Following the approval by the Portuguese Parliament, on 9 October 2026, of Bill No. 108/XVII/2, authorising the Government to reduce the general Personal Income Tax (IRS) rates applicable to the first six taxable income brackets, with effect from 1 January 2026, exceptional adjustments have been introduced to the Portuguese withholding tax tables for November 2026.
Pending the publication of the legislation implementing the reduction in the general Personal Income Tax rates, the Minister of State and Finance approved, through Ministerial Order No. 12523-A/2026 of 14 October, temporary amendments to the withholding tax tables currently in force in Portugal.
In the Azores, the same 50% reduction is provided for under Order No. 12610-A/2026 of 15 October, while in Madeira it is established by Order No. 434/2026 of 29 October, issued by the Regional Secretariat for Finance and published in the JORAM (Official Gazette of the Autonomous Region of Madeira).
1. Scope of application
The approved adjustments apply exclusively to employment income (Category A) and pension income (Category H) paid or made available between 1 and 30 November 2026, to taxpayers who are tax residents in mainland Portugal.
The measure also covers Christmas bonuses, if they are paid or made available during this period.
2. Exceptional reduction in withholding tax
During November 2026, the amount of Personal Income Tax (IRS) withheld at source will correspond to 50% of the amount that would normally result from applying the withholding tax tables in force for 2026, approved by Ministerial Order No. 233-A/2026 of 6 January.
In practice, this reduction represents a significant decrease in the amount of tax withheld monthly by employers and pension-paying entities, temporarily allowing taxpayers to benefit from higher net income.
However, the reduction will not apply to monthly income exceeding the upper threshold of the penultimate withholding tax bracket, corresponding to approximately €20,000 for Category A income and €18,000 for Category H income. In these cases, withholding tax will continue to be calculated in accordance with the usual applicable tables.
3. Return to the usual withholding tax tables in December
The approved reduction is strictly temporary and applies exclusively during November 2026.
Accordingly, as from 1 December 2026, the withholding tax tables currently in force in Portugal will once again apply, without the exceptional adjustments introduced by Ministerial Order No. 12523-A/2026.
4. Adjustment of withholding tax
The Ministerial Order also provides for an adjustment mechanism for paying entities which, for whatever reason, did not apply the approved adjustments during November.
In such circumstances, they may proceed with the corresponding correction through the withholding tax deductions to be made by the end of December 2026.
5. Final considerations
The exceptional reduction in withholding tax for November represents a temporary adjustment to the taxation of employment and pension income, bringing forward, in terms of cash flow, part of the effects of the reduction in the general Personal Income Tax rates approved by the Portuguese Parliament.
It should nevertheless be emphasised that a reduction in withholding tax does not necessarily mean a definitive reduction in the tax ultimately payable. Withholding tax constitutes an advance payment on account of the annual Personal Income Tax liability. The final tax due will therefore be determined by reference to the income earned, the applicable deductions and the taxpayer’s other individual tax circumstances.
In this context, it will be particularly important to monitor the publication of the legislation implementing the legislative authorisation approved by the Portuguese Parliament, as well as its implications for the final assessment of Personal Income Tax for the 2026 tax year.
Belzuz Abogados, S.L.P.‘s Tax Law Department closely monitors developments in Portuguese tax legislation, providing specialised legal and tax advice and tailored solutions to meet the needs of both businesses and individuals.
Should you require any further clarification or wish to assess the impact of these changes on your specific tax position in Portugal, our team will be pleased to assist you.