The Finance Minister, Joaquim Miranda Sarmento, announced on Thursday that the government will approve a reduction in the Personal Income Tax (IRS) through a Council of Ministers decision and expressed hope that Parliament will also pass the measure, allowing it to take effect from September, similar to the previous implementation in 2024.
“What we did last year, which we will try to do again this year, is quite simple: We are going to approve an IRS reduction of approximately 500 million euros, covering up to the 8th tax bracket, inclusive. Only the 9th bracket will be excluded directly,” the minister told Portuguese journalists during the Eurogroup meeting in Luxembourg.
“Once approved—and I am assuming that Parliament will approve—the IRS law proposal, these 500 million euros will be fully reflected in an extraordinary reduction of withholding tax,” he explained.
Recalling last year’s reduction, which took place in “September and October,” the minister estimated that this year it should also occur “at that time,” provided the government “can get the law approved within that timeframe.”
The Finance Minister confirmed that the government will “approve an IRS reduction of about 500 million euros, covering up to the 8th bracket, inclusive.” This measure will apply to September salaries with retroactive effect from January, similar to 2024.
How will the IRS reduction take place?
The measure is expected to be approved in the Council of Ministers within the next two weeks, as promised by Prime Minister Luís Montenegro during the Government Program debate on Tuesday.
However, to apply to September salaries as anticipated by the Finance Minister, the measure must be approved by the Assembly of the Republic in July.
Last year, the IRS reduction was approved in mid-July and came into force two months later.
Following the approval of several IRS changes, new withholding tables were published with particularly reduced rates in September and October to compensate taxpayers for the excess amounts withheld between January and August.
During these two months, salaries of up to approximately 1,700 euros gross paid 0% IRS (benefiting taxpayers with an increase in disposable income), and for higher salaries, the withholding was also lower than usual.
Prime Minister calls IRS reduction “a matter of fairness”
On Tuesday, during the Government Program debate, Luís Montenegro argued that “reducing taxes on labor income is a fair act for those who work” and announced that the government will present the IRS reduction proposal “within the next two weeks.”
Luís Montenegro assured that during this legislative term, the government will continue its tax-reduction trajectory, noting that one of the administration’s goals is to reduce the IRS for up to the 8th bracket by two billion euros by 2029, with a 500 million reduction already planned for 2025.
