Lisbon, June 26, 2025 (Lusa) - The Cabinet has approved a draft bill for an additional €500 million reduction in personal income tax, to be applied later this year in Portugal, a measure that has already been submitted to Parliament.

In a statement released on Wednesday evening, the Cabinet stressed that the approved proposal “allows for further tax relief, additionally reducing marginal rates in all brackets, up to the 8th bracket”.

The Government’s proposal provides for decreases in IRS rates of 0.5 percentage points between the first and third brackets, 0.6 percentage points between the fourth and sixth brackets and 0.4 percentage points in the seventh and eighth brackets.

In the same note, the Cabinet stressed that the Government wants to "bring the amount of tax withheld as close as possible to the amount due at the time of payment".

“New withholding tax tables will therefore be approved to reflect the reduction in IRS rates, with retroactive effect from January”, it said.

The measure had been announced by Prime Minister Luís Montenegro in an interview with RTP on Wednesday evening.

Luís Montenegro also said that the proposal would be submitted “today to parliament so that it can be debated next week”.

The prime minister pointed out that this will be the third IRS reduction under his government and promised to “continue to do so during the legislative term”.

According to the Cabinet statement, this reduction in IRS in all brackets, except the highest, will "increase disposable income beyond what was already provided for in the state budget for 2025, benefiting all families, especially those in the middle class".

The Government also pointed out that, with the additional reduction, the lowest brackets and middle-class families will feel “even more significant tax relief than was planned for 2024”.

DMC/AYLS // AYLS

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