Following the approval of the 2026 Portuguese State Budget, several changes were introduced to the Personal Income Tax (IRS) brackets and withholding tax rules.
These changes have raised questions among many taxpayers regarding the tax bracket they now fall into and how the new rules may affect the amount of tax they will ultimately pay.
In this article, we explain the main changes and what you need to consider.
Portuguese IRS tax Brackets for 2026: What has Changed?
In 2026, the first IRS withholding tax threshold for employees begins at a gross monthly income of €920.
Significant changes also apply to the annual IRS assessment for income earned during 2026. These include:
- The update of the Portuguese IRS tax brackets;
- An increase in the Minimum Existence Threshold (Mínimo de Existência) to €12,880;
- The adjustment of the Minimum Existence Threshold in line with the increase in the National Minimum Wage (Remuneração Mínima Mensal Garantida – RMMG), which rose from €870 to €920 in 2026.
For pensioners, the withholding tax also increased to 920 € per month, compared with the previous threshold of 870 €.
In practical terms, both employees and pensioners are exempt from IRS withholding tax if their gross monthly income is below 920 €.
The updated IRS tax brackets for 2026 are shown below.
| Taxable income | Tax Bracket | Mininum Tax Rate | Average Tax Rate |
| Up to 8.342€ | 1º | 12,50% | 12,50% |
| From 8.342€ to 12.587€ | 2º | 15,70% | 15,70% |
| From 12.587€ to 17.838€ | 3º | 21,20% | 21,20% |
| From 17.838€ to 23.089€ | 4º | 24,10% | 24,10% |
| From to 23.089€ to 29.397€ | 5º | 31,10% | 31,10% |
| From 29.397€ to 43.090€ | 6º | 34,90% | 34,90% |
| From 43.090€ to 46.566€ | 7º | 43,10% | 43,10% |
| From 46.566€ to 86.634€ | 8º | 44,60% | 44,60% |
| Above 86.634€ | 9º | 48,00% | 48,00% |
Understanding the Minimun Eistence Threshold
It is also important to understand what the Minimum Existence Threshold is and how it affects Portuguese income tax.
Under Article 70 of the Portuguese Personal Income Tax Code (Código do IRS), the Minimum Existence Threshold represents the minimum level of annual income that cannot be reduced through the payment of IRS.
The threshold is calculated as 1,5 times the Social Support Index (IAS) multiplied by 14 months.
Its purpose is to ensure that taxpayers whose income is only sufficient to meet their basic living needs are not subject to personal income tax.
In other words, IRS is only payable once a taxpayer’s income exceeds this minimum protected amount.
For 2026, the Minimum Existence Threshold is set at €12,880 per year, reflecting the increase in the National Minimum Wage to €920 per month.
As in previous years, this amount may be updated in the future in line with changes to the Social Support Index (IAS).
Whenever significant tax changes are introduced, it is natural for taxpayers to have questions about how the new rules affect their individual circumstances.
Understanding your applicable tax bracket, withholding tax obligations and the impact of the Minimum Existence Threshold can help you plan your finances more effectively and avoid unexpected tax liabilities.
If you have any questions regarding the 2026 Portuguese IRS tax brackets or would like personalised advice, speak to a Certified Accountant, who can help you understand how the latest changes apply to your specific situation.