Lisbon, June 26, 2025 (Lusa) - The president of the Accountants' Association, Paula Franco, said on Thursday that the announced reduction in income tax rates is “necessary” and “positive”, mainly affecting the middle class, which “contributes the most significant share” of income tax.
“This is a necessary reduction because since the intervention of the ‘troika’, income tax, especially concerning dependent work (although income tax is general for all income, it greatly affects dependent workers), has seen a very sharp rise,” Paula Franco told the Lusa news agency.
According to Franco, one of the new features of the reduction the cabinet has now approved given the latest adjustments to the personal income tax is that it covers income up to the eighth bracket.
“Therefore,” she explained, “higher incomes, but which essentially cover the middle class, which ultimately bears most of the income tax burden.”
As she noted, this concerns workers “who already have higher incomes, also due to their performance and skills,” and who remain uncovered by the most recent reductions in personal income tax (IRS).
Highlighting the measure as “positive”, Paula Franco noted that the government would incorporate the announced adjustment to IRS withholding rates into the final settlement of this tax.
"In the past, what happened was that withholding taxes were excessive and, therefore, taxpayers paid too much to the state, paid more in advance, and then received their income tax refunds. With the adjustment of the withholding tables, these advance payments will be as close as possible to the final payment and, therefore, taxpayers can expect to stop making those forced savings with the state,” she emphasised.
On Wednesday, the cabinet approved a draft law for an additional income tax reduction of €500 million, which the government will implement later this year. Parliament has already received the measure.
In a statement, the cabinet highlighted that the approved proposal “allows for further tax relief, further reducing marginal rates in all brackets, up to the 8th bracket”.
In the same note, the cabinet stressed that the government wanted to “bring the amount of tax withheld as close as possible to the amount due at the end”.
‘Thus, the government will approve new withholding tax tables that will reflect the reduction in IRS rates, with retroactive effect to January,’ it said.
In an interview with RTP on Wednesday evening, Prime Minister Luís Montenegro stressed that this would 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 across all brackets, except the highest, will “increase disposable income beyond what the State Budget for 2025 already provides, 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”.
PD/ADB // ADB.
Lusa
