The reduction was approved with votes in favor from the PSD, CDS-PP, Chega, IL, and Livre, a vote against from the PCP, and abstentions by PS and BE.
The rate for the first bracket remains unchanged at 12.5%. The second bracket rate decreases from 16% to 15.7%, the third drops from 21.5% to 21.2%, the fourth reduces from 24.4% to 24.1%, and the fifth’s rate decreases from 31.4% to 31.1%.
As previously determined by the parliament’s decision in July, the rates for the 6th, 7th, 8th, and 9th brackets will remain at 34.9%, 43.1%, 44.6%, and 48%, respectively.
Although there is no rate reduction for the highest brackets, taxpayers in these ranges will also benefit from the reduction since the IRS is calculated progressively. The taxpayer’s income is divided according to bracket levels, and the respective rate is applied to each portion. This means that reductions in the lower brackets also affect the taxable income of these taxpayers, decreasing the IRS payable.
Besides the rate reductions, the newly approved table includes a 3.51% update on the values that define each IRS bracket.
Another approved measure updates the minimum existence threshold, ensuring that those with lower incomes, up to the minimum wage, are completely exempt from tax.
With this approval, annual incomes up to 12,880 euros, or higher amounts up to 1.5 times the Social Support Index (IAS) over 14 months, will not be subject to IRS.
[Updated at 7:15 PM]
