# Portugal Approves Draft Law to Cut IRS Rates Through Sixth Bracket

> Council of Ministers approved IRS cuts for brackets 1-6 on 17 September 2026. Parliament must still vote; new withholding tables are pending.

- Source: https://www.growinportugal.com/news/government-approves-draft-law-to-cut-irs-rates-through-the-s-2026-10-04
- Publisher: GrowIN Portugal (https://www.growinportugal.com)
- Published: 2026-10-04
- Last reviewed: 2026-10-04
- Language: en

> **Key figures — as of 2026-10-04:** Council of Ministers approved the draft law on 17 September 2026 — rates cut by 0.3 percentage points in the 1st and 6th brackets, 0.5pp in the 2nd–5th — covering income earned throughout all of 2026; estimated cost €400 million, benefiting nearly 3 million households; Parliament received the bill on 21 September with a request for urgent, same-day voting across all three legislative stages.

## What the Council of Ministers actually approved

On 17 September 2026, Portugal's Council of Ministers approved a draft law that authorises the Government to reduce IRS rates up to the sixth bracket of taxable income, reinforcing disposable income for Portuguese households. Crucially, the measure applies already to income earned in 2026 and benefits almost 3 million households.

This isn't a new tax regime — it's a rate adjustment layered onto the existing 2026 brackets set by the State Budget. According to the Government's own figures, the proposed normal rates become 12.2% (1st bracket), 15.2% (2nd), 20.7% (3rd), 23.6% (4th), 30.6% (5th) and 34.6% (6th). The specific cut sizes: a drop of 0.3 percentage points in the 1st and 6th brackets and 0.5 points from the 2nd to the 5th, while keeping the bracket thresholds and the normal rates of the 7th to 9th brackets unchanged.

Prime Minister Luís Montenegro confirmed the move in a televised address the same evening, framing it as tax relief aimed in particular at "middle-class households", with effects expected in November pay and the Christmas subsidy. Official Lusa reporting put the headline figure at 400 million euros, covering all taxpayers.

## Why foreign employees should care

For the large population of foreign workers on Portuguese payroll — tech hires on a Tech Visa, relocated staff, freelancers who've shifted to a company contract, or spouses of Golden Visa and D7 holders working locally — this is a direct payslip issue, not an abstract policy debate. Anyone paying IRS on employment income in Portugal sits somewhere in these first six brackets unless earning well into six figures.

The government has pitched this as its fifth IRS reduction of the current legislature, and the Executive presents it as the "fifth IRS cut" promoted by this Government. Lusa's wire report noted that the new reduction represents the fifth IRS decrease during the PSD/CDS-PP governments' terms, which matters for context: this is part of a pattern, not a one-off emergency measure.

## GrowIN's calculation: what it's actually worth

The percentage-point changes sound small, so GrowIN Portugal ran the published 2026 bracket thresholds and both rate sets through the maths for a worker with taxable income sitting at the very top of the sixth bracket — €43,090, the upper limit before the unchanged 7th bracket kicks in.

Under the current 2026 rates, cumulative IRS on that income works out to roughly €10,831. Under the proposed reduced rates, it falls to approximately €10,657 — a saving of about **€173 a year, or roughly €14.40 a month**, assuming the law passes unchanged. Someone lower down, with taxable income near the middle of the fifth bracket (around €26,000), would see a more modest saving in the region of €2–3 a month. The relief scales with income up to the sixth-bracket ceiling, then flattens, since brackets 7 through 9 — including the 48% top rate — are untouched.

"A €14-a-month gain for a mid-income earner is real money, but it only shows up once Parliament votes and the withholding tables catch up," says GrowIN Portugal Editorial.

## What hasn't happened yet

This is still a draft. The bill needs parliamentary approval, which — being a Government initiative — requires presenting a draft law to the Assembleia da República. That step has already begun: the proposal entered Parliament with a request for urgency, specifically simultaneous scheduling and voting across the three phases — general debate, specialty, and final global vote.

Two things are therefore not yet in place. First, final parliamentary sign-off — the government is pushing for speed, but opposition parties could still amend or delay. Second, and just as important for anyone budgeting a monthly salary, the **new withholding tables (tabelas de retenção na fonte)** that employers use to calculate how much IRS to deduct each month haven't been published. The Government's own target is for November payslips to already reflect the lower withholding, with retroactive adjustment back to January, but the drop should be reflected in withholding from November, including the Christmas subsidy, with retroactive effects to January — language that signals intent, not a guarantee.

## What to watch next

Keep an eye on three dates: the parliamentary vote itself, the publication of updated withholding tables on Portal das Finanças, and your November payslip. If the law passes as drafted, most of the adjustment should arrive automatically through payroll rather than requiring any action from employees. Freelancers and the self-employed filing via recibos verdes won't see a withholding change in the same way — any benefit will show up when the 2026 IRS return is filed between 1 April and 30 June 2027.

For a fuller breakdown of how Portuguese income tax brackets, NIF registration and residency status interact for foreign earners, see GrowIN's guide at [tax & NIF](/tax-and-nif/). If you need help confirming how a bracket change affects your specific payroll or freelance setup, GrowIN's team can walk through the numbers via [services](/services/).

This remains a draft law, not settled legislation — budget for the current withholding rates until Finanças confirms otherwise.

## Sources

- [Portuguese Government — Council of Ministers communiqué](https://portugal.gov.pt/gc25/governo/comunicados-do-conselho-de-ministros/comunicado-do-conselho-de-ministros-de-17-de-setembro-de-2026)
- [Observador](https://observador.pt/2026/09/22/governo-pede-urgencia-no-parlamento-para-baixar-irs-ate-ao-6-o-escalao-taxas-descem-entre-03-e-05-pontos/)
- [ECO](https://eco.sapo.pt/2026/09/17/primeiro-ministro-explica-baixa-de-irs-e-anuncia-novos-apoios-acompanhe-aqui/)
- [Santander Salto — IRS brackets 2026](https://www.santander.pt/salto/escaloes-irs)

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© GrowIN Portugal. Cite as: GrowIN Portugal, "Portugal Approves Draft Law to Cut IRS Rates Through Sixth Bracket", https://www.growinportugal.com/news/government-approves-draft-law-to-cut-irs-rates-through-the-s-2026-10-04