If you’re an expat living in Portugal or planning your move here, staying informed about Portugal’s tax cuts in 2025 is crucial. In 2025, the Portuguese Government introduced new IRS (personal income tax) rates to ease the tax burden, which may lead to a tax reduction of the personal income tax by the Regional Government of Madeira in the next regional budget law. These changes translate into meaningful savings for many residents, including foreign nationals working or retiring in Portugal.
Tax Reductions for Employees and Pensioners
Under the new regime, individuals earning a gross monthly salary of €1,000 can expect to pay around €409 in annual income tax, representing a saving of over €340 compared to the rates in effect as of March 2024. Those earning €2,000 a month will save nearly €570 annually. At a €3,000 monthly income level, the savings reach approximately €750.
Households with two earners benefit even further.
For example, a couple each earning €2,500 per month will see their total IRS payment reduced by nearly €1,500 compared to 2024. If the couple has children over six, the annual savings may exceed that amount, thanks to additional deductions.
Pensioners are also included in this relief.
A retiree receiving a €2,000 monthly pension would now pay around €3,729 in income tax for the year, enjoying the same tax reduction as a working individual at the same income level. The total annual savings for pensioners in this bracket are estimated at around €570.
Why This Matters for Expats
Portugal’s tax cuts in 2025 strengthen the appeal as a destination for expatriates by improving net income across various profiles:
- Single professionals and digital nomads benefit from lower monthly withholdings and higher take-home pay.
- Couples and families enjoy additional relief, particularly when both partners are employed or receiving pensions. Retirees find Portugal increasingly attractive due to more favourable taxation on pension income.
These updates are especially relevant when considered alongside Portugal’s other tax benefits for foreign residents, such as double taxation treaties and allowances for remote work and investment income.
How MCS Supports You
At Madeira Corporate Services, we provide expert tax advice tailored to expats and international investors. From navigating the latest IRS rules to assisting with NIF acquisition, fiscal representation, and full compliance with Portuguese tax law, our multilingual team ensures your obligations are met and your opportunities maximised.
We encourage new clients to schedule a consultation to assess their specific case. This first step can clarify your options, avoid costly errors, and optimise your financial planning in Portugal. You can easily book a meeting online by clicking the “Book a Meeting” button at the top right of the page.
Let us confidently and compliantly help you make the most of Portugal’s 2025 tax changes.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
