The initiative, stemming from a proposed amendment to the State Budget for 2026 (OE2026), was endorsed by the votes of PS, IL, PAN, and BE and passed with the abstention of CDS, PCP, PSD, and Chega.
Specifically, the approved measure will allow a deduction from personal income tax (IRS) of 15% of the VAT incurred on the purchase of books, theater admissions, tickets for concerts and dance performances, as well as entries to museums and historical monuments, and expenses related to library and archive activities.
This range of expenses, now deductible from personal income tax, aligns with the existing deduction group for restaurant, hairdresser, car repair shop, and veterinary services. Taxpayers will need to request an invoice with their Tax Identification Number (NIF).
During the specialialized discussion of OE2026, now on its first day, the reduction of the rates for the second to fifth IRS brackets was also approved for the next year, aligning with the Government’s original initiative, reducing the rates by 0.3 percentage points from the current table.
The tax rate reduction was supported by the PSD, CDS-PP, Chega, IL, and Livre, faced a vote against from the PCP, and saw abstention from the PS and BE.
The rate for the first bracket remains unchanged at 12.5%. The rate for the second bracket decreases from 16% to 15.7%, the third bracket lowers from 21.5% to 21.2%, the fourth bracket sees a reduction from 24.4% to 24.1%, and finally, the rate for the fifth income tier moves from 31.4% to 31.1%.
As decided by the parliament’s last adjustment to the IRS table in July, the rates for the sixth, seventh, eighth, and ninth brackets remain fixed at 34.9%, 43.1%, 44.6%, and 48%.
Although the top brackets do not see a rate reduction, taxpayers within these income bands also benefit due to the progressive nature of IRS calculation: a taxpayer’s income is divided according to the brackets, and each portion is taxed at its respective rate. Thus, the relief in the lower brackets translates into a reduced IRS obligation.
In addition to the reduced rates, the newly approved table updates the values defining each IRS bracket by 3.51%.
Furthermore, a measure was approved updating the minimum existence value, ensuring the lowest income earners, up to the minimum wage amount, remain completely tax-exempt.
The approval guarantees that annual incomes up to 12,880 euros, or above, up to the amount resulting from the updated Social Support Index (IAS), equivalent to 1.5 times the IAS for 14 months, will be exempt from IRS.
