Lisbon, April 10, 2025 (Lusa) - Income tax refunds are expected to fall by €1.167 billion in 2025 due to changes in withholding tax last year, with a positive impact on tax revenue, according to the Portuguese Public Finance Council (CFP).

According to the document released by the CFP on Thursday, "it is estimated that the reduction in withholding taxes in September and October 2024 will lead to an increase in direct tax revenue of €1.167 billion in 2025, due to the reduction in refunds".

Nazaré da Costa Cabral, president of the CFP, explained at the presentation of this report in Lisbon that this issue "is complicated to estimate because refunds depend to a certain extent on what the level of withholdings was in 2024 and it was necessary to have more detailed information to know at the level of which households these withholdings occurred and what this will translate into in terms of revenue."

When asked about the withholding tax adjustment made last year, she pointed out that "it was a policy choice": "what the government did in 2024 was to give up part of the revenue, and speaking of measures in the context of tax relief, the income tax was reduced".

"The mechanical effect of applying the withholding tables meant that the state gave up more revenue than it could have obtained if the measure had not been adopted," which “will have a favourable cyclical impact in 2025,” he explained.

In the report, the CFP emphasises that this effect is one-off, as it has made progress with a downward revision of direct taxes that "is almost entirely determined by the approval of permanent measures aimed at increasing the income of families and companies".

There is "no repetition, in 2026, of the positive one-off effect (revised upwards in this projection) associated with a lower volume of refunds in 2025, resulting from the bringing forward in September and October 2024 of part of the refunds on account of the personal income tax for 2024, which would have been paid in 2025", the CFP points out.

MES/ADB // ADB.

Lusa