The State Budget proposal for 2025 was submitted last Thursday, 10 October. This proposal presents the new IRS Jovem scheme, which offers a partial IRS exemption for workers up to the age of 35, including both Portuguese and foreign citizens, promoting the country as an appealing destination for those looking to start or develop their careers.
The scheme applies to income from categories A (employee work) and B (self-employment) during the first 10 years of earning the income. It is not necessary to have completed a cycle of studies to benefit from the exemption, making it easier to integrate into the Portuguese labour market. This measure aims to retain and attract young workers.
Details of the proposal
The ‘IRS Jovem’ scheme offers a partial IRS exemption applicable to income in categories A and B for tax residents in Portugal who are up to 35 years old, both Portuguese and foreign, as long as they are not considered dependents in a household.
This exemption can be enjoyed during the first 10 years of earning income, regardless of whether they have completed any cycle of studies.
The exemption applies for the first year in which the taxpayer opts for the scheme and for the following nine years, provided they are within the age limit. In years in which there is no income from categories A or B, the exemption does not apply but can be resumed in subsequent years until the total 10 years of benefit is reached, always respecting the 35-year age limit.
The amount of the exemption is calculated as follows, with a limit of 55 times the IAS per year:
- 100% in the first year;
- 75% between the 2nd and 4th year;
- 50% between the 5th and 7th year;
- 25% between the 8th and 10th year.
The classification of years of exemption follows the number of years of income in categories A or B, disregarding the years in which the taxpayer was considered a dependent.
Taxpayers who have or have had the following tax benefits are excluded from this regime: the non-habitual resident regime, incentives for scientific research and innovation, the Regressar programme or who do not have their tax situation regularised.
In order to avoid withholding tax on exempt income, taxpayers, whether Portuguese or foreign, must inform the paying entities of their adherence to the scheme, indicating the year in which the income was obtained.
Tax Department
Sofia Quental | Inês Grácio | Catarina Amaral
