Employment Tax & Global Mobility Tax Insight
Portugal | State Budget Law proposal for 2025
Summary
Last Thursday the Portuguese Government delivered to parliament the State Budget Law Proposal for 2025. Tax measures requiring special attention from HR professionals.
The detail
General PIT (Personal Income Tax) rates
- It is foreseen that the limits of each bracket of the PIT (Personal Income Tax) table of general rates be updated by 4.62%. The applicable PIT rates shall remain unchanged.
| Taxable income (€) | Tax rate (%) | Deductible amount (€) |
| To | From |
|
0
| 8,059 | 13 |
0
|
|
8,059
| 12,160 | 16.5 | 282.07 |
| 12,160 | 17,233 | 22 |
950.91
|
|
17,233
| 22,306 | 25 |
1,467.91
|
|
22,306
| 28,400 | 32 |
3,029.38
|
|
28,400
| 41,629 | 35.5 |
4,023.14
|
| 41,629 | 44,987 | 43.5 |
7,353.76
|
|
44,987
| 83,696 | 45 |
8,028.38
|
| More than 83,696 | – | 48 |
10,539.00
|
Youth PIT (“IRS Jovem”)
- It is proposed an update to the Youth PIT (“IRS Jovem”) regime, extending it to cover employment and self-employment income earned by taxpayers (non-dependants) up to 35 years old, during the first 10 years of earning income, regardless of the taxpayer’s level of education. The exemption applies in the first year when the option is exercised in the annual personal income tax return and in the subsequent 9 years. The maximum exempt income limit is 55 times the value of the IAS (“Indexante dos Apoios Sociais”), which represents a maximum exemption limit of €28,009.30, considering the IAS value in force for 2024.
- The amount of exempt income (subject to the above-mentioned exemption limit) will be as follows:
- 100% in the 1st year of earning income;
- 75% in the 2nd to 4th years of earning income;
- 50% in the 5th to 7th years of earning income;
- 25% in the 8th to 10th years of earning income.
- It is also proposed that taxpayers who benefit or have benefited from the Non-Habitual Residents’ regime, the Tax Incentive for Scientific Research and Innovation, or the “Programa Regressar”, as well as those who do not have their tax situation regularized, cannot benefit from the Youth PIT (“IRS Jovem”) regime.
- The taxpayers who have already earned employment or self-employment income in the past, fall into the subsequent year of the number of years in which such type of income was received in previous years, excluding the years in which they were considered dependents.
- For the purposes of applying the mentioned exemptions at the level of PIT withholding, the taxpayer must inform the entities responsible for paying the income about the year in which the income is earned.
Meal allowance
- It is proposed that the tax-exempt amount of meal allowance paid via meal card or voucher be increased from € 9.60 to € 10.20. The tax-exempt amount of the meal allowance paid in cash will remain unchanged (€ 6.00).
Specific deduction update
- It is proposed an update to the value of the specific deduction applicable to the employment income and pension income, increasing it from € 4,104 to 8.54 times the Social Support Index (“IAS”), considering the IAS of € 509.26 (in 2024).
Minimum Subsistence Level
- It is proposed to update the reference value of the minimum subsistence level (“mínimode existência”) threshold, to align it with the increase of the monthly minimum wage (“Remuneração Mínima Mensal Garantida” or “RMMG”).
Productivity bonuses, performance bonuses, profit-sharing, and balance sheet bonuses paid in 2025
- An exemption from PIT and social security contributions is proposed for productivity bonuses, performance bonuses, profit-sharing, and balance sheet bonuses paid or made available to the employee or board members, borne by the employer, voluntarily and on a non-regular basis, up to a limit of 6% of the employee’s annual base salary.
- The application of the exemption depends on the paying entity complying with the requirements relating to the eligible salary increase foreseen in article 19.º-B of the Tax Benefits Code (“EBF”) in 2025.
- The withholding tax rate to be applied to these amounts should correspond to the one applicable to the monthly remuneration paid in the month the premiums are paid or made available.
- In the annual statement of earnings to be issued by the employer, relating to the year 2025, a reference must be made to the fulfillment of the salary increase conditions, as referred above.
Tax withholdings – Supplementary work
- It is proposed that the PIT withholding rate applied to the remuneration paid for supplementary work be 50% of the tax withholding rate applicable to the monthly remuneration of the month the supplementary hours are paid (autonomous tax withholding). Currently, this reduction in the withholding tax rate only applies as from the 101st hour of supplementary work.
Tax withholdings – Self-employment income from professional activities
- It is proposed a decrease in the withholding tax rate from 25% to 23% to be applied to self-employment income resulting from professional activities specifically listed in the table referred to Article 151.º of the PIT Code.
Payments on account
- A change is expected to occur in the calculation of payments on account for self-employed workers, where the total of these payments will correspond to 65% of the assessed amount, instead of the 76.5% currently foreseen under the PIT Code.
Increase of tax deductible costs related to salary increases
- It is foreseen that, for purpose of determining the taxable profit, the entities subject to corporate Income tax (CIT) or self-employees with organized accounts, will be able to deduct 200% (currently 150%) of the costs corresponding to salary increases for employees with indefinite-term employment contracts if:
- the increase in the average annual base salary per employee is at least 4.7% compared to the previous year; and
- the average increase in the annual base salary for employees earning an amount equal to or less than the company’s average annual base salary is at least 4.7%, with reference to the end of the previous year.
- Only expenses related to employees covered by collective labor regulation instruments (as defined in the Labor Code) and signed or updated within the last three years, are considered.
- Expenses are defined as the amounts borne by the employer regarding the employee’s base salary and the employer’s contributions to social security.
- The maximum annual amount of expenses that can be increased per employee corresponds to five times the guaranteed minimum monthly wage (currently 2024), excluding expenses resulting from the update of this value.
Tax Incentive for Scientific Research and Innovation
- The State Budget Law proposal for 2025 does not include any amendment or guidelines regarding the Tax Incentive for Scientific Research and Innovation (Article 58.º-A of EBF), introduced by the previous Government.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Ana Duarte
Lead Partner
Ana Rita Dias
Senior Manager
Cristina Reis
Senior Manager
Mariana Maciel
Manager
Pedro Niza
Senior Manager
Sara Infante
Manager
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