Youth Personal income tax benefit – Youth PIT

22 September 2022

Rui Pedro Fonseca

The Youth Personal Income Tax benefit was established in 2020 and is applicable to young workers who received their first income as an employee or self-employed. The goal is for young adults starting their work life to pay less taxes and consequently have more disposable income.

Any young workers who wish to obtain this tax benefit must meet 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 degree, a master’s degree or a PhD).
Age between 18 and 26 years.
Considered independent, i.e., no longer included in the parent’s household.

The above-mentioned age range can be extended up to 30 years old, in case the degree to be concluded matches level 8 of the National Qualifications Framework (PhD).

After the conclusion of the cycle of studies, the worker can be partially exempted from personal income taxes for a period of 5 years, as detailed below:

30% of the income in the first 2 years with a cap of 7,5 times the Social Support Index – IAS – value (€3,324).
20% of the income in the following 2 years with a cap of 5 times the IAS value (€2,216).
10% of the income in the last year with a cap of 2,5 times the IAS value (€1,108).

Under the terms of this regime, the tax benefit can be used as follows:

When the taxpayer is receiving income from employment or self-employment in their first year and in the following years, provided that this benefit is triggered up to the maximum age referred above (26 or 30 years old respectively).
In consecutive or non-consecutive years, provided that the maximum age does not exceed 35 years old.

The Youth Personal Income Tax benefit is not an automatic procedure. The taxpayer must file the tax return using the Annex 4A to be eligible for this special regime. Also, the exemption can only be used once by the same taxpayer.

If you have further questions regarding this matter, get in touch with us, and we will be delighted to assist you.