The update to the minimum threshold for income tax exemption in Portugal, included in the government’s proposed State Budget for 2026, was delivered to parliament today. This proposal states that the exemption benchmark will correspond to “the higher of 12,880 euros or 1.5 × 14 × IAS [Social Support Index].”
This year, the value was equivalent to “the higher of 12,180 euros or 1.5 × 14 × IAS.”
The minimum threshold is a rule within income tax that provides full or partial tax exemption for those with lower incomes. The law specifies a fixed income amount below which taxpayers are not required to pay any income tax, with a reduction applying to those with incomes just above this threshold.
The government announced in the State Budget report its intention to raise the minimum wage from 870 euros in 2025 to 920 euros in 2026. The fixed reference for the minimum threshold—12,880 euros—now represents 920 euros monthly calculated over 14 months (12 regulatory months, plus holiday and Christmas bonuses).
This ensures that the minimum exemption value will be at least equivalent to the annual total of the guaranteed minimum monthly wage.
However, as the current calculation from the “1.5 × 14 × IAS” formula already exceeds 920 euros (amounting to 1,0972.5 euros), it is expected that the actual minimum threshold will result from this second formula. This is because the IAS for 2026 is anticipated to be higher than the current one, thus exceeding 920 euros.
The government notes in the OE2026 report that the update will have a budgetary impact of 85 million euros.
[Updated at 13:58]
