Portugal Approves Tax Cuts, Pension Bonuses to Ease Living Costs

The Portuguese government approved a new package of measures on Thursday to mitigate the rising cost of living, formalizing announcements made during last week's censure debate. The centerpiece is an additional reduction in Personal Income Tax (IRS) rates for the first six brackets, costing roughly 400 million euros and taking effect with November salaries.

Rates will drop by 0.3 to 0.5 percentage points depending on the bracket. For example, the first bracket falls from 12.50% to 12.20%, while the third drops from 21.20% to 20.20%. A worker earning 1,000 euros monthly will save about 12 euros per year under the new rates.

“We will not trade more cents of ISP discount for more taxes, more deficit, more debt we would have to pay in the future.”

The Council of Ministers also greenlit a third consecutive extraordinary supplement for pensioners with the lowest pensions. Beneficiaries receiving up to 537.13 euros will get 200 euros; those between 537.13 and 1,074.26 euros will receive 150 euros; and those up to 1,611.13 euros will get 100 euros.

To offset fuel price hikes, the ISP discount will rise from 0.23 to 0.25 euros per liter next week. The Green Rail Pass will also be extended to CP urban services in Lisbon and Porto through year-end. Prime Minister Luís Montenegro ruled out a "bidding war" of measures, citing fiscal responsibility and the memory of the troika era.