving at the Eurogroup meeting in Brussels.
The government is currently awaiting the committee debate on the proposal before publishing the new tables.
The IRS reduction approved last Friday by parliament will allow a single worker without children earning 1,000 euros to pay 34 euros less in annual tax than under the current IRS table, according to PwC simulations.
“What was approved by Parliament was the bill, which has moved to the committee stage. Our expectation is for final approval in parliament on the last vote, which I believe is on the 16th of this month,” stated Joaquim Miranda Sarmento.
It’s important to note that the government’s proposal to reduce IRS rates by 500 million euros this year was approved in the Assembly of the Republic with support from PSD, CDS-PP, Chega, IL, PAN, and JPP, while PS abstained. BE, Livre, and PCP voted against.
What does the government’s proposal entail?
According to the proposal, the rate for the first tax bracket will decrease from 13% to 12.5%, the second will reduce from 16.5% to 16%, the third will drop from 22% to 21.5%, the fourth will decrease from 25% to 24.4%, the fifth will fall from 32% to 31.4%, the sixth will lower from 35.5% to 34.9%, the seventh will reduce from 43.5% to 43.1%, and the eighth will decrease from 45% to 44.6%.
The rate for the highest income bracket remains at 48%.
While there is no change in the top bracket, the proposed IRS reduction applies to all taxpayers falling within it due to the progressive nature of the tax table.
The reduction in the lower brackets means taxpayers in the new bracket will also benefit from the tax relief.
For the tax relief to be realized by taxpayers, the Ministry of Finance will need to approve new withholding tables, which the minister assured will happen.
Joaquim Miranda Sarmento argued that the reduction should be reflected “as immediately as possible” to expedite the tax return to taxpayers so that families “do not have to wait” for the IRS settlement the following year.
Read also: Government expects IRS reduction approval by mid-month
