Portugal is gearing up to significantly lower taxes for individuals aged 35 and below. The initiative aims to retain young Portuguese talent and attract young professionals globally..
Under the proposal by Luis Montenegro’s government, younger workers will see a decrease in income tax. The measure will be debated during the 2025 budget vote on October 31st.
Presently, individuals earning Portugal’s average income of €20,000 (£16,700) are taxed at 26% on earnings exceeding €16,500.
The plans would see those 35 and under, with annual earnings reaching €28,000 (£23,000), receiving a 100% tax exemption during the first year. Afterwards, tax rates would gradually increase. Exemptions would decrease to 75% from years two to four, 50% from years five to seven, and 25% from years eight to ten.
The scheme succeeds a previous suggestion to have a standardized 15% income tax, at a cost of €1bn.
The government states the tax exemption followed by progressive rate could assist 350,000 – 400,000 younger people. In Portugal, income tax rates range from 13 – 48%.
This new tax relief seeks to address the emigration of young people. Emigration Observatory claims 850,000 young people have left Portugal due to low wages and housing costs.
The proposal is estimated to require €645 million in 2025. Youth minister Margarida Balseiro Lopes stated in Portuguese media that the decision’s cost is justified “the monetary price and costs of the best qualified generation emigrating and leaving is incomparable higher than the measures.” [Source: BBC].
How this affects young people moving abroad.
This is planned to accommodate young people who wish to move into Portugal. An influx of workers has been important, especially those in Lisbon, Porto and the Algarve. Lisbon has become an international tech hub, with the likes of Microsoft, Amazon and Google all having presences. In 2023, it was recognized as the Capital of Innovation.
Portugal discontinued its non-habitual resident tax and real estate golden visa, but the D8 was released, the digital nomad visa. This enables those from non-EU countries to work remotely for a foreign-based company while living in Portugal. The Portugal News reports that interest in the D8 visa has steadily increased in 2024.
The Digital Nomad Visa
If you’re interested in working remotely in Portugal, it can offer emails followed by sunbathes on the golden sands of the Algarve. The opportunity to tour Lisbon’s greatest galleries, it gives way to a new way to get the balance between work and leisure right.
If you’re interested in Portugal’s D8 visa, here’s a rundown of the basics:
- You can stay in Portugal for up to one year and can be renewed.
- You can be a freelancer or have a fully remote position for an overseas company.
- You’ll need to be from a non-EU country.
- You need a monthly salary of at least €3,040 to qualify.
- You can bring a spouse and/or dependents, but the monthly income increases higher. An additional €254 per underage family member and €380 per adult.
For more information on visas in Portugal, head here.
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