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Joaquim Miranda Sarmento announced that the tax relief proposal, which was approved in parliament and is now under special commission review, is expected to pass the final vote on the 16th of this month. Speaking at the Eurogroup meeting in Brussels, he explained that if the reduction of IRS rates, outlined in Article 68 of the IRS code, is approved, the government will immediately publish withholding tax tables. These tables will allow retroactive adjustments from January this year.
Sarmento indicated that taxpayers could see these changes reflected as early as August and September, with retroactive adjustments, followed by new monthly tables starting in October, illustrating the reductions in the Personal Income Tax (IRS).
To implement these reductions, the Ministry of Finance must approve new withholding tables, a step the administration is committed to taking.
Last Friday, the government’s proposal to cut IRS rates by 500 million euros this year received parliamentary approval. Support came from PSD, CDS-PP, Chega, IL, PAN, and JPP, with PS abstaining. BE, Livre, and PCP opposed the measure.
This initiative proposes reductions from the first to the eighth bracket, and will now be discussed in detail. Under the proposal, the first bracket rate will drop 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 32% to 31.4%, the sixth from 35.5% to 34.9%, the seventh from 43.5% to 43.1%, and the eighth from 45% to 44.6%. The final bracket remains at 48%.
While the highest bracket remains unchanged, this IRS reduction affects all taxpayers obligated to pay taxes due to the progressive nature of the table. The reductions in lower brackets allow taxpayers in the highest bracket to benefit from the relief as well.
During his remarks in Brussels, Sarmento was questioned about the leadership of the Bank of Portugal, with the current president’s term ending on July 20. “We are evaluating this process,” the Finance Minister stated.
