The Portuguese Government reduces Personal Income Tax rates and adjusts withholding tables
The Portuguese Government approved the reduction of the Personal Income Tax (IRS) rates with effects from January 1, 2025, and the new withholding tax tables applicable from August until the end of the year.
In order to alleviate the tax burden on families, the Portuguese Government proceeded with the reduction of marginal IRS rates up to the 8th bracket, with retroactive effects from January 1, 2025, through Law no. 55-A/2025, of 22 July.
In order to implement this measure, Order no. 8464-A/2025 was published, approving the following new withholding tax tables:
- Transitional withholding tax (WHT) tables, applicable to income paid or made available between 1 August and 30 September 2025, aimed at offsetting the excessive tax withheld during the first seven months of the year;
- Definitive WHT tables, to be applied from 1 October 2025 onwards, already aligned with the new PIT rates in force.
Furthermore, acknowledging the potential operational constraints in the immediate implementation of the new WHT tables, the order establishes a regularization mechanism, allowing withholding agents to adjust the withholdings related to August and September up until the end of December 2025, inclusive.
Contacts
