Explainer of the week. What are and how the IRS ranks work

O Government announced a descent from the IRS to the sixth step, which will be felt by taxpayers at the end of this year – in particular, already november salary - but how do the IRS ranks work anyway? 

“ The iRS classes are the tax income intervals to which tax rates apply. The higher the income, the higher the rate to be applied“, you can read on the blog Jump from Santander. 

Why, “for each IRS step corresponds to a tax income range and two tax rates, except for the latter (normal rate and average rate). Currently, there are nine IRS ranks”.

How do IRS echelons work?

“ On the basis of the delivery of the IRS declaration, the Tax and Customs Authority (AT) shall sum up all gross income received during the previous year and subtract the specific deduction to obtain the taxable income. Then, it is inserted into an IRS step, in order to determine the rate of IRS that will be applied to income”, can be read on the same portal. 

However, you should know that “taxable income is not all subject to the same rate of IRS”, since “in each IRS step, except in the last, there is a normal rate and an average rate”.

For example, “in the case of incomes of 2025, taxpayers with tax returns exceeding EUR 8,059 (the first step limit) are covered by more than one tax”.

According to the same portal, to find out the rate to be applied to it must divide the taxable income into two parts:

• part 1: “equal to the limit of the highest step in which the yield fully fits, to which the average rate of that step applies”;
• part 2: “equal to the surplus (difference between tax income and the first part), to which the normal rate of the next step applies”.

Accounts made... an example

“ After the specific deduction, João obtained a tax return of 18,000 euros. In this example, we use the applicable rates on the continent. In order to calculate the IRS rates, João has to understand which step fits entirely in his tax income. In this case, it is the third step, ranging from EUR 12.160 to EUR 17,233.
Tax income: €18.000
IRS scales:
– 3rd step: between €12.160 and €17.233
Average rate: 15.982%
– 4th step (for surplus value) 24.4% (normal rate)
Step-by-step calculation:
part 1 of the income (up to the 3rd step):
17,233 × 15,982% = 2,754,18€
2nd part of income (surplus entering the 4th step):
18.000€ – 17.233€ = 767€
767€ × 24.4% = 187,15€
Total collection:
2.754,18€ + 187,15€ = 2.941,33€”. 

Government calls for urgency in Parliament to approve further descent of the IRS

The government's initiative to reduce the IRS by the sixth step has already entered Parliament, with a request for urgency for scheduling and voting at the same time in general, specialty and overall final vote.

The request, addressed by the Minister of Parliamentary Affairs, Carlos Abreu Amorim, to the President of the Assembly of the Republic, José Aguiar Branco, is due to the “relevance” of the initiative and also covers the proposal for a law extending the temporary and exceptional amendment of the minimum limits of the unitary rates of the Tax on Petroleum and Energy Products (ISP).

According to the letter, which dates from 21 September, the request is for the adoption of urgent procedure, namely the urgency of scheduling and voting simultaneously in the three phases (generality, specialty and overall final vote).

It is also pointed out that at the next Leaders Conference, the government will schedule.

The Prime Minister confirmed in a statement to the country that the Council of Ministers approved the bill to lower the IRS rates from 1st to 6th step, which will fall between 0.3 and 0.5 points.