The Personal Income Tax for Young People (in portuguese, “IRS Jovem”) has undergone significant changes which came into force on January 1st 2025. Let’s take a look at how the new regime works:
Who is the new Personal Income Tax for Young People aimed at?
Young workers, who are not considered dependents, up to and including the age of 35, regardless of their level of education
What are the benefits?
This scheme allows income earned by young people to be exempt from or reduced by the Personal Income Tax.
What income is exempt?
The exemption applies to both employment income (category A) and self-employment income (category B), for a maximum period of 10 years. This period begins in the first year in which the young person submits their tax return without being considered a dependent. Subsequently, subsequent years are counted, except for those in which they do not receive any income from category A or B of the Personal Income Tax.
What are the requirements to benefit from the scheme?
The young person must cumulatively fulfill the following conditions:
- Be up to 35 years old, regardless of education level;
- You can’t be a dependent in terms of the Personal Income Tax and you have to fill in an individual tax return;
- Have your tax situation regularized.
Are there any situations that exclude the application of this regime?
Yes. If you are benefiting or have previously benefited from the non-habitual resident regime or the tax incentive for scientific research and innovation, you cannot have opted for taxation under the terms of article 12-A of the Portuguese Personal Income Tax Law (“Programa Regressar”).
What are the exemption limits?
This exemption is limited to 55 times the value of the IAS, €28,737.50:
- 100% in the 1st year of earning income;
- 75% from 2nd to 4th year;
- 50% from 5th to 7th year;
- 25% from 8th to 10th year.
If the income is higher, the beneficiary may have total or partial exemption up to the limit set by law, and the remainder will be taxed at the general Personal Income Tax rates.
How can I benefit from this regime?
The beneficiary will have to indicate that they wish to benefit from Article 12-B of the Portuguese Personal Income Tax Law in their annual tax return, which is submitted between April and June of the following year.
However, the beneficiary can ask for the Personal Income Tax for Young People to have an impact on their salary from January onwards, on a monthly basis, by reducing the withholding tax; to do this, you will have to ask your employer to apply the benefit, under article 99-F of the Portuguese Personal Income Tax Law, and indicate the year in which you started working, not being dependent. Here, the employer will apply the withholding tax rate that would have been due on all income, including exempt income, but only on the part of the income that is not exempt, depending on the year to which the exemption refers.
