8 September 2025
By: Rogério Fernandes Ferreira, RFF Lawyers, Lisbon (Portugal)
Personal Income Tax – Young Individuals
- The special personal income tax (IRS) regime for young individuals has been significantly extended.
- It now applies to all individuals under 35 years of age.
- Young taxpayers may benefit from an exemption from personal income tax for up to ten years, covering both employment and self-employment income.
- The exemption is capped at €28,737.50 per year (equivalent to 55 times the IAS [social support index]).
- Exemption rates decrease over time: 100% in the first year, 75% between the second and fourth year, 50% between the fifth and seventh year, and 25% between the eighth and tenth year.
Personal Income Tax – Families
- Families will benefit from an update of IRS tax brackets, increased by 4.6% to reflect inflation.
- The specific deduction for categories A (professional income) and H (pensions) has also been increased, from €4,104 to €4,462.15.
- The daily meal allowance has been updated to €10.20 per day when provided as vouchers.
- The minimum subsistence threshold has been revised, providing better protection for low-income households.
- Additionally, withholding tax on self-employment income (category B) has been reduced from 25% to 23%, and instalments are now capped at 65% of the final payable amount, offering increased liquidity to families.
Corporate Income Tax
- The general corporate income tax (CIT) rate has been reduced from 21% to 20%, while the reduced rate is set at 16% for SMEs.
- The special tax regime of the Madeira Free Zone has been extended until 2026.
IFICI Regime (Tax Incentive for Scientific Research and Innovation)
- Flat tax rate of 20% on net income from employment or self-employment in Portugal (from areas/activities defined as relevant).
- Tax exemption for income from non-Portuguese sources from (*) :
- Professional income (category A)
- Income from self-employment (category B)
- Capital income (category E)
- Rental income (category F)
- and capital gains (category G)
(*) Except for certain types of income from “tax havens” – tax rate 35%.
- Granted for a period of 10 years
Eligibility Conditions
- Acquire tax residency status in Portugal
- Have not been a tax resident in Portugal during the past five years
- Income from Portuguese sources in areas/activities defined as relevant
- Access to this regime is subject to prior registration with the competent public entities.
