Discover the Key Changes in Portugal's 2025 Budget That Will Impact Your Wallet!
Cnn Portugal7 months ago
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Discover the Key Changes in Portugal's 2025 Budget That Will Impact Your Wallet!

Economy
irs
pensions
economy
budget
taxes
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Summary:

  • IRS Young Scheme: Tax exemptions for youth up to 35 years.

  • IRS Brackets Updated: Increased by 4.6% for tax neutrality.

  • Pension Increases: Up to 3.8% for lower pensions.

  • Minimum Wage: Raised to 870 euros.

  • Corporate Tax: Decreased to 20%.

  • Property Tax Exemptions: For homes up to 324,058 euros for young buyers.

  • Lower Electricity VAT: Set at 6% starting January 2025.

  • Salary Bonuses: Tax-free under specific conditions.

  • Reduced VAT on Children’s Food: Now 6%.

  • Increased Fuel Taxes: Projected rise of 750 million euros.

  • Housing Loan Fees: Reinstated for early repayments in 2025.

Portugal's 2025 State Budget Proposal Set for Approval

The State Budget for 2025 (OE2025) is expected to receive final approval today in the Assembly of the Republic, following the Socialist Party's announcement to support the government's proposal. Here are the key measures that will affect your finances starting January 1, 2025:

Enhanced Young IRS Scheme

The government has proposed improvements to the Young IRS scheme, which aims to prevent youth emigration. The new plan will last for 10 years, benefiting all individuals up to 35 years old who are not considered dependents. In the first year, 100% of their income will be tax-exempt, dropping to 75% in years two to four, 50% in years five to seven, and 25% in years eight to ten, with a maximum income limit.

Updated IRS Tax Brackets

The government has decided to increase the IRS tax brackets by 4.6%, surpassing the projected 2.3% inflation rate. This adjustment aims to ensure tax neutrality for those receiving salary increases of 4.6% or less.

Pension Increases

Pensions will see an increase of up to 3.8%, particularly affecting those earning below 1,018.52 euros. This includes both disability and retirement pensions.

National Minimum Wage Increase

The national minimum wage will rise to 870 euros, an increase of 50 euros from the current rate, as part of a plan to reach 1,020 euros by 2028.

Lower Corporate Tax Rates

The IRC (corporate tax) will decrease from 21% to 20% in 2025, a point of contention during negotiations with the Socialist Party.

Property Tax Exemptions for Young Buyers

Young individuals can now purchase their first home with an exemption from the IMT (Municipal Property Transfer Tax) for properties valued up to 324,058 euros.

Lower Electricity VAT

Starting January 2025, more consumers will benefit from a 6% VAT on electricity, doubling the portion of consumption eligible for the reduced rate.

Salary Bonuses without Tax

Companies can now offer tax-exempt salary bonuses to employees, provided they meet specific conditions related to salary increases.

Reduced VAT on Children’s Food

Child food products will now be taxed at a reduced 6% VAT, a measure supported by various parties.

Increased Fuel Taxes

Fuel prices are set to rise due to a projected 750 million euros increase in taxes, driven by higher consumption and the removal of tax exemptions on advanced biofuels.

Reintroduction of Housing Loan Early Repayment Fees

The previously frozen fees for early repayment of housing loans will be reinstated, affecting borrowers starting in 2025.

These changes come after considerable debate and negotiation, highlighting the government's focus on social support and economic stability as it navigates financial challenges ahead.

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