Flash News NA 4/11/2024

Portugal_Youth PIT – State Budget 2025

The Portuguese government managed to reach an understanding to make the State Budget for 2025 viable, but now it remains to be defined which proposed changes will be approved in the specialty voting.
In this article we will focus on the Youth PIT measure. This measure is intended to be an improved and broader version when compared to the legislation introduced by previous budgets in this matter.

Until now, the focus of this type of measures was to prevent the departure of young people with high levels of academic training to other countries, since the level of educational qualifications was the essential factor in taking advantage of this tax benefit.

In the 2025 state budget, the scope of this measure gains another magnitude, since the level of education no longer conditions access to this benefit for all young people aged 35 or under.

We better understand the practical effects of the Youth PIT that will be introduced by the 2025 State Budget we present the following example: let's assume that a young person born in the year 2000 and another taxpayer who will not be covered by this measure both earn a gross income (that is, before taxes) of €1,000.00 (one thousand euros).

To simplify the calculations, deductions from PIT collection greater than the limit for general and family expenses, the current €250.00, are not being considered for any of the taxpayers.

In 2025 the general PIT regime will apply to a taxpayer who is not covered by this measure:

Monthly Income → €1,000.00

Annual Income → €14,000.00 (14 months)

Annual Personal income tax to pay → €845.00

With the Youth PIT measure approved, which is part of the State Budget Proposal for 2025, young people born in the year 2000 will not pay PIT, which will translate into an increase of €845.00 in their annual disposable income:

With the approval of this measure the government intends to encourage younger people to establish their tax residence in Portugal, making the country more attractive in this regard for those taking their first steps into the world of work.

At Nominaurea we have specialized teams that can advise you on these and other tax matters. We look forward to hearing from you.