Flash News NA 2025/02/05

Portugal - Tax Incentive for Salary Valuation: What Does It Mean for Companies?

A new tax incentive for companies that increase salaries. The measure, introduced in the General State Budget for 2025, represents a strategic opportunity to optimize costs and improve competitiveness, directly impacting Human Resources management and payroll processing.

This measure aims to encourage companies to increase their employees' salaries by offering significant tax benefits that can be an excellent opportunity to adjust salary policies more advantageously.

Salary increases represented a financial challenge for many companies, with direct implications on social costs. With the introduction of this tax incentive, companies will be able to fully deduct salary increases in the Corporate Income Tax (IRC). Additionally, companies that choose to increase salaries in more stable contracts, such as permanent contracts, will benefit from an increase in deductible expenses, contributing to greater tax efficiency.

Main Benefits for Companies:

• Tax Efficiency: The deduction of salary increases in the Corporate Income Tax (IRC) represents a significant reduction in the tax burden.

• Attraction and Retention of Talent: In competitive markets, salary increases can be an essential tool for retaining employees and hiring new talent. The tax incentive offers an opportunity for companies to adjust their salary levels more competitively without compromising financial sustainability.

• Promotion of Job Stability: This measure can contribute to reducing staff turnover by encouraging companies to opt for longer-term contracts. Transforming temporary contracts into permanent contracts can provide greater job stability, promoting medium and long-term employee commitment and the continuity of the company's operations.

For Human Resources and payroll processing professionals, the implementation of this measure requires careful planning. Companies must evaluate the impact of salary increases and ensure that adjustments are sustainable in the long term. Additionally, it is essential that the modifications are correctly reflected in the payrolls, ensuring that the increases are recorded and that the tax deduction is applied appropriately.

It is also important to communicate salary changes clearly and effectively to employees to ensure they understand the advantages provided by the tax incentive and its impact on their working conditions.

We closely monitor fiscal and labour changes, ensuring that companies can take full advantage of these new opportunities. Our experience in payroll management and human resources optimization allows us to support companies in adapting to these changes, ensuring compliance and correctness of procedures.