Lisbon, Sept. 28, 2025 (Lusa) - The 2026 State Budget will be submitted to parliament by 10 October and has several measures that affect the margin the government has for possible negotiations and proposals, as it is aiming for a surplus.
The flagships of Luís Montenegro's government, a reduction in personal income tax and corporate income tax, will once again be a hallmark of this budget, which is due to have its final overall vote on 27 November, according to the proposal from the committee responsible for the State Budget.
Here's what is already known about the SB2026:
+++ Budget has measures with an impact of €4,449 million +++
The Budget already includes several measures that will impact public accounts, totaling €4,449 million, according to the invariant policy framework submitted by the government to the Budget, Finance, and Public Administration Committee (COFAP).
Among the measures affecting revenue, the reduction in corporate income tax by one percentage point stands out, with an impact of €300 million, as well as the updating of the specific deduction, the personal income tax brackets and the existence minimum, with €325 million.
In terms of expenditure, items such as personnel costs (€1.248 billion) stand out, with the increase determined in the income agreement (€512 million) and also salary agreements (€262 million), as well as pensions (€1.563 billion).
+++ Finance expects a surplus this year and next +++
The government expects to achieve a budget surplus of 0.3% of Gross Domestic Product (GDP) this year and, although it has not yet presented new forecasts for 2026, it continues to expect a positive balance, with the latest outlook being for a surplus of 0.1% in 2026, according to the report submitted to Brussels in April.
The Portuguese Public Finance Council (CFP) continues to project a budget deficit next year, but now lower, at 0.6% of GDP, according to the report released, and the Bank of Portugal also points to a negative budget balance in 2026.
As far as the macro scenario is concerned, in the State Budget, the government had forecasted growth of 2.1% for this year, which was revised to 2.4% in the report submitted to Brussels in April. However, it remains uncertain whether this estimate will be maintained.
+++ Government cuts personal income tax rates +++
In July, parliament approved a reduction in personal income tax for 2025 and a commitment to a further reduction next year, to be included in the 2026 State Budget.
The approved law includes a rule, added to the government's initial proposal at the initiative of the PSD and CDS-PP benches, so that ‘in the State Budget for 2026’, the government proposes to parliament to ‘additionally reduce the marginal rates of the 2nd to 5th bracket by 0.3 percentage points’.
With this initiative, parliament made the government move forward with a new proposal to reformulate the IRS table, to enshrine a further reduction in the rates of the 2nd to 5th bracket, to be applied to the income earned by taxpayers throughout 2026.
With an additional reduction of 0.3 percentage points, the second bracket would have a rate of 15.7%, the third 21.2%, the fourth 24.1% and the fifth 31.1%.
+++ Minimum wage rises to at least €920 +++
The tripartite agreement on wage increases and economic growth for 2025-2028, signed in October last year between the government, the four business confederations, and the General Workers' Union, revised upwards the trajectory of the national minimum wage, forecasting increases of €50 a year to reach €1,020 in 2028.
The document therefore predicts that the national minimum wage will rise from the current €870 to €920 in 2026.
In the government programme, the executive has set a new target to cover the entire legislature, aiming for the guaranteed minimum wage to reach €1,100 gross per month by 2029.
The Minister of Labour, Solidarity and Social Security said this week that the government “does not open or close the door” to revising the trajectory of the national minimum wage, which stipulates that the guaranteed minimum wage will rise to €920 in 2026.
+++ Company tax reduction on the sidelines of the State Budget +++
The reduction in the corporate income tax rate was already approved in parliament in general on 19 September, before the budget debate began. Although the discussion is taking place on the sidelines, the budgetary impact of the measure will be included in the State Budget for 2026.
Following a drop in the corporate income tax rate this year, from 21% to 20%, the rate will decrease to 19% next year. For 2026, there is also a reduction in the rate that applies to Small and Medium-sized Enterprises (SMEs) and small and medium capitalisation companies in the first €50,000 of taxable income from 16% to 15%.
+++ Timeline +++
The State Budget must be submitted to parliament by 10 October, and COFAP already has a proposed timetable for examining the State Budget, so that the general discussion will take place on 27 and 28 October.
Voting on the proposed amendments and the document, paragraph by paragraph, will begin on 20 November, and the final overall vote is scheduled for 27 November.
MES/ADB // ADB.
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