Key figures — as of 2026-10-08: OE2027 was delivered to Parliament on 8 October 2026, marking the sixth IRS reduction in two and a half years of PSD/CDS-PP government — IRS rates fall 0.3 to 0.5 percentage points across the 1st to 6th brackets, covering taxable income up to €43,090; the cut costs the state ~€400 million and already shows up in November 2026 withholding; separately, the 2027 bracket thresholds themselves rise 3.88% to offset inflation.
A sixth cut, already landing in payslips
Portugal's finance ministry handed its 2027 state budget proposal to the Assembleia da República on Thursday, and the headline is a tax cut that most salaried residents — Portuguese and foreign alike — will already have felt before the document was even printed. The Government delivered the OE2027 to Parliament with the sixth IRS cut in two and a half years — a reduction of 0.3 to 0.5 points from the 1st to the 6th bracket already reflected in 2026 withholding, plus a new update to brackets, the specific deduction and the minimum existence threshold.
The mechanics are specific. The first bracket rate falls 0.3 percentage points, the second to fifth brackets fall 0.5 points each, and the sixth bracket falls 0.3 points. In cash terms, the sixth bracket drops from 34.9% to 34.6%. The relief applies broadly: it covers taxable income up to €43,090, and reaches almost 3 million households, according to the Council of Ministers decision. The Treasury puts the overall cost at roughly €400 million.
Because the cut is retroactive, foreign employees won't need to wait for a new tax year to see it. If approved, the reduction has retroactive effect to January 2026, and workers should feel the relief in November, through adjustments to withholding — particularly in the Christmas subsidy payment.
What it's actually worth
The government's own simulations are modest. For a monthly gross salary of €2,500, estimated annual savings rise to between €90 and €115 — while someone on the minimum wage of €920 gets no additional saving, since they're already exempt from IRS under the minimum existence rule. Earlier reporting on lower salary bands pointed to similarly small figures for a €1,500 gross earner.
Here's GrowIN's own read on those numbers: spread across twelve months, a €90–€115 annual saving on a €2,500 salary works out to somewhere between €7.50 and €9.60 extra per month — less than the price of a weekday lunch in Lisbon, and dwarfed by the rent increases many foreign tenants have absorbed over the same period. For a dual-income foreign household — say, two remote-friendly professionals each on €2,500 gross — the combined annual gain lands around €180–230, which is a genuine number but not one that moves the needle on affordability. Separately, 2027 brings a second layer of relief: the thresholds that define the nine IRS brackets will be updated by 3.88% next year, according to the OE2027 proposal. That update exists mainly to stop inflation from quietly pushing people into higher brackets — a mechanism, not a windfall.
Why it matters specifically for expats
This cut applies to the standard progressive IRS scale used by most salaried foreign residents in Portugal — including D7 visa holders living off pensions taxed locally, D8 digital nomads who've become tax resident, and anyone on a normal Portuguese payroll. It does not change anything for people under the IFICI ("NHR 2.0") regime, who pay a flat 20% on qualifying income regardless of what happens to brackets 1 through 6 — a distinction worth knowing before anyone assumes this budget news applies to them. For everyone else, the bracket cut and the 3.88% threshold update both feed into the same payslip line, and both are worth checking against a payroll statement rather than assumed.
As one editor here put it: "a sixth tax cut sounds dramatic until you divide it by twelve." That's the quotable truth of OE2027's IRS chapter for foreign salaried residents — real, recurring, and genuinely too small to change a household budget on its own.
What's next
The rate-cut law itself was debated as separate legislation on 7 October, with a vote scheduled for Friday, allowing the extraordinary tax refund promised for the November salary to go ahead. The full OE2027 budget — including the 3.88% bracket update, changes to the specific deduction and minimum existence threshold, and a €50 rise in the Complemento Solidário para Idosos — now moves into parliamentary committee review ahead of a final vote expected before year-end. Finanças has not yet published the definitive 2027 withholding tables; foreign taxpayers should check Portal das Finanças directly once they're released rather than rely on simulation figures. For a fuller breakdown of how Portugal's income tax brackets, NIF registration and residency rules interact, see our tax & NIF guide.
Nothing here changes IFICI eligibility, NHR grandfathering, or filing deadlines — the IRS declaration window for 2026 income still runs 1 April to 30 June 2027, and anyone unsure how these changes apply to their specific situation should check with a Portuguese accountant or tax representative before assuming the savings quoted above match their own payslip.