Flash News NA 03/14/2025
Key Changes in Payroll Processing in Portugal in 2025
The year 2025 brought several tax and labour changes that directly impact payroll processing for companies in Portugal.
Among the most significant changes are the increase in the national minimum wage, the update of meal allowance tax exemption limits, the extension of the IRS Jovem (Youth IRS) scheme, and the modification of withholding tax rates on overtime work.
To ensure compliance with these new legal provisions, partnering with specialized companies such as NOMINAUREA is essential.
1. Increase in the National Minimum Wage
As of January 1, 2025, the national minimum wage has been updated to:
• Mainland Portugal: €870.00
• Autonomous Region of Madeira: €915.00
• Autonomous Region of the Azores: €913.50
This measure aims to improve the living conditions of low-wage workers and promote fair pay.
2. Update of Meal Allowance Tax Exemption Limits
The meal allowance is subject to IRS withholding and Social Security contributions when it exceeds certain exemption limits. In 2025, these limits have been updated to:
• Paid in cash: €6.00 per day (unchanged)
• Paid via meal card: €10.20 per day
This change encourages companies to opt for meal card payments, offering tax benefits for both employers and employees.
3. Extension of the IRS Jovem (Youth IRS) Scheme
The IRS Jovem scheme has been extended to cover a period of ten years, either consecutive or non-consecutive, starting from the moment a young worker leaves their parents’ household and files their own IRS tax return.
The applicable tax exemptions are:
• 100% in the first year of professional activity
• 75% between the second and fourth years
• 50% between the fifth and seventh years
• 25% between the eighth and tenth years
This scheme applies to all young people up to 35 years old, regardless of their educational qualifications, with an exemption limit of 55 times the IAS value, approximately €28,700.00.
4. Changes to Withholding Tax on Overtime Work
The withholding tax rate on overtime work has been reduced to 50% of the standard withholding tax rate applied to the employee’s monthly salary for the month in which the overtime is paid or made available.
Previously, this 50% reduction was only applied from the 101st hour of overtime work.
Conclusion
The changes introduced by the 2025 State Budget require companies to carefully adapt to ensure compliance with the new legal provisions regarding payroll processing.
In this context, partnering with specialized companies like NOMINAUREA is crucial to ensure regulatory compliance and efficiency in human resources and payroll management.
With extensive experience in accounting, tax consultancy, and administrative human resource management, NOMINAUREA stands out as a reliable partner, ready to support companies in navigating the complexities of legal and tax obligations.
