On October 29, the government approved a reduction in IRS (personal income tax) rates across the first six tax brackets. The new rates apply retroactively to all income earned in 2026, starting January 1, RTP reports.
The rates are being cut by 0.3–0.5 percentage points. They will now stand at 12.2%, down from 12.5%; 15.2%, down from 15.7%; 20.7%, down from 21.2%; 23.6%, down from 24.1%; 30.6%, down from 31.1%; and 34.6%, down from 34.9%. The top three brackets remain unchanged. The government estimates that nearly 3 million households will benefit, with taxpayers keeping around €400 million. Minister António Leitão Amaro called this the sixth IRS tax cut since April 2024.
The overpaid tax for January–October will be returned immediately. In November, only half the usual tax will be withheld from salaries and pensions, including the Christmas bonus (subsídio de Natal) if it is paid in November. From December, withholding will return to the previous tables, DN reports. The tax itself is not being halved; this is a one-off measure.
The final tax calculation will be made in the 2026 tax return, which is filed in spring 2027. You will receive part of the tax savings as early as November, so your tax refund in 2027 will be smaller, and some people may even have to pay additional tax, Jornal de Negócios warns.
The cut applies to Portuguese tax residents. Non-residents pay a flat 25% tax on Portuguese-source income, and nothing changes for them. If you were expecting a large refund in 2027, bear in mind that it will be smaller than usual.
