IRS tax cut to be applied in September

A tax cut that will benefit tax payers in the 7th and 8th tax brackets, earning between €3,500 and €7,000 gross per month, and will provide a double benefit, should be introduced in September.

Portugal’s government intends to reduce IRS income tax rates up to the 8th bracket, and reflect this reduction by withholding tax rates and apply the measure with retroactive effect to January this year according to the newspaper Correio da Manhã.

The government’s plan to reduce the IRS by €500 million this year will give “a double bonus” to salaries between €3,500 and €7,000 gross monthly, in the case of a single person without children.

This will be done through the reduction of taxes in the 7th and 8th bracket rates and through the relief of taxation at the lowest income levels, which, due to the effect of progressivity, also benefits the highest salaries in these brackets.

The effects will be reflected on the taxes levied on this year’s salaries with retroactive effect to January due to the decrease in the withholding tax tables, meaning discounts that are made to the tax authorities every month.

The current government has a long term plan to slash taxes up to the 8th bracket by €2Bn by 2029.