You'll feel relief from the IRS already on this month's salary. Know what to count on

Jhas been published in Diário da República o decree-law amending the IRS Code to reduce the rates of the first six steps on incomes of 2026, and this degravation will be reflected in retentions at the source of wages and pensions in november.

What is this about? 

Approved on 29 October in the Council of Ministers and published today in Diário da República, Decree-Law No 212/2026 has retroactive effects on January, so in order to try to translate the decline of IRS rates in the first six echelons since the beginning of the year, in november the retentions at the source will have a “discount” of 50%.

In December the normal tables will be applied again – those that have been in force since january -, not applying at that time the 50% cut decided for november.

The new IRS rates

According to the published diploma, the rate of IRS of the 1st step goes from 12.50% to 12.20%, the rate of the 2nd step falls from 15.70% to 15.20%, the rate of the 3rd step falls from 21.20% to 20.70% and the rate of the 4th step falls from 24.10% to 23.60%.

On the other hand, the rate of the 5th share of income goes from 31.10% to 30.60% and, in the 6th step, falls from 34.90% to 34.60%.

In the following classes, the rates remain the same: 43.10% in the 7th, 44.6% in the 8th and 48.0% in the 9th.

However, as the text of the order reads, “because of the progressive nature of the tax, [degravation] benefits not only taxpayers whose income falls within the categories covered, but also taxpayers of the higher classes, in relation to the share of income subject to the now reduced rates”.

This amendment to the IRS Code is made through a decree-law because the executive of Luís Montenegro (PSD/CDS-PP), when he presented to parliament the bill proposal to lower the rates from 1st to 6th echelons between 0.3 and 0.5 percentage points, submitted a request for authorization to be the government itself to adjust the legislation, rather than a direct change by law.

The legal authorisation allowed the executive “to change Article 68(1) of the IRS Code by reducing the normal rates applicable to the first six tax income steps to 12.20%, 15.20%, 20.70%, 23.60%, 30.60% and 34.60% respectively, and adjusting the corresponding average rates”.

Before doing so, the Minister of State and Finance, Joaquim Miranda Sarmento, signed on October 13 an order that adjusts the retention tables at the November source reducing the amount of the IRS collection of this month by 50% for the general wages and pensions.

What happens to the salary this month?

The mechanism of retentions at source adapts the monthly collection to the interim relief, concentrating the degravation in a single month, both the monthly salary or pension, and the Christmas allowance, which is subject to withholding at source independently from wages or retirement.

The order also provides for the exception of the 50% cut in retention some higher wages and pensions, leaving out those who have incomes exceeding the upper limit of the penultimate step of the retention tables – values above EUR 20 thousand monthly (in the case of workers on behalf of others) or above about EUR 18 thousand (in the case of pensioners).

Withdrawal rates do not correspond directly to income levels rates, acting as a regular tax collection mechanism, for taxpayers to pay IRS in a fractional manner over the 12 months.

The State gets the value on its side and, at the time of the final calculation of the IRS on all incomes of 2026, the tax settles the accounts, knowing whether the person receives a refund, whether he still has to deliver any more amount to the tax or whether there is nothing to deliver or receive.