The government has set a date for easing the tax burden of the Personal Income Tax (IRS). What are the details of this tax relief? Who will benefit? When will it take effect? This guide clarifies the main questions based on the available information.
1. What is the expected IRS reduction?
The measure was announced as part of the Government Program, now approved by the Assembly of the Republic, which includes an IRS reduction. What is Luís Montenegro’s team’s plan?
The document aims to “reduce the IRS by two billion euros over the legislature, with 500 million euros already in 2025, lowering the tax burden particularly for the middle class.”
2. Who will benefit from the IRS cut?
The government intends to reduce the IRS up to the 8th bracket, which means it will cover taxpayers earning up to:
“What we did last year, which we will attempt again this year, is straightforward: We will approve an IRS reduction of about 500 million euros, covering up to the 8th bracket, inclusive. In other words, only the 9th bracket is directly excluded,” stated Finance Minister Joaquim Miranda Sarmento last week to journalists on the sidelines of the Eurogroup meeting in Luxembourg.
This essentially means that the tax relief will be felt by workers earning up to 83,696 euros annually:
Current IRS brackets in 2025 © Reprodução Portal das Finanças
The calculations by a tax specialist suggest that those earning between approximately 3,500 and 7,000 euros gross per month will also benefit from the IRS reduction announced by the government.
Moreover, the government’s proposal provides a double bonus for gross monthly salaries between 3,500 and 7,000 euros for a single person without children: by lowering rates for the 7th and 8th brackets and easing taxation in the lowest income brackets, which equally benefits higher salaries.
The measure is part of the Government Program.
Notícias ao Minuto | 10:47 – 16/06/2025
3. When will the tax relief take effect?
The Finance Minister indicated that the government will approve the IRS reduction in a Council of Ministers and hopes that Parliament will also approve it so it can take effect from September, similar to 2024.
“Once approved—and I assume Parliament will approve—our IRS law proposal will result in a complete transfer of these 500 million euros to an extraordinary reduction in withholding,” he explained.
Recalling that last year’s reduction occurred in “September and October,” the minister estimated that it would also take place at that time this year if the government “manages to get the law approved by then.”
The Finance Minister confirmed the government will “approve an IRS decrease of about 500 million euros, including up to the 8th bracket.” The measure will be applicable to September salaries with retroactive effects back to January, as happened in 2024.
Márcia Guímaro Rodrigues | 15:03 – 19/06/2025
Recall that last year, new withholding tables with lower rates were published in September and October to compensate taxpayers for the excess amount withheld from January to August.
