Lisbon, Dec. 31, 2024 (Lusa) - Next year, there will be a rise in the minimum wage, pensions, and civil service pay, as well as various changes to the personal income tax that should increase net income.

In the private sector, wage increases are not guaranteed, but there are incentives for companies that increase the average wage by at least 4.7% (according to the tripartite agreement signed by the social partners), and some of the changes to the personal income tax may also lead to a rise in net income.

For 2025, the government has opted to keep the rates of most taxes unchanged and at municipal level more municipalities are applying the minimum property tax rate or making slight decreases compared to the value applied in 2024.

Here are some of the changes to salaries, pensions and taxes that come into effect with the arrival of 2025:

+++ Minimum wage +++

The national minimum wage will rise by €50 in 2025 to €870. In the case of the Autonomous Region of Madeira, the minimum wage has been set at €915, €65 more than the current figure.

+++ Civil service +++

The agreement signed between the government and two civil service unions (Fesap and STE) ensures that in 2025, salaries will increase by €56.85 for workers with salaries of up to €2,630 gross. The increase is 2.15% above this amount.

In turn, the minimum wage in the public sector is set at €878.41.

The new year also brings a 5% increase in subsistence allowances.

+++ Pensions +++

Pensions will be updated in 2025 according to the legal formula (which combines inflation with the economy's growth), with those up to three social support index (IAS) receiving an additional increase of 1.25 percentage points, approved by parliament with the parties supporting the government voting against.

Thus, pensions up to €1,045 gross (two IAS) increase by 3.85% (2.6% by the legal formula and an additional 1.25%), while those between two and up to three IAS (up to €1,567.5) increase by 3.35%: 2.10% by the formula laid down in the law and 1.25% by the aforementioned extra increase.

Pensions between three and up to six IAS (i.e. up to €3,135) will be updated by 2.10%, while those between six and up to 12 IAS (up to €6,270) will see an increase of 1.85% in 2025. There is no increase above this level.

+++ Retirement age and sustainability factor +++

In 2025, people will have to wait until they are 66 years and seven months old to be able to retire without the cuts in the sustainability factor (which goes hand in hand with average life expectancy) and the 0.5% penalty for each month of early retirement compared to the normal retirement age.

Next year, the sustainability factor cut will be 16.9% (1.1 percentage points more than the cut in force in 2024).

+++ Solidarity Supplement for the Elderly+++

The Solidarity Supplement for the Elderly (CSI) increases from €600.60 to €630.60. This increase results from a 4.99% increase in the reference value of the CSI, which will now be €7,568 per year, an increase of €360 compared to what had been in force since June (€7,208).

+++ Unemployment benefit +++

Updating the social support index in 2025 (following the legal formula that combines inflation with economic growth) to €522.50 will increase the maximum unemployment benefit to €1,306 (€1,273 in 2024).

This unemployment benefit is capped at the equivalent of 2.5 IAS.

+++ Income tax+++

The tax levied on personal income has undergone several changes that will come into force or take effect from January 2025 and will ultimately result in a rise in net income as of January and/or when the annual tax return is submitted.

These changes include updating the limits of the brackets by 4.6%, raising the amount exempt from personal income tax (minimum of existence) to €12,180, in line with the rise in the minimum wage, increasing the specific deduction to €4,462.15 or raising the deduction for house rents, whose limit rises from €600 to €700.

The new IRS Jovem model will also come into force from January, which is more generous and comprehensive than the previous model, although critics of the measure anticipate that it won't stop young people leaving. The scheme can now be used for 10 years (until age 35) and applies to annual gross income of up to 55 times the Social Support Index (IAS).

In 2025, self-employed workers will benefit from a reduction in the withholding tax rate, which will drop from 25% to 23%, and private taxpayers in general, will be able to donate up to 1% of their personal income tax (IRS) to organisations of a cultural, youth or sporting nature and interest.

+++ Meal allowance +++

Also in terms of personal income tax, the limit on the value of meal allowances in the form of cards or vouchers exempt from tax and contributions has risen by 60 cents to €10.20. Exempt cash payments are still limited to six euros.

+++ IMT tax bracket update +++

As with the IRS, the exempt limits or the limits on which the marginal IMT rates fall have also been updated by 4.6%. This increase in exempt amounts applies to the IMT Joven model.

+++ Most municipalities with property tax at the minimum rate +++

More than half of the municipalities have decided to apply IMI at the minimum rate of 0.3% in 2025 (for the tax for 2024), including Lisbon, Oeiras, Sintra, Albufeira and Faro.

Most municipalities will also grant IMI discounts for resident families with dependents.

+++ Recomposition of the fuel tax mix +++

The ISP unit rates on a litre of diesel and petrol will increase by around three cents in January, accommodating the same order of magnitude decrease in the carbon tax. The government says the final value of the ISP borne by the consumer will not change, but rather, the weight of each of the components of this tax will be recomposed.

The aim is to remove the extraordinary measures to mitigate the rise in fuel prices seen in 2022 and even in 2023, in line with Brussels' demands, says the government.

+++ Car taxation +++

As of 2025, the ISV (Vehicle Excise Duty) discount tables according to the age of imported used vehicles will no longer be split into two - the cylinder capacity component and the environmental (CO2) component - but only one for the entire tax. Generally, ISV will fall in 2025, especially on cars with higher CO2 emissions.

In 2025, the road tax will not be updated, and the rates of autonomous taxation levied on vehicles owned by companies or sole proprietors will fall.

LT/ADB // ADB.

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