{"id":21792,"date":"2026-08-31T09:18:45","date_gmt":"2026-08-31T08:18:45","guid":{"rendered":"https:\/\/belzuz.com\/?post_type=publicacion&p=21792"},"modified":"2026-08-31T09:33:02","modified_gmt":"2026-08-31T08:33:02","slug":"youth-irs-start-of-tax-benefit-period","status":"publish","type":"publicacion","link":"https:\/\/belzuz.com\/en\/publicacion\/youth-irs-start-of-tax-benefit-period\/","title":{"rendered":"Youth IRS: Portuguese Tax Authority Clarifies Start of Tax Benefit Period"},"content":{"rendered":"

The Portuguese Tax and Customs Authority (\u201cAT\u201d), in Binding Information relating to Case No. 29668<\/strong>, clarified how the relevant years are calculated for the Youth IRS regime under Article 12-B of the Portuguese Personal Income Tax Code (\u201cPIT Code\u201d), where the taxpayer elects the regime after beginning to earn employment income.<\/strong><\/p>\n

The issue is especially relevant where there are years without Category A or B income<\/strong>, periods in which the taxpayer was treated as a dependent, or joint tax returns filed with a spouse.<\/p>\n

What is at issue?<\/h2>\n

The Youth IRS regime<\/strong> provides for a partial tax exemption on Category A and B income for a maximum period of 10 years of income<\/strong>, provided that the statutory requirements are met, including the age limit and the requirement that the taxpayer is not considered a dependent.<\/p>\n

Currently, the exemption amounts to 100%<\/strong> in the first year of income; 75%<\/strong> from the second to the fourth year; 50%<\/strong> from the fifth to the seventh year; and 25%<\/strong> from the eighth to the tenth year.<\/p>\n

Since the regime is subject to an election in the annual PIT return<\/strong>, it is necessary to identify the first relevant year to determine the applicable exemption percentage.<\/p>\n

The case analyzed by the tax authority<\/h2>\n

In the case under review, the taxpayer was considered a dependent in 2020 and 2021; filed joint tax returns between 2022 and 2024, without any personal Category A or B income; earned Category A income for the first time in 2025 as an independent taxpayer; and intended to opt for the Youth IRS regime<\/strong> only in 2026.<\/p>\n

The question was whether 2026 could be considered the first year of the benefit, with a 100% exemption, given the absence of relevant income in previous years and the taxpayer’s status as a dependent during the first years.<\/p>\n

The Tax Authority’s response<\/h2>\n

The AT concluded that 2026 constitutes the second relevant year for the purposes of the Youth IRS regime<\/strong>, and not the first.<\/p>\n

This conclusion results from the combined application of Article 12-B of the PIT Code and the transitional regime provided for in Article 116 of Law No. 45-A\/2024 of 31 December.<\/p>\n

Article 12-B provides that the exemption applies, upon election, during the first 10 years of income, establishing that:<\/p>\n

\u201cIt does not apply in years in which no Category A or B income is earned, resuming its application for the remaining years of income.\u201d<\/p>\n

Furthermore, for the purposes of applying the regime, Article 116 of Law No. 45-A\/2024 provides that taxpayers are classified according to the percentage corresponding to the year following the number of years of Category A or B income already elapsed, with the years in which they were considered dependents not being taken into account for these purposes<\/strong>.<\/p>\n

In the case analyzed:<\/p>\n

2020 and 2021 \u2013<\/strong> dependent \u2192 do not count<\/strong>;<\/p>\n

2022 to 2024 \u2013<\/strong> no Category A or B income \u2192 do not trigger the application of the exemption<\/strong>;<\/p>\n

2025 \u2013<\/strong> first year with Category A income as an independent taxpayer \u2192 1st relevant year<\/strong>;<\/p>\n

2026 \u2013<\/strong> second year of income \u2192 2nd relevant year<\/strong>.<\/p>\n

Therefore, if the taxpayer opts for the Youth IRS regime<\/strong> in 2026, the taxpayer will benefit from the exemption applicable to the second year \u201475%\u2014<\/strong>, rather than the 100% exemption.<\/p>\n

The election for the Youth IRS regime does not restart the calculation<\/h2>\n

The Binding Information confirms that opting for the Youth IRS regime<\/strong> in a later year does not make that year the first year of the benefit.<\/p>\n

Therefore, a taxpayer who started working in 2025 and only elects to apply the Youth IRS regime<\/strong> in 2026 cannot, for this reason, treat 2026 as their \u201cfirst year\u201d for the purposes of applying the 100% exemption.<\/p>\n

What happens in years in which no income is earned?<\/h2>\n

Binding Information also clarifies an important practical issue. Years in which no Category A or B income is earned do not consume a year of entitlement<\/strong>.<\/p>\n

During those years, the exemption simply does not apply, and its application subsequently resumes for the remaining years in which income is earned, until the taxpayer completes the 10 years of benefit, without exceeding the statutory age limit.<\/p>\n

This distinction is particularly important, since the year of income relevant for determining the taxpayer’s position within the Youth IRS sequence<\/strong> is not necessarily the same as a year in which the exemption is enjoyed.<\/p>\n

What if the tax return is filed jointly with the spouse?<\/h2>\n

The fact that a taxpayer files a joint tax return with their spouse does not mean that the taxpayer should be considered a dependent for these purposes.<\/p>\n

For the purposes of Article 12-B, what matters is the taxpayer’s status as a taxpayer and, in the specific case, whether Category A or B income relevant for the calculation was earned.<\/p>\n

Accordingly, the filing of joint tax returns between 2022 and 2024, without personal Category A or B income, does not alter the AT’s conclusion.<\/p>\n

Our experience in providing tax advice on Youth IRS matters<\/h2>\n

Based on our experience in providing tax advice in Youth IRS matters, this is one of the issues that most frequently raises questions regarding the practical application of the regime.<\/strong><\/p>\n

The determination of the \u201cfirst year\u201d should not be made solely by reference to the year in which the taxpayer decides to elect for the benefit.<\/p>\n

It is necessary to review the taxpayer’s tax history<\/strong>, identifying, among other aspects, the years in which the taxpayer was considered a dependent; the first years in which Category A and\/or B income was earned; any years without employment income; the taxpayer’s age in each tax year; the years in which the Youth IRS regime<\/strong> was actually elected; and any tax regimes incompatible with the application of the benefit.<\/p>\n

This analysis is particularly important because an error in determining the relevant year may have a direct impact on the applicable exemption percentage and, consequently, on the tax payable.<\/p>\n

The AT concludes that:<\/p>\n