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Changes in 2024 Personal Income Tax (IRS) for Young Professionals

Feb 07, 2024

The Portuguese Government created a tax benefit for young professionals, providing them with tax discounts to alleviate financial burdens. This initiative, introduced to bolster the financial standing of young professionals embarking on their careers, underwent notable revisions in 2024.

The primary modification entails a complete exemption from taxes during the first year of employment, applicable to both dependent and independent workers. Dependent workers, engaged under formal employment contracts, receive wages from entities, while independent workers conduct professional activities without such contracts.

Following the initial year of total exemption, taxpayers enjoy an additional four years of partial exemption, which can be consecutive or interspersed, ensuring flexibility during periods of unemployment.

With the revisions implemented in 2024, the discount structure for the five-year period of the Personal Income Tax (IRS) for young individuals varies as follows:

A 100% tax exemption is granted in the first year, applicable if the total income does not exceed 40 times the indexante dos apoios sociais (IAS), which amounts to €509.26 in 2024. If the income exceeds this amount, the excess portion is subject to taxation;
A 75% tax exemption is provided in the second year, with a maximum total exemption corresponding to 30 times the IAS;
In the third and fourth years, a 50% tax exemption is applicable, with the maximum total exemption corresponding to 20 times the IAS;
Finally, a 25% discount is available in the fifth year, with the maximum total exemption corresponding to 10 times the IAS.

IAS serves as a reference value for calculating, measuring, and updating various social benefits provided by the Portuguese state.

Eligibility for these discounts is contingent upon certain criteria, including:

Holding a high school diploma or higher between the ages of 18 to 26;
Holding a PhD until the age of 30; and
Filing separate tax returns from parents even with the same tax residency.

Beneficiaries can benefit from this discount for a period of 5 years until they reach the age of 35, with these 5 years being consecutive or interspersed.

It is also important to note that this benefit cannot be combined with the Non-habitual Resident (NHR) Tax Regime or the Programa Regressar.

This taxation benefit underscores Portugal's commitment to economic development, sectoral support, and enhancing taxpayers' well-being. Navigating the intricate landscape of taxation requires expertise to make informed decisions and achieve financial objectives.

Should you require further assistance on this tax matter or any other related issues, please do not hesitate to contact us. We will be delighted to offer our support.

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Benefits of Personal Income Tax for Young Professionals

by Diogo Pedro • 07 May, 2024

Over the past four years, young workers who earned their first income as employees or self-employed individuals have been eligible for a tax benefit in their personal income tax, known as 'IRS Jovem”. This benefit is intended to offer young workers the possibility of minimising their tax obligations, allowing for a higher amount of disposable income. To enjoy this benefit, taxpayers are required to comply with the following requirements: Have a complete course of level 4 or higher studies on the National Qualifications Framework (high school level acquired through double certification and aimed at pursuing higher education such as a bachelor’s degree, a master’s degree, or a PhD). Age between 18 and 26 years old. Considered independent, i.e., no longer included in the parent’s household for tax purposes. The specified age limit includes individuals up to 26 years old, inclusive. However, this limit is extended to 30 years old for taxpayers who have completed a degree at level 8 of the National Qualifications Framework (PhD). In 2024, this tax benefit has been improved, with increased tax exemption rates and an expanded range of applications over time. In this sense, upon completing the course of studies required, the individual may qualify for an exemption from personal income taxes for a duration of 5 years, as explained in the following details: 100% of the income in the first year with a cap of 40 times the Social Support Index – “IAS” value (€20.370,40). 75% of the income in the second year with a cap of 30 times the IAS value (€15.277,80). 50% of the income in the third and fourth year with a cap of 20 times the IAS value (€10.185,20). 25% of the income in the fifth year with a cap of 10 times the IAS value (5€.092,60). Moreover, the exemption can only be used once by the same taxpayer and should be requested when preparing and filing the personal income tax return. It is also important to acknowledge that this benefit has implications for withholding tax, allowing adjustments to the value subject to withholding tax. However, be aware that, while the withholding tax rate applied corresponds to the total amount of income earned, it is only applicable to the portion that is not exempt. If you have any questions or need assistance with this or related matters, feel free to reach out . We would be delighted to help you.

Being an urgent process, this legal action has priority over legal actions not deemed to be urgent.

My application has been pending for months with the Immigration Office - AIMA. What can be done?

by Sara Ferreira • 29 Apr, 2024

It is known to the general public that the Portuguese Immigration Office (AIMA) has not been able to timely approve residency authorisation requests within the legal timeframe defined to do so, thus resulting in residency applicants having their applications on hold for months, in some cases even years. One way to tackle this inaction from the Immigration Office is to file a legal action, namely the Subpoena for rights, freedoms and guarantees of the citizens.