Lisbon, July 4, 2025 (Lusa) - The government's proposal to reduce personal income tax rates this year by €500 million was approved in parliament on Friday with the PSD, CDS-PP, Chega, IL, PAN and JPP voting in favour and the PS abstaining.
The BE, Livre and PCP voted against.
The initiative, which provides for a reduction in rates from the first to the eighth bracket, will now be discussed in detail.
All of the opposition parties' bills that proposed changes to the income tax table or alterations to other rules in the IRS Code to increase tax deductions (such as deductible expenses related to property costs) were rejected. At issue were initiatives from IL, BE, PAN, Livre and PCP.
Chega, which presented a bill to lower income tax more sharply from the 2nd to the 5th bracket in 2026 and another to extend the deduction for housing expenses, withdrew both initiatives before they were voted on.
The withdrawal came after the leader of the PSD's parliamentary group, Hugo Soares, said during the debate that the Social Democrats are willing to include a rule in the State Budget for 2026 that meets Chega's proposal.
In the final stretch of the debate on the government's proposal, Chega leader André Ventura announced that the bench would be willing to vote in favour of the government's initiative if it committed to "a 0.3 [percentage] point drop from the 2nd to the 5th bracket", like the one included in his party's initiative.
In response to this challenge, Hugo Soares opened the door to including a rule in the 2026 budget, and Chega later abandoned efforts to bring the project to a vote.
According to the government's proposal, the rate for the first bracket will go from 13% to 12.5%, for the second it will go down from 16.5% to 16%, for the third it will go down from 22% to 21.5%, for the fourth it will go down from 25% to 24.4%, for the fifth it will go down from the current 32% to 31.4%, for the sixth it will go down from 35.5% to 34.9%, for the seventh it will go down from 43.5% to 43.1% and, finally, for the eighth it will go down from 45% to 44.6%. The rate for the bottom income bracket remains at 48 %.
Although there is no change at this last level, the reduction in personal income tax now proposed by the government covers all taxpayers who are required to pay tax, due to the progressive nature of the tax table. The drop in the previous levels means that taxpayers in the new bracket also benefit from the reduction.
Chega, on the other hand, proposes lowering the IRS rate for the second bracket to 15.7%, cutting the rate for the third bracket to 21.2%, lowering the rate for the fourth bracket to 24.1%, and lowering the rate for the fifth bracket to 31.1%. In his initiative, he had already indicated that these additional cuts would only take effect in 2026.
During today's debate, Finance Minister Joaquim Miranda Sarmento asked the opposition parties for "responsibility" to ensure that the reduction reaches taxpayers' pockets as soon as possible.
For the reduction to be felt by taxpayers, the Ministry of Finance will have to approve new withholding tax tables, which the government has said it will do.
Joaquim Miranda Sarmento argued that the reduction should be reflected "as immediately as possible", to anticipate the return of the tax to taxpayers, so that families "don't have to wait" for the IRS to be paid the following year.
PCT/ADB // ADB.
Lusa
