Key figures — as of 2026-10-10: Council of Ministers approved Bill No. 108/XVII/2.ª on 17 September 2026, cutting IRS rates 0.3–0.5 percentage points across the 1st–6th brackets (income up to €43,090) — effects retroactive to 1 January 2026, costing the state ~€400 million and reaching over 2 million households — new withholding tables apply from November 2026, covering both the monthly salary and the Christmas subsidy.
The number that matters
Nothing changes on a Portuguese payslip until November. That's the headline for the roughly two million households affected by this year's IRS cut: Portugal's Council of Ministers signed off on a cut to personal income tax (IRS) on 17 September, with cuts ranging from 0.3 to 1 percentage point across the first six brackets, leaving the top three brackets unchanged. The underlying authorisation is Bill No. 108/XVII/2.ª, approved on 17 September 2026, seeking parliamentary authorisation to lower the general rates of personal income tax applicable to the first six brackets of taxable income.
The measure, announced on 8 September by Prime Minister Luís Montenegro during the debate on the motion of censure presented by Chega, is expected to directly affect more than two million households and reach up to the sixth IRS bracket. That's the sixth consecutive IRS cut delivered by this government since 2024.
How the correction actually works
The mechanics matter more than the announcement. The exact new rates, published by payroll specialists tracking the bill, bring the first bracket down from 12.5% to 12.2%, and the second through fifth down 0.5 points each — bracket 1 up to €8,342 falls from 12.50% to 12.20%; bracket 2 (€8,342–€12,587) from 15.70% to 15.20%; bracket 3 (€12,587–€17,838) from 21.20% to 20.70%; bracket 4 (€17,838–€23,089) from 24.10% to 23.60%; bracket 5 (€23,089–€29,397) from 31.10% to 30.60%; and bracket 6 (€29,397–€43,090) from 34.90% to 34.60%. Brackets seven to nine, which apply above roughly €43,090, aren't touched.
The change will feed through into November's withholding tax and the Christmas bonus, Prime Minister Luís Montenegro has said. Because the reduction is backdated, January through October will already have been taxed at the old, higher rates. Finance ministry officials confirmed to Observador that the new withholding tables deducted deliver a correction of the tax overpaid since the start of the year, a devolution that will boost net salaries in November, the month when the Christmas subsidy is also paid out.
What it means for foreign employees
This is the standard progressive IRS scale, not a special regime — so it applies to the same payroll most foreign residents sit on: salaried employees on Portuguese contracts, D7 visa holders with pension or passive income taxed locally, and D8 digital nomads who've crossed into tax residency and moved onto Portuguese payroll. It has nothing to do with the closed NHR regime or the newer IFICI scheme — it sits apart from any special tax regime a foreign resident may already hold in Portugal, and capital gains, corporate income and wealth held through structures fall outside its scope. If your income is taxed under IFICI's flat 20%, this bracket adjustment doesn't touch you.
Freelancers on recibos verdes under the simplified regime won't see a November bump either — their flat withholding rate is separate and this correction flows through employer payroll systems, not independent invoicing.
GrowIN's math: why December matters as much as November
Here's the part payroll emails tend to skip. Run the official bracket widths against the new rates, and an employee with taxable income at or above €43,090 — a gross salary in the region of €48,000–€50,000 — gains roughly €171 a year once all six brackets are fully phased in. Spread over twelve months that's barely €14. But because nine-plus months of tax were already withheld at the old, higher rates, the entire annual saving has to be squeezed into the two pay runs that remain: November and December. That means this same earner should see something closer to €85 extra in November and another €85 in December — not a gentle monthly trickle, but a one-off jump followed by a quieter 2027.
"The cut is real, but most of it arrives as a lump-sum correction in November and December, not as a bigger number on every future payslip," says GrowIN Portugal Editorial.
Lower earners see proportionally smaller amounts — someone whose taxable income sits mid-way through bracket 3 or 4 might be looking at a one-off correction closer to €20–€40 across the two months, depending on marital status and dependents, which still shift the withholding tables significantly.
What to watch next
Nominal rates don't mean much until the Autoridade Tributária publishes the actual updated withholding tables (tabelas de retenção na fonte) on the Portal das Finanças — as of early October these were not yet officially divulged, so payroll departments are still working from the January tables for now. Once published, check your own payslip against your marital status and number of dependents, since those variables shift the table you fall under. Whatever lands in November is still only an advance: the final tax bill for 2026 is only settled when you file your IRS return between 1 April and 30 June 2027. For a broader walkthrough of how Portuguese payroll tax actually works for newcomers, see our tax and NIF hub, and for the bigger budget picture, read our coverage of the OE2027 bracket changes. If you want a professional to check your withholding code and dependents are correctly registered before year-end, GrowIN's tax advisory service can review your situation ahead of the November payslip.
The cut is confirmed, the mechanism is retroactive, and the money is coming — foreign employees on Portuguese payroll just need to wait one more payslip cycle to see it land.