The Portuguese government plans to slash taxes for people under the age of 35. This is an attempt to prevent young Portuguese people from emigrating and tempt youthful foreigners to its shores.
The centre-right minority government of Luís Montenegro’s proposed plan would mean a reduction of income tax for those aged 35 and under. It will be part of Portugal’s budget for 2025, a vote will be held on its contents on 31st October.
Currently, people earning the average salary of €20,000 (£16,700) pay a 26% rate of tax on the money that they earn over €16,500.
Under the new plans, those aged 35 and under that earn up to €28,000 (£23,000), in the first year, they would be 100% exempt from paying tax. After that, the tax would progressively increase. It would drop to 75% in the second to fourth year, 50% between the fifth and seventh year, and then 25% in the eighth and tenth year.
This proposal is replacing a previous one to 15% cap on income tax, which would have cost €1bn.
According to the government, this new tax exemption followed by progressive rate could assist between 350,000 to 400,000 young people. In Portugal, the average annual salary is about €20,000. While income tax rates range from 13 – 48%.
The new measures are intended to tackle a brain drain of young people. According to Emigration Observatory, about 850,000 young people (30% of those between 15 and 39) have left Portugal at some point. Many site low wages and tall housing costs as their reasoning.
It is estimated that this proposal will cost €645 million in 2025. But youth minister Margarida Balseiro Lopes told the Portuguese media that it was worth the financial cost, “the cost to the country of having the most qualified generation ever, fleeing and leaving and emigrating, is incomparably higher than the financial cost of the measure” [Source: BBC].
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The impact on young emigrants
The proposal will also apply to young people looking to move to Portugal. Emigration has been a driving force in Portugal, especially in Lisbon, Porto and the Algarve. Lisbon has fashioned itself as an international tech hub, with the likes of Microsoft, Amazon and Google all having offices there. In 2023, Lisbon was named the Capital of Innovation.
In the last year, Portugal ended its non-habitual resident tax scheme and the real estate route of the golden visa. However, it also launched the D8, 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.
Portugal’s digital nomad visa
A digital nomad visa is a fantastic route to exploring a country without having to stop working. It promises emails followed by sunbathes on the golden sands of the Algarve, phone calls followed by tours of Lisbon’s greatest galleries, it gives way to a whole 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:
- The visa allows you to stay in Portugal for up to one year and can be renewed.
- You will need to have a fully remote position for an overseas company or be a freelancer.
- To apply, you’ll need to be from a non-EU country. Post-Brexit, that includes Britons.
- You will need a monthly salary of at least €3,040 to qualify.
- If you would like to, you can bring a spouse and/or dependents, but you must be able to demonstrate a higher monthly income. An additional €254 per underage family member and €380 per adult.
For more information on visas in Portugal, head here.
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