Lisbon, July 10, 2025 (Lusa) - The Portuguese government's bill to lower income tax rates in 2025 is being debated at the committee stage and vote on Thursday in parliament.
The debate is scheduled for late afternoon in the Budget, Finance and Public Administration Committee, after the plenary session of the Parliament of the Republic.
In the first reading debate and vote on 4 July, the initiative was voted in favour by the PSD, Chega, IL, CDS-PP, PAN and JPP, with the PS abstaining and the Livre, PCP and BE voting against.
The initiative reduces rates from the 1st to the 8th income bracket, bringing across-the-board tax relief at various income levels.
Although rates only fall up to the 8th bracket, the reduction is also felt by taxpayers in the 9th bracket because of the progressive tax rules.
According to the Government's proposal, the rate for the first bracket will fall from 13% to 12.5%, the second from 16.5% to 16%, the third from 22% to 21.5%, the fourth from 25% to 24.4%, the fifth bracket decreases from the current 32% to 31.4%, the sixth bracket drops from 35.5% to 34.9%, the seventh bracket goes from 43.5% to 43.1% and, finally, the eighth bracket falls from 45% to 44.6%. The rate for the last income bracket remains at 48%.
As a rule, when there are changes to the IRS bracket rates, governments update the IRS withholding tables so that the monthly tax deduction made from employees' salaries and pensions is closer to the final IRS payable.
In this case, the executive has already said it will do so, planning to reflect the reduction in August and September, with effect from the first months of the year, when this decrease did not yet apply.
In Brussels, speaking to Portuguese journalists on arrival at the Eurogroup meeting on 7 July, Finance Minister Joaquim Miranda Sarmento said he expected that, after the vote at the committee stage, the proposal would be approved in the final reading and vote in plenary during the current legislative session.
"Once the reduction in IRS rates - the rates under Article 68 of the IRS code - is approved, the Government will immediately publish the withholding tax tables, which will allow - in simpler terms - retroactive payments to be made for January this year," the minister said.
Contrary to the executive's proposal, which was passed at the first reading and vote, all the initiatives of the opposition parties - IL, BE, PAN, Livre and PCP - that provided for an alternative reduction in IRS rates or changes to other rules of the IRS Code to increase tax deductions (such as deductible expenses relating to property charges) were rejected in plenary.
The only bills that were not voted on because they were withdrawn by the parliamentary group that presented them were two initiatives from Chega. One involved a more significant reduction in IRS rates from the 2nd to the 5th bracket in 2026, with an additional cut of 0.3 percentage points to that proposed by the government. The other would have extended the deduction for housing expenses.
The withdrawal of the initiatives came after, during the debate on the government's proposal, the leader of the PSD parliamentary group, Hugo Soares, opened the door to the inclusion of a provision in the 2026 State Budget that would meet Chega's initiative to reduce taxes in that income bracket.
At the committee stage, the PS presented an initiative, but it does not include changes to the income tax table.
The socialist party's proposal only concerns the reconciliation of the young people's IRS rules with another existing measure, the wage bonus granted to young workers as a way of repaying tuition fees during their first years of professional activity.
The PS wants to make it clear in the law that the bonus can be combined with the young people's IRS, which is already in effect this year.
PCT/AYLS // AYLS
Lusa
