Government proposes a reduction of IRC to 17% over three years and revamp of IRS Jovem

The Government has decided not to drop a tax cut for young people under 30 – IRS Jovem – proposed by the previous PS socialist government , but instead has suggested to the PS that the benefit be concentrated on income up to the sixth tax bracket with the policy lasting for a maximum duration of 13 years.

With regard to cutting IRC corporation tax, the Government has accepted the three selective reductions proposed by the socialists but with a gradual decrease in the rate to 17% over three years, without altering the State surcharge taxes.

The Government welcomed some of the Socialist Party’s measures in an “irrefutable proposal” presented to allow the viability of the State Budget. After a meeting of about 30 minutes with the leader of the opposition, the Prime Minister Luís Montenegro confirmed that the government had opted for a framework for compromise on the most controversial parts of the previous government’s tax cuts policy, such as IRS jovem and IRC, without hiding the fact that negotiations over the degree of concessions “were quite intense”.

The prime minister said that the “Budget will adopt the Youth IRS (IRS Jovem) and IRC models contained in the PS electoral programme, expanding them progressively from the base tax”.

The current government’s proposal is that IRC will be cut by only one percentage point and not two in 2025, as the Government had initially intended, and at the end of the legislature the rate will be 17% and not 15%. The IRS Jovem (Young IRS) policy, on the other hand, will remain similar to the policy that the previous PS government had set out in its electoral programme, being extended to all young people and not only to graduates.

However, the Government insists on some changes of its own: it now covers people up to the age of 35 and can cover a period of 13 years.