Government approves €500 Million income tax cut
According to simulations, annual savings will range from €34 to €207 per taxpayer, equivalent to a monthly relief of between €2 and €15.
The government has approved a €500 million reduction in personal income tax (IRS), aimed primarily at middle-income earners.
The measure, approved by the Council of Ministers on Wednesday and submitted to Parliament the same day, is expected to deliver annual tax savings to millions of workers and pensioners.
Crucially, the measure will apply retroactively from January 1, 2025.
Last night, Expresso reported that the government intends to bring the €500 million reduction into effect as early as the beginning of August.
The goal is clear: to stimulate summer spending and help offset the economic slowdown, a concern, for now, voiced only within government circles.
Simulations
According to simulations released by the Ministry of Finance, annual savings will range from €34 to €207 per taxpayer, equivalent to a monthly relief of between €2 and €15.
The impact will be most significant for individuals and households earning between €8,000 and €41,600 per year, falling into the second through sixth IRS brackets.
The reductions include a 0.5% cut in tax rates for the first to third brackets, 0.6% for the fourth to sixth, and 0.4% for the seventh and eighth.
The top tax bracket remains unchanged, although high-income earners will still benefit due to the progressive nature of the tax system.
For example, a single salaried worker earning €1,000 per month will save €34 annually; someone earning €2,000 per month will save €124; and a €3,000 monthly income translates to a saving of €207.
These figures are based on annual IRS payments divided across 14 salary payments (12 months plus holiday and Christmas bonuses).
The Finance Ministry also released projections for couples and pensioners.
A childless couple where each partner earns €1,500 per month will save €165 annually (€6 each per month).
A couple with two children, earning €2,500 per partner per month, would save €332 per year, €12 per month each.
Pensioners will see similar benefits: someone receiving €1,000 per month will save €34 per year, while a pension of €2,000 monthly leads to a €124 saving.
Parliamentary approval
While the government presents the reform as a broad-based tax relief, it still requires parliamentary approval.
This is far from guaranteed.
The ruling PSD/CDS-PP coalition does not hold an absolute majority in Parliament, and both the Socialist Party (PS) and Chega have expressed reservations about the proposal.
These opposition parties argue that any tax cuts should be more targeted toward low-income earners, rather than across the middle brackets.
In political terms, this move reflects the government’s attempt to deliver on its campaign promises of easing the tax burden on working families, even as it navigates a fragmented Parliament.
If approved, the first effects of the IRS reduction are expected to be felt as early as September, once new withholding tables are finalized and implemented.