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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