Portugal approves income tax cuts for three million families

The government has approved reductions to personal income tax rates and new regulations for obtaining Portuguese nationality.

By Sidsel Senius , in News, Economy · 30 Oct 2026, 18:03 · 0 Comments

Credits: Unsplash; Author: Jakub Zerdzicki;

In a press release issued by the Council of Ministers on 29 October, the government announced that it had approved a reduction in personal income tax rates, which will benefit approximately three million families.

The decree-law reduces the IRS rates applicable to the first six income brackets, with retroactive effect from 1 January 2026.

The measure will reduce taxes on income from work and pensions, allowing Portuguese citizens to increase their disposable income.

“That’s an additional 400 million euros in people’s pockets,” stated the Minister of the Presidency, António Leitão Amaro, during the Council of Ministers briefing.

Leitão Amaro recalled that this is the sixth reduction in personal income tax since April 2024, “continuing the strategy of valuing work and returning to families the results of economic growth and responsible management of public accounts.”

This measure is “a reinforcement of the purchasing power of families, at a time when the Portuguese are feeling the increase in the cost of living, particularly through fuel prices,” the Minister of the Presidency said.

According to the government official, the benefit is mainly concentrated “on the incomes of the middle class, although taxpayers with higher incomes can also benefit,” since their income also falls within the lower tax brackets.

As reported by Jornal Económico, the income tax reductions will also affect withholding tax on salaries and pensions in November 2026.

A government order issued on 13 October establishes that withholding tax for November will be reduced by 50% for most salaries and pensions.

The legislation, authorised by Parliament on 22 October, sets the new tax rates for the first six income brackets at 12.2%, 15.2%, 20.7%, 23.6%, 30.6% and 34.6%, respectively.

New requirements for Portuguese nationality

The Council of Ministers also approved the decree-law regulating the new Nationality Law, specifying the new requirements for the granting and acquisition of Portuguese nationality, with changes also made to speed up applications and reduce delays.

The legislation establishes residency requirements for obtaining nationality, requiring seven years of legal residence for nationals of the PALOP countries and citizens of the European Union, and ten years for nationals of other countries.

For children born in Portugal to foreign parents, original nationality depends on at least one parent having completed five years of legal residence at the time of birth.

According to Leitão Amaro, “The main pillars of this reform were decided in the nationality law; it was now up to us to approve the regulations for its full implementation, and that is what we did, while also seeking to simplify some procedural aspects to make it less bureaucratic.”

“We have made the granting of Portuguese citizenship more demanding in terms of demonstrating an effective connection,” the minister said.

The decree also sets out the rules for tests on the Portuguese language, culture, history and institutions. It also explains the financial requirements applicants must meet and how they must formally declare their commitment to the principles of democracy and the rule of law.