Proposed State Budget Law for 2027
PIT
Check PwC’s analysis of the 2027 State Budget, focusing on Personal Income Tax (IRS). Stay informed about all the changes. When in doubt, PwC explains.
New general and solidarity rate tables, a new housing incentive, an update of the minimum subsistence level and, for 2027, the renewal of the exemption for bonuses of up to 6% of annual base remuneration and of the “former residents” regime.
General rates
Proposal to update of the limits of the progressive Personal Income Tax (PIT) brackets by 3.88%, through the automatic mechanism provided by law.
| PIT rates for 2027 | ||
|---|---|---|
| Taxable Income (€) | Rate | Deduction (€) |
| Up to 8,666 | 12.20% |
0.00 |
| Above 8,666 up to 13,075 | 15.20% |
259.98 |
| Above 13,075 up to 18,530 | 20.70% |
979.06 |
| Above 18,530 up to 23,985 | 23.60% |
1,516.50 |
| Above 23,985 up to 30,538 | 30.60% |
3,195.52 |
| Above 30,538 up to 44,762 | 34.60% |
4,417.02 |
| Above 44,762 up to 48,373 | 43.10% |
8,221.88 |
| Above 48,373 up to 89,995 | 44.60% |
8,947.07 |
| Above 89,995 | 48.00% |
12,007.13 |
Additional solidarity rate
Proposal to update of the brackets of the additional solidarity rate.
| Taxable Income (€) | Standard rate (A) |
|---|---|
| Above 89,995 up to 250,000 | 2.5% |
| Above 250,000 | 5.0% |
Tax incentive for employee housing
Employment income in kind arising from the use of a permanent residence in Portugal provided by the employer, for the period from 1 January 2027 to 31 December 2027, becomes exempt from PIT and from Social Security contributions, under the Law Proposal.
The exemption applies up to the rent limits set out under the Rental Support Programme (“Programa de Apoio ao Arrendamento”), even if the properties are not included in that programme, and does not cover persons who hold, directly or indirectly, a stake of at least 10% of the share capital or voting rights of the employer.
Minimum subsistence level
The reference value for the minimum subsistence level becomes the higher of € 13,580 (previously € 12,880) and 1.5 × 14 × the Social Support Index (IAS).
“Former residents” regime
The 50% exclusion from taxation of employment income and business and professional income under the “former residents” regime shall be extended to taxpayers who become tax resident in 2027. This requires that they were not resident in Portugal in any of the five preceding years and were resident at some time before that period. The exclusion applies for five years.
As for those who became tax resident in 2024 or later, the exclusion is subject to a limit of € 250,000.
Productivity bonuses, performance bonuses, profit-sharing and year-end bonuses
The benefit relating to productivity bonuses, performance bonuses, profit-sharing and year-end bonuses, paid voluntarily and without regularity, shall be extended.
This benefit provides for an exemption from PIT, up to a limit of 6% of the annual base remuneration, on amounts paid or made available by the employer in 2027 to employees or members of statutory bodies as productivity bonuses, performance bonuses, profit-sharing and year-end bonuses, provided they are paid voluntarily and without regularity.
These amounts are also excluded from the Social Security contribution base.
This exemption only applies if the employer, in 2027, has implemented a salary increase eligible for the purposes of the tax incentive for salary enhancement.
Where applicable, explicit mention of compliance with these conditions must be included in the annual income statement provided to the employee by the employer.
The withholding tax rate to be applied to these amounts is the one corresponding to the monthly employment remuneration in the month in which the payment is made or the amount is made available.
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