The increase is automatic, resulting from a rule enshrined in the IRS Code.
The legislation states that the subsidy, when “provided through meal vouchers,” is only subject to IRS on the portion exceeding 70% “of the established legal limit.”
As the threshold used for this calculation is the subsidy amount granted to Public Administration workers, and on Wednesday, the government proposed to unions an update of the current six euros per day to 6.10 euros in 2027, the IRS exemption amount will automatically increase in line with this 10-cent increase.
The update of the tax exemption threshold occurs both when the subsidy is paid in cash by employers (along with salary) and when it is paid via meal cards (prepaid bank cards, the amount of which cannot be withdrawn but only spent at supermarkets, restaurants, and cafes contracted with the card operator).
The IRS Code provides for two different exemption limits, depending on how the subsidy reaches the workers’ accounts.
If an employer pays a subsidy traditionally, the IRS exemption applies up to that amount, which currently means being exempt from IRS up to six euros per day. If the subsidy is higher, the worker pays IRS on the portion above that threshold (for example, if the subsidy is 11 euros per day, the worker is exempt on the first six euros and pays IRS on the remaining five euros).
If an employer provides the subsidy via a card, the exemption is higher, currently up to 10.20 euros. For example, if the meal subsidy is 11 euros, the worker only pays IRS on 80 cents.
If the Government’s final decision on the subsidy increase matches the proposal presented to public administration unions on Wednesday, there will be an update to each tax exemption threshold in 2027.
Thus, for subsidies paid in cash, the threshold increases from the current six euros to 6.10 euros, and for subsidies transferred on a card, it increases from the current 10.20 to 10.37 euros.
No changes are expected for 2026 compared to the current situation. The Government proposes to keep the subsidy unchanged at six euros per day in 2026.
The government only foresees a 10-cent daily update each year from 2027 to 2029, raising the subsidy to 6.10 euros in 2027, 6.20 euros in 2028, and 6.30 euros in 2029.
The last increase in the meal subsidy for the public sector was in April 2023, effective from January 1 of that year, by decision of the PS Government of António Costa, when Fernando Medina was the Finance Minister.
At that time, the IRS exemption difference between the subsidy paid in cash and the amount paid on a card was 60%, not 70% as it is currently.
Later, in 2025, this difference rose to 70%, due to an amendment introduced by Luís Montenegro’s government in the State Budget Law proposal for 2025.
The proposed increase for 2027, 2028, and 2029 falls short of the unions’ demands.
At the end of Wednesday’s meeting at the Ministry of Finance, the secretary-general of Fesap, José Abraão, stated that the 10 cents “do not even afford a loaf of bread today.”
The coordinator of the Common Front, Sebastião Santana, mentioned that this was the only “novelty” brought by the Government regarding the addendum proposal to the current multi-year agreement, accusing the Government of “continuing to put Public Administration workers through another year of losing purchasing power.”
